Why this is important to Wisconsin businesses: Financial technology and education technology are areas of particular opportunity.
Funding of Latin American startups has doubled each year over the past two years, and this surge has benefited Peru as well. In 2019, a new record of at least $11 million of capital was invested into Peruvian startups, a 24% increase over the prior year. The sectors that benefited the most were startups in financial technology (47%) and education technology (37%). Over the past four years, more than $22.7 million in public funds went toward startup-related projects. Moreover, over the years Latin America has become a top destination for impact investment capital, outpacing many other regions in the world, with a 15% compound annualized growth rate over the last five years, according to the Global Impact Investing Network.
The government-backed program Innóvate Perú awarded approximately $13.8 million of its total investments almost exclusively to startups, and in 2019, Peru’s development bank, COFIDE, announced a series of funds to invest in venture capital firms.
There is currently a massive financial technology boom playing out across Latin America, with the size of the industry expected to exceed $150 billion by 2021. Peru is home to an estimated 120 financial technology startups, which are looking to service the region’s small and midsize businesses. Peru is an ideal landing pad for companies in this sector because the economy is still largely informal, with approximately 14 million people underbanked. This opportunity has not gone unseen; the publicly traded Peruvian bank, Credicorp, for example, recently set up a corporate venture fund called Krealo with the aim of investing in financial technology companies in Peru.
Education technology represents a rising entry point across the region for impact investors, thanks to its potential for both financial and non-financial returns. For the first time in 2018, Peru attracted more impact investment capital than Mexico, a longtime leader in the region. Much of the investment is focused on improving Peru’s education system, with local and foreign startups looking to improve everything from early childhood education to workforce training, and as more success stories emerge, more resources will be needed to fully tap into Latin America’s large markets for these solutions.
As government support for entrepreneurs continues to pour in, the Peruvian startup ecosystem is entering a new phase. Regionally, Latin America has proven that it is a place where startups can scale and succeed. Now, with more startups coming out of the region’s smaller, underserved markets like Peru, there is an opportunity to deploy capital effectively and bring more impact to millions of people across the region.