Graduate of Harvard’s OPM Program (Owner/President Management), Arrieta is a serial entrepreneur who has been involved in the online media industry since 1994. His projects include Digital Ventures, Directa Network, Performa Network, Afiliados Hispanos and InZearch – all of which were acquired by FOX in 2007. He is also a frequent speaker at AdTech, IAA, IAB, Online Marketing Europe, OMD, Marketing 2.0 and AMDIA.
CH: What do you think is behind this shining moment for Latin American accelerators and incubators?
AA: Right now, creating a company is quite inexpensive compared to how much it cost in the past. Connectivity prices have come down, co-working spaces are popping up to render offices unnecessary, and cloud computing is on the rise – all of this contributes to lowered costs. The people involved are also different, and they often implement lean startup methodologies and philosophies that require less manpower. If the only employees are the founders, they receive compensation via equity. All of these factors combined foster a huge opportunity for angel investors and incubators that decide to inject funds into companies in very early stages. These early-stage startups have the potential to grow exponentially.
CH: What balance between expectations and results do you seek with Nxtplabs?
AA: We try to align the interests of investors, entrepreneurs and mentors, and it is going pretty well. We started only recently and have invested in 32 companies, the idea being that they would start to sell in the third year. However, we are already in the process of selling the first two (I can’t provide details yet) and multiplying the capital invested several times over, which validates the process. If these companies would have sold in the expected time period (two or three years), that number would be multiplied even more. These early sales serve in that they prove that the model works.
CH: What types of businesses are going to indulge the market over the years to come?
AA: I would say that in five, ten years, there will probably be fewer computers than there are now. Everyone will have a smartphone or tablet, and we’ll likely be able to do everything that we do today with the computer or offline with a phone. There are tons of companies that are going to be able to fit into this new market scenario, but these companies aren’t going to be built in two days. These companies are emerging now, and they are going to grow over the next few years. These are the types of companies we want to create.
CH: In your opinion, what is it that currently prevents more investment on a regional level?
AA: The biggest issue with the industry and venture capital is the ignorance of many investors – not only in terms of money but also with respect to the ability to relate and reach out – as to what these new businesses have to offer. Startups are created and managed by highly-ambitious individuals. There is a new generation of entrepreneurs out there right now that is much bolder and better able to see the light at the end of the tunnel. They are not shocked if a 20-year-old is the CEO of a company or achieves a million-dollar IPO. More conservative members of society, corporate employees and owners of offline businesses, have yet to get their feet wet, though they have the capacity to be important players in the ecosystem. Explaining investment opportunities to these individuals is a challenge, and risk is much more evenly-distributed today than it was years ago.
CH: There is a paradigm that says: “Brazil has the market, Chile the legal security and investors, and Argentina the entrepreneurial spirit and population.” What is your opinion of it?
AA: If you look at the 10 biggest companies to spring from this industry over the past few years (MercadoLibre, BuscaPé, Vostu, Digital Ventures), what they all have in common – with the exception of BuscaPé – is that they have Argentine management, are copycats (clones of other business models), and operate principally in Brazilian or U.S. markets. In other words, the paradigm fits the current situation, but it is changing. There are opportunities aside from copycatting. There are other markets, meaning you can build a great business without being in Brazil. Take OLX, for example. It is active in 40 countries, and while Brazil is an important market for it, it’s not as important as it is for, let’s say, MercadoLibre. Moreover, one can’t overlook Colombia, which is growing in leaps and bounds right now. The same is true for Mexico. A startup taking off today can have management located anywhere. It’s true that the Chilean legal structure is sound, and Start-Up Chile does a good job of putting it to the test and therefore putting Chile on the entrepreneurial map. But Colombia can compete as well, in terms of both talent and opportunity, with Argentina. And the Mexican market is limitless.
CH: What advice do you have for businesses just getting started?
AA: For businesses commencing activities right now, staying in just one country won’t work. This is a major critique of Brazilian startups that ignore the world at large and concentrate solely on Brazil. The business models that work there are ones that are based in Brazil but that employ engineers from other places, because labor costs are so high there. It is important to choose a large principal market, like Brazil or, if the idea is really novel, the United States. The engineers have to be in Latin America. If you aim straight at the consumer and there is already a principal player present, it’s a good idea to think of a strategy for expansion in other areas with less competition.
Ariel Arrieta will be a featured speaker at PulsoConf. He will present alongside a number of other industry leaders, about whom you can find out more here.
This text has been adapted into English from its original Spanish publication.