The Challenge of Entrepreneurship in Latin America: More Unicorns or Local Startups?

We analyze the importance of entrepreneurial diversity in Latin America and how Road to Innovate contributes to creating an enabling environment for diverse entrepreneurship in the region.
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At the Innovate Entrepreneurship Summit 2022 in Guatemala, a relevant question emerged: Do we need more unicorns in Latin America or a more solid and equitable entrepreneurship system for all entrepreneurs? The media and social networks often highlight unicorn startups with eye-catching headlines, but it is essential to change our perspective and consider other indicators of entrepreneurial success.

One of the things that attracts the most attention in media and social media is when a startup achieves unicorn status. We see headlines like "Company X is the first unicorn of..." or "The club of X country's unicorns has 3 new members, do you know them?" Undoubtedly, these headlines are very captivating and make us think about the "mythological" aspect of being such a startup, seemingly emerging out of nowhere. However, these ideas are far from reality as becoming a success overnight takes years of hard work. Nevertheless, the emergence of these companies always makes us reflect on the triumph it represents for the country they reside in to have more unicorn companies.

Instead of fixating solely on this entrepreneurial mythology, we must value the importance of business diversity and broaden our definition of success. Fostering smaller startups allows for greater business variety across different sectors, creating a resilient business ecosystem that fosters competition and continuous innovation. A noteworthy example is the U.S. case, which has 124 of the 500 companies listed in the Fortune 500; however, less known is that 97.3% of their exports come from micro, small, or medium-sized enterprises (MSMEs).

The significance of Road to Innovate initiative lies in strengthening small startups by focusing not only on large and conventional ventures but also by making participation simple and accessible, especially for young entrepreneurs at their early stages. By promoting smaller startups, we encourage a diverse range of businesses across various sectors and niches. Additionally, smaller startups tend to be more agile and flexible, allowing them to quickly adapt to market changes and capitalize on new opportunities, as seen during the COVID pandemic.

While unicorn companies often become major employers, their primary focus is often on efficiency and automation to scale rapidly. On the other hand, smaller startups possess significant potential for generating employment at the local level. By fostering a conducive environment for such startups, we can drive job creation in the region, thus reducing poverty and strengthening the local economy.

According to the Economic Commission for Latin America and the Caribbean, MSMEs in Latin America account for about 61% of formal employment. These businesses, deeply rooted in local communities, contribute to reducing inequality gaps and strengthening the economic and social fabric at the regional level. By adopting a more balanced approach, the region can build a sustainable and resilient entrepreneurial ecosystem, having a lasting impact on the economy and society as a whole. This requires implementing public policies and strengthening the rule of law to enable free competition and a flexible and agile legal framework.

Rather than exclusively pursuing the dream of becoming a "unicorn," we should value the efforts and importance of each startup at its own scale. By creating spaces like Road to Innovate, we facilitate access to key knowledge and opportunities for young entrepreneurs, thereby promoting sustainable development in the region. In a world where inclusivity and equal opportunities are crucial, investing in local startups effectively generates employment at the local level and contributes to a more resilient and prosperous society in Latin America.