Startup in... Latin America?

Paul Graham recently wrote about Why Startup Hubs Work. He cited two reasons why startups do not die in startup hubs:

“[1] being in a place where startups are the cool thing to do, and [2] chance meetings with people who can help you. And what drives them both is the number of startup people around you.”

Starting a startup is hard enough, doing so in a place where it is seen as synonymous with unemployment is a major setback. And chance meetings with mentors and people pursuing the same ideas can be miraculous for a startup. While I believe these antidotes for “startup death” are true in developed countries like the US, developing countries like Guatemala bring new factors into play.

In the United States, the number of entrepreneurs has hovered around 10%, give or take, depending on the economy. In Latin America, on the other hand, this number averages around 20%, with the highest around 30-35% in Peru and Bolivia. Starting a startup is not looked down upon as unemployment, indeed, these people are thought highly of in the community.

Other quirks of a developing country that a startup can benefit from are the limited availability of good wages and the cheap abundance of resources. More people are likely to start their own business when they can get better wages working for themselves. Work-live places, an essential for startup entrepreneurs are easier than ever to create when the cost of living is a fifth of the cost in the US. Latin American countries also tend to rapidly adopt new technologies: most people in Guatemala leapfrogged from no phone connection within miles to 3G cellphones in a couple of years. Argentina, Venezuela, Colombia, Chile, Mexico, Puerto Rico and Peru are 7 of the top 20 countries using social networks:

Lacking a strong community of mentors that startup hubs like Silicon Valley, Boston or Boulder offer is one of the biggest setbacks. But as the connectivity and education increases there is no question this will change. Guatemalan businesses are starting to prop up websites in a similar way as the beginning of the .com bubble years ago. Given the rate of conversion to new technologies, the creativity and self-discipline people have to new startups and the economy of resourcefulness, Latin America will soon produce startups to rival Silicon Valley.