Imagine one idea that strikes twice, simultaneously inspiring two entrepreneurs physically separated by 3,000 miles and the equator. The tenets of capitalism suggest that of these two, only one will succeed by providing the market with a better product at a more competitive price.
Now, assume that the first entrepreneur is based in Silicon Valley and the other in Costa Rica. The playing field is now uneven, and the significance of a solid business acumen and competence gives way to geographic fortune.
When compared to their Silicon Valley counterparts, Latin American entrepreneurs are faced with significant funding gaps. For investors, this represents a wide swath of untapped investment options. For business owners, it is a competitive disadvantage. Latin America lacks a single platform that bridges these funding gaps, and investors have traditionally struggled to build the critical mass needed to launch successful ventures. Often, the money dries up after initial sources of funding such as family, friends and local banks are exhausted.
The entrepreneurs of the region can look to a mainstay of the American economy for a bridge: the stock exchange. The various New York-based and international stock exchanges that have developed in the past 150 years have helped companies and investors alike by providing an equal playing field that facilitates growth through investment. Startups in Latin America can benefit from such an exchange, which would also allow for the funding of all properly-vetted projects, by evening out the playing field.
An exchange exclusively focused on startups and interested investors presents a solution to such problems. For Latin American firms trying to gain momentum, the biggest time suck is playing the dual roles of fundraiser and product-maker. Without a built-in Rolodex of venture capitalists (VC), founders can find themselves working a full-time job just to secure funding. An “exchange for all” is an elegant, egalitarian solution that will disrupt this insular model of VC investment.
Other obstacles exist that conspire to keep Latin American startups from succeeding. Some are cultural, deeply embedded within nationalistic attitudes. Failing is a requisite in business, but failure can be a source of great shame in some Latin American circles. Also, for many people on the lower end of the socioeconomic scale, class barriers can prevent even the best of ideas from being realized.
This is why a startup stock exchange should incentivize investor participation by setting a low barrier for entry. A minimum of US$100 is a reasonable amount to expect from investors, which allows for incremental investment.
From the investor’s perspective, the world of international startups can be a murky one. To navigate these opportunities, investors need a single platform in which to apply judgment, and a tool that undertakes the task of due diligence, which is indispensable to making wise investments. To this point, the marketplace has been void of a trading platform that solely focuses on startups and interested investors.
Investors want a clearer path. They want a vehicle that allows them to invest and divest as they see fit, following the traditional exchange marketplace model; a place where their shares appreciate in value as the companies they invest in show returns.
Investors also crave transparency. Too often, seemingly lucrative investments in foreign companies can come with unexpected roadblocks, regulatory and otherwise. There is no way to anticipate wild cards, such as local politics and rogue regulators, without a marketplace that accounts for them, conducting due diligence on behalf of the investor community and shining light on these potential potholes. There is a need for a place that enables trading startup shares with ease and confidence.
The best ideas and entrepreneurs in Latin America deserve a fair chance to either sink or swim. All that is missing is a clean pool.