CHINA AND LATIN AMERICA: TIME TO COLLABORATE

By: Sisi Peng | Mar 31, 2021

We are a multicultural organization. Born in Colombia with Chinese-American and Spanish founders and a clear purpose towards the Latin American middle-class, we are always looking to expand our collaboration bonds with markets that can elevate our work. Our relationship with China began a few years ago, through the obvious connection with our Founder and CEO, Wenyi Cai, and it has become an important source of trends, know-how, talent, and allies looking to expand their presence in Latin America. In this new blog post, we talk a bit more about why are building a strong bridge between China and Latin America.

CHINA AND LATIN AMERICA: THE SIMILARITIES

With an advanced digital economy and a well-developed tech ecosystem, China has invested billions of dollars in emerging markets, historically focusing on India and South East Asia.

In 2019, Chinese companies invested $12.8 billion in Latin America, up 16.5% from 2018, concentrating on regional infrastructures such as ports, roads, dams, and railways. Also, China represents 4% of all venture capital in Latin America and more and more Chinese investors began to realize that China and Latin America share similar market conditions, making a mutual understanding and their experience very relevant to the region.

In fact, China’s Internet giants have already taken action. In 2018 alone, big events in their expansion in Latin America include DiDi’s acquisition of Brazilian shared mobility leader 99, Tencent’s stake in FinTech company Nubank, and GGVCapital’s lead in bike-sharing company Yellow.

In fact, amongst all emerging markets, China and Latin America have the most similar market conditions. The GDP per capita (PPP) of China and Latin America is relatively close, both around $17,000; and the ratios of the middle class to the total population are both 30%. In terms of Internet penetration rate, average daily use time, mobile Internet penetration rate, and other indicators, Latin America is also much higher than developing countries in Southeast Asia, South Asia, and Africa, even exceeding China. These have laid the foundation for the Latin American Internet industry to learn from China’s experience.

CHINA AND LATIN AMERICA TECH ALLIANCE: HOW IT STARTED

Witnessing such an exciting process and forecasting the massive opportunities this bridge may develop, we foresee that Latin America will be the next China, leapfrogging to a digital economy, in which Digital revenues will dominate or compete for leadership in the B2C landscape and the middle class will drive the adoption of digital solutions. We also believe that the development of the digital industry in China can provide Latin America with inspiration on all aspects of talent, business models, strategies, financing, and so on.

Therefore in 2019, we decided to formalize our cross-border tech collaboration between China and Latin America, and further launched the China-LatAm Tech Alliance Initiative, aiming to bridge the information gap between the two regions and unlock true opportunities for collaboration.

The Latin American Internet venture capital market is currently facing three main challenges: limited access to capital, scarcity of tech know-how, and high costs to reinvent the business model. Our understanding is that most of these challenges can be addressed through this cross-regional collaboration, Chinese corporations and investors have the capital and expertise to support the evolution of raising startups in our region. Chinese venture capitalists systematically evaluate tech businesses and have enabled the rise of the largest unicorn ecosystem in the world. Their tech companies have developed and applied mature technologies and have been continuously innovating new business models that have proven to fit the needs of China’s massive middle class, which can definitely be a great source of learning for Latin American entrepreneurs looking to solve similar challenges.

LEVERAGING CHINA EXPERTISE TO ELEVATE LATAM STARTUPS

Elenas, Polymath’s digital direct sales platform, also the first digital direct sales company in LatAm, accelerated its product-market-fit due to its close relationship with Meesho and one of its leading angel investors from China. As India’s No.1 digital direct sales platform, Meesho not only became the anchor investor for Elena’s Series A round, it also provided relevant learnings and best practices about their journey and their growth strategy.

Another example is Ualá, Argentina’s leading digital bank, which took inspiration from WeChat Pay to develop its own product roadmap thanks to the strategic investment from China. In 2019, Tencent’s corporate venture capital led Ualá’s $150 million Series C round. Tencent also provided critical strategic advisory from its experience with WeChat Pay, including which product features are prioritized in WeChat Pay, how WeChat Pay defined prices for its financial services, and so on, which greatly sped up Uala’s product development and reduced its risk.

INFLUENCE & PREVIOUS SUCCESSFUL CASES

In the past 2 years, Polymath Ventures has built a strong and large network of investors, allies, and tech companies across China, and it already positioned as the region’s leading partner between China and Latin America thanks to the execution of several initiatives designed to enable collaboration and reduce the gap.

– Latin American Tech Expedition to China 2019: Polymath Ventures led a group of renowned Latin American investors and entrepreneurs on a 7-day expedition to China, to meet with the most important tech companies like Alibaba, ByteDance, Xiaomi, and CreditEase. Check our trip recap blog to discover learnings and insights.

– First China and Latin America Tech & Innovation Summit in Beijing: The first summit specifically focused on discussing Latin America’s technological landscape with the Chinese tech community. The Summit was structured in a way to facilitate the conversation around opportunities in Latin America’s tech boom. Learn more about the summit and the content here.

– Content about Latin American opportunities for China’s audience: Polymath Ventures analyzes the local technological and entrepreneurial ecosystem in Latin America and develops content specifically targeted to Asian venture capitalists, entrepreneurs, and tech companies.

– Content about China’s tech ecosystem for LatAm audience: Polymath Ventures develops in-depth content pieces about China, Southeast Asia, and India, its venture capital ecosystem, business model innovation, digital expertise, and going overseas strategy.

EXPANDING FROM CHINA TO ASIA

In an effort to provide more resources to Latin American startups, we are also expanding our presence outside of China. Last year, Polymath Ventures became the official partner of Born2Global Center, a Korean government agency under the Ministry of Science and ICT contributing to the national startup ecosystem and beyond. Our role as an official partner is to accompany Korean startups in their expansion journey into Latin America. From leveraging our established methodologies to securing new business opportunities, we are here to enable a path of success for them.

Today, our Asia Team is committed to accelerating Latin America’s digital transformation by leveraging Asian expertise and enabling partnerships with India, China, SEA, and Korea to secure a continuous exchange of resources. So, if you need some international experience for your startup in LatAm, please consider our Asia Team, and hope you could find your inspiration in Asia!

Reach out to Sisi Peng with any inquiries or ideas: sisi.peng@polymathventures.co

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