Latin American Start-ups Drive Development and Innovation
In Brazil, tech company Loggi is disrupting business as usual and creating economic opportunities. © Loggi
As a single mother, Rosa Maria Costa prizes a flexible work schedule. For years, she navigated Sao Paulo’s infamously congested boulevards as a motorcycle courier for a radio dispatch service. She enjoyed the work, but it was hard to make ends meet and she had little time for her sons.
My kids complained that they never saw me,” Costa, 47, says.
Costa now works for Loggi, a Brazilian start-up that connects couriers to customers needing express delivery service. It allows Costa to work flexible hours so she can build her day around her 3-year-old’s school schedule. Best of all, she’s earning twice what she used to make with the dispatch company. “I’m working less and making more money,” she says.
Founded in 2013, Loggi is part of a new wave of Latin American start-ups that’s disrupting business as usual and creating new economic opportunities across the region. These companies are using technology to help close Latin America’s inequality gap, provide broader access to goods and services, and create jobs. They are important allies in Latin America’s efforts to strengthen its skills, technology, and innovation base—all critical elements to boosting prosperity.
This week, 50 of the region’s most promising start-ups—including Loggi—are joining a forum in Sao Paulo organized by the World Economic Forum and IFC. The gathering builds on the momentum generated by the region’s new wave of tech entrepreneurs and offers them the opportunity to tap into a network of global investors, corporate leaders, and policymakers.
Spurred by increased early-stage funding, the number of venture-capital deals in Latin America has risen steadily in the past few years, reaching nearly 250 in 2017, according to the Latin American Private Equity & Venture Capital Association (LAVCA), a non-profit organization that tracks investors and start-ups in the region. Brazil was the largest market in terms of capital invested, followed by Colombia and Mexico.
“You would be hard-pressed to find a start-up in Latin America that’s doing something superfluous,” says LAVCA’s Julie Ruvolo. “They’re having an impact on digital inclusion, financial inclusion, access to transportation, access to medical care.”
The Latin American start-up market is still undercapitalized relative to the opportunities there, says Ruvolo, but investors are increasingly taking note as the region becomes more important for major tech firms like Amazon, Google, and Netflix. “It’s part of an evolution, shifting away from a Silicon Valley perspective to a global perspective,” Ruvolo says.
Relying on an Existing Resource: Sao Paulo’s “motoboys”
For Loggi’s co-founder and CEO, Fabien Mendez, the Brazilian start-up moment is “really happening now.” After an expansion in the number of start-ups in the last decade, many were wiped out during Brazil’s worst-ever recession over the past few years. As the economy starts to recover, firms that survived “are extremely resilient because of what they went through,” he says. “They’re providing meaningful services at scale and have big potential for IPOs.”
Mendez, a 32-year-old French transplant to Brazil, has some advice for new entrepreneurs: “Try not to have a strategy which relies only on raising a lot of capital. The truth is you won’t find this money in Latin America. Try to build a strategy which relies on a good product that is more capital efficient.”
In the case of Loggi, that capital-efficient approach meant tapping into an existing resource: Sao Paulo’s hundreds of thousands of independent motorcycle couriers known as “motoboys”. Improving delivery to offices and homes has become a game changer for businesses that rely on speedy service—and for the drivers who provide it.
“We basically created a new market for businesses that need to send something fast,” Mendez says. “We opened new opportunities for many companies.”
He recalls his “aha” moment:
“One day I was walking on one of the main avenues in Sao Paulo and I saw one motoboy, then another, and another—a constant flow of motoboys and drivers. I thought, ‘Wow, what’s the size of this market?’ I always knew that logistics was key for the Brazilian economy. I realized there was a huge opportunity to use the transformative power of technology to optimize the existing base of drivers and build a ‘UPS 3.0’ for Brazil.”
An Efficient Approach has Ripple Effects
Loggi has a pool of about 5,000 independent couriers who are registered to use its smartphone app—up from 1,000 in 2015. They are licensed, covered by insurance, and operate motorcycles and vans that meet government standards. The company’s algorithms match supply and demand, improve delivery routes, and maximize drivers’ time.
The app pings them based on their location and cargo space. They arrive for pickup in about seven minutes—an instant, relative to an average of two hours for traditional radio dispatch couriers. That means Loggi’s couriers complete more deliveries, earning twice as much as they would with other services. And Loggi’s volume of work means they can pay their drivers higher rates.
Though the company started mainly as a document delivery service, Loggi has since branched out to delivering food and products ordered online. Amazon, for example, is a client. When customers in Sao Paulo click on Amazon’s same-day delivery option, chances are their packages will be delivered from a nearby warehouse by a Loggi courier.
IFC made a $5 million equity investment in Loggi in 2016. We invest in start-ups because of their potential to drive development and innovation. IFC’s investments are made directly into a company and through venture-capital funds. We also provide support for accelerators and matchmaking with other companies.
Investing in promising, ground-breaking tech companies often yields results that go much beyond the more direct gains. In the case of Loggi, this could mean much-needed benefits for urban development.
“Loggi generates big data, which has the potential to make Sao Paulo a better place,” said Sean Petersen, who leads IFC’s venture-capital investment program in Latin America. “Knowing how goods move around the city all day can be used for urban planning and transport. So, beyond the immediate impact Loggi is having, it could one day also help us see trends and predict future growth needs.”
Read more about IFC’s venture capital financing at www.ifc.org/venturecapital
Follow the conversation: #IFCimpact
Published in March 2018.