A Look At The Corporate Venturing Ecosystem In LatAm

Scott Cook, the founder, and chairman of Intuit once said: “Success is a powerful thing. It tends to make companies stupid, and they become less and less innovative.”

His statement highlights the struggle many large corporations face once they have reached a high level of success. It is a clear indication that companies are doing things right, yet it can also mean they get stuck in their ways and fail to see incumbent threats or industry changes that can directly impact their business.

Corporate giants that become aware of this often aim to build relationships with startups as a way to gain innovation insights, disrupt others and themselves, and benefit from different perspectives for their future forecasting. An in-depth report from the VC firm 500 Startups highlights the drivers that engage in this behavior. Overwhelmingly, most companies approach startups to gain access to new technology (over 92%) and in over half the cases, the companies are also trying to execute a pivot or transformation of their business.

This is called Corporate Venturing (CV), a collaboration between established organizations and startups to develop ‘win-win’ relationships, where corporations usually aim for disruptive or better and faster ways to deliver value to their customers, and startups seek platforms and resources to scale.

Around the globe, the number of companies engaging in some sort of corporate venturing quadrupled from 2013 to 2019. Some popular examples are Amazon which has invested in over 120+ startups and announced a $2B fund last year to explore the clean energy market, LG Technology Ventures which has $400M in fund assets and invests in early-stage start-ups in artificial intelligence, mobility, and advanced materials, and Coca-Cola Venturing and Emerging Brands (VEB), which responsible for seeking and igniting growth opportunities for The Coca-Cola Company, has invested and acquired hundreds of companies around the globe like IrisNova and Topo Chico, and is now entering the plant-based industry.

Latin America however is far behind in corporate venturing. Despite startup investment booming in the region — $4.1 billion of VC money was invested across 488 deals in 2020 — there is a low correlation between large companies and startup acquisitions/scaling.

According to a 2020 study by IESE and Wayra, in LatAm there are just around 460 corporate venture initiatives undertaken by 180 companies. Although this may sound like a good statistic, more than 50% of collaborations between large companies and startups are limited to low-engagement mechanisms like challenge prizes (106), scouting missions (94), and hackathons (50). None of these prove to be astronomically impactful. The study also highlights that only 16% of the larger companies analyzed in the region had some sort of corporate venturing mechanism compared to a steep 75% of the companies on the Fortune 100 list.

Despite the region playing catch up in comparison to other corporate giants globally with well-established corporate venture initiatives, these companies are notably leading the way in LatAm.

InovaBRA

Bradesco Bank’s Inovabra, based out of Brazil, is an ecosystem created to promote innovation inside and outside Bradesco. Through programs based on collaborative work between the organization, companies, startups, investors, and mentors, InovaBRA helps to solve challenges and ensure the sustainability of its customers. They offer a six-month accelerator program, 22,000 square meters of co-innovation space, and a fund that provides direct contributions to startups to the likes of Semantix, blockchain platform R3, and SaaS platform AgroSmart.

Mercado Libre Fund

Mercado Libre, Latin America’s largest marketplace, reached unicorn status in 2020. The e-commerce giant created the fund as a means to pursue value creation and ecosystem growth in Latin America. Their investment strategy has two avenues:

1. Business Development Strategy: Investing in seed-stage companies that have a clear impact on the e-commerce/tech ecosystem

2. Opportunities Strategy: Investing in early and growth-stage companies that have developed innovative solutions through the use of technology

In its five years, they have invested in 26 startups from four countries across the region including Increase an Argentinian fintech company for small companies, Liftit, a last-mile Colombian logistics startup and Buscalibre, an e-commerce trade operator that wants people to “buy any product in the world as if you were buying it at your neighborhood convenience store.”

Globant Ventures

Globant, an Argentinian “software factory” aims to become the best company in delivering profound transformations for organizations, while generating global career opportunities for IT professionals throughout the world. Having begun as a tech startup themselves in 2003, the now corporate giant deeply emphasizes the importance of accelerating and working closely with technology-based startups.

The corporate venture arm seeks to support seed-stage startups, making them grow rapidly and transforming them into companies that generate a real impact on the world. Entrepreneurs receive mentorship during nine months and can garner investment ranging between $100K and $400K. Entrepreneurs also have the perk of using Globant’s global offices, present in 34 cities in 17 countries across the world. So far, they have invested in six startups around Latam such as Robin, helping employers use neuroscience, gamification, and AI to improve recruitment & diversity, and TheEye, a robotic automation platform for systems and processes.

A key differentiator of Globant’s initiative is the strategic partnerships with firms such as EY and Endeavor, the world’s leading community of high-impact entrepreneurs with over 2,100 meticulously selected members.

Cemex Ventures

With a global focus, this CV initiative invests in innovative construction startups to drive the construction industry revolution. Startups are encouraged to apply to one of their five categories including carbon footprint mitigation, supply chain management, advanced building materials, efficient job site environment, and new construction methods.

Two of their most notable investments have been to StructionSite, an intelligent project tracking software, and Arqlite, a recycling technology company that provides building materials made from plastic waste. They received $1.5M and $1.7M respectively.

Cemex is attractive for startups because they offer capital investment, commercialization, and distribution channels, mentoring, and the ability to leverage Cemex’s Global Network.

Krealo

Launched in 2018, Krealo is Credicorp’s innovation arm with a regional level growth plan of impacting the lives of 100M people in Latin America. They specifically seek fintechs that are revolutionizing everyday finance with groundbreaking and customer-focused solutions.

So far they have invested in five startups in Latin America that are tackling their dream vision of tending to the needs of the LatAm population that is unbanked. Additionally, they are looking to help SMEs with no credit solutions, individuals with no investment possibilities, and startups offering solutions to those who don’t have access to health and life insurance.

Krealo acquired Multicaja, now Klap, a universal integration platform that unifies and ensures a consistent transactional system available on different devices for $19M in 2019, their first major investment.

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