Latin Dot-Com Markets: Ups and Downs
That was the consensus of executives at nine Latin America-focused Internet companies speaking at a panel session of the international network 2000 conference here earlier this month.
The event was organized by Rising Tide Studios, an Internet publication and conference company, and drew 140 speakers and 1,300 attendees from 30 countries. It focused on the global aspects of the Internet.
Over the last six months, the panelists agreed, money was pouring into Latin American dot-com startups, but they were unsure how the beating high-tech stocks have taken over the last six weeks would affect them.
Some were upbeat, arguing the shakeout was good for business because only companies in business for the long term and with well-crafted business plans were likely to survive and receive new funding.
"Building companies for the long term is just as important on the Internet as it is for steel or any other industry," said Tracy Leeds, Star Media's senior vice president for corporate development. "This is a long-term business."
Bob Wollheim, CEO of Ideale, a three-month-old incubator startup designed to help "young entrepreneurs with the garage spirit" get going, noted that two years ago, venture capitalists didn't know where Latin America was.
"The situation has changed dramatically," said the former Star Media executive. "Tons of new companies are being created in Brazil, and they are being supported by venture capitalists and by private banks."
Since he started, Wollheim added, "at least 13 incubators have been launched in Brazil." But he warned that this summer money would go to only companies who can demonstrate that they will generate cash.
Santos Rodriguez, the CEO of Ecuality, a Spanish company that operates in five Latin American countries, argued against venture capital financing. He got money from independent companies whose executives are on his board.
"They got valuation in my company in exchange, and they were urging me to go faster and to spend faster so that you can create value today because next year it is going to be harder and more expensive," he said.
Star Media's Leeds agreed. Dot-coms, she said, had to build brands early to stand out as the brand leader. The longer people wait, the harder it gets.
Gustavo Morales, whose company, Yupi Internet Inc., is a content provider, took a different tack in describing the Latin American dot-com market. It was not, he said, a geographical concept but a cultural and linguistic one.
"You can't approach the Latin American market with an English-language focus," he said. "You need Spanish products and Spanish attitudes."
He has a site that covers the Spanish-speaking film industry and an online matchmaking club with 250,000 members. "If you're looking for a woman in Barcelona, we're the right place to go," he said.
Carlos Guajardo, the CEO of Asista.com, said the business-to-business sector had a brighter future in Latin America once it got going than consumer sales. He operates a Web-based marketplace where businesses come to buy and sell goods and services they need.
He called his business "transactional content" that provides descriptions of goods and services for people running a business who go online for a short time to meet specific needs "and then go back to running their offline business."
His platform is simple to access -- "all you need is a computer and Internet entry" -- and does not require expensive and complicated software.
Leapfrog technology should help Latin America catch up, Leeds said. The spread of mobile phones, many equipped with Internet access, are proliferating, with their number expected to jump from 50 million now to 200 million by 2003.
Free Internet access is making solid headway, especially in Brazil where not so long ago surfers were paying $200 a month to get online.
Online banking, Wollheim said, has been the staple of Brazil's Internet community for the last three years, with 80 percent of those connected doing their banking on the Web.
Even more startling, 80 percent of Brazilians who pay taxes -- a relatively small sector of the population -- do so online. In fact, the number of online taxpayers is larger than the number of people with Internet access.
"They use banks, kiosks or their friends' computers," Wollheim said.
Latin American governments at all levels are taking greater interest in communicating with people online, enough for Kaleil Tuzman to take his year-old govWorks.com to the region where he already has a contract with the Colombian government.
Brazil, he noted, plans to count absentee ballots online in the 2002 presidential elections.
Panelists conceded problems, but grudgingly. Under intense questioning Rodriguez admitted that he had only 35,000 buyers on his Web site. And logistics bedevil a region with few courier services and little reliable delivery.