Why creating business models can help accelerate venture capital in Latin America – Andes Times

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Latin America (LatAm) has a unique business landscape, with its own set of advantages, challenges and everything in between. One could even say that the LatAm market can be described as a functional dichotomy.

On the one hand, the region has a huge economic gap that has only been exacerbated by the pandemic – a recent study showing that an average increase in inequality across Latin America has been observed despite the differences country, age of head of household or socio-economic status.

On the other hand, venture capital (VC) investments amounted to more than $15.7 billion in 2021 for the region, more funding than the previous ten years combined, and private capital reached a new record of $29.4 billion in the region.

This divergence shows a clear need to find a way to support the economy as a whole, which can only come from bridging the gaps on either side of the economic spectrum. With a high middle class, people from all walks of life can find opportunities in a rapidly changing business landscape, ensuring that their contributions to Latin American society have a chance of success and sustainability.

Let’s see how a proper business model helps provide a long-term solution for companies from all walks of life hoping to take advantage of the new VC merger that was seen in 2021.

The rise of the middle class

A recent study showed that by 2030, the long-awaited rise of the middle class in Latin America will be in full swing, with its share expected to reach 43% of the region’s population, double its value in 2005.

While these forecasts demonstrate steps in the right direction, business in Latin America still lacks key fundamental measures to ensure that these changes can be achieved, and for good.

“Systemic change can’t be this finished, dry solution,” says Wenyi Cai, co-founder and CEO of Venture Studio Polymath. “Usually with paradigm shifts it’s a change in behavior that’s needed, where you have to reprogram an entire society to open the door to a demographic that hasn’t had a door open in a long time.”

Wenyi Cai, co-founder and CEO, Polymath

For LatAm to truly catch up with its international counterparts in the business world, integrations for a sustainable middle class are needed. This means training businesses on how to navigate the modern, digital business landscape of 2022.

“For people running small businesses, they don’t yet understand all the complexities and different technologies needed to run a large-scale business in today’s business environment,” says Cai. “This is especially true for more traditional service businesses that tend to universally lack access to markets and don’t yet have digital marketing savvy.”

Building business models challenges accelerators in developing countries, helping them to address overlooked and unwatched areas in the pipeline of growing companies. This not only helps in providing modern knowledge and infrastructure to build a solid business foundation, but ultimately helps new ventures gain validation from available investors.

Let’s see how Cai’s company, Polymath, is responding to this call to action in the LatAm region.

Convergent classes

“I think there are, in essence, two societies coexisting in Latin America, they interact, but they don’t integrate, and resources from one don’t go to the other,” Cai continued. “This allows for variable access to markets from region to region.”

Polymath is a venture capital studio that aims to create companies from scratch to break into the business scene in Latin America, opening the market to owners regardless of their socio-economic background. Cai’s partner, co-founder and chief financial officer, Carlos F. de la Pradilla, has knowledge specific to the region’s unique set of business advantages and challenges.

Wenyi Cai and Carlos F. de la Pradilla, co-founders, Polymath

Carlos was most recently a partner at N+1 Mercapital, where he spent nine years leading its operations in the Andean region. He holds an MBA from IE Business School, a Masters in Corporate Finance from IEB and a law degree from Universidad Autónoma de Madrid. He has also been a founder and angel investor of start-ups in Spain and Colombia, which has given him extensive experience in helping Polymath bring the right business insights for building business models in LatAm.

Working to bridge the talent and capital gap and solve the region’s most complex challenges, Polymath aims to “empower the middle class and lay the foundations for a more equal, stable and prosperous society”.

“I think a lot of the current economic health in LatAm is tied to the history of capital markets in the region,” Cai said. “It’s particularly critical in terms of the private market, and whether public and private markets have equal access to the infusion of capital we’ve seen in 2021.”

The company hopes to be a liaison with homeowners in Latin America as the region navigates its current economic metamorphosis, providing them with the tools they need to build a successful business.

By helping to create great, transformative businesses for the emerging middle class, Polymath helps build a bridge between the lower and upper classes so that everyone, no matter where they reside on the economic spectrum, can have equal access to opportunity.

Building a sustainable future in Latin America

Although LatAm’s rapid advancement is in line with the growth seen in the early days of Silicon Valley, the region is still underfunded internationally. Compared to Southeast Asia – an area with the same population size – the region achieved nearly double what LatAm’s record year in VC did with $25.7 billion in funding for 2021.

For Latin America’s middle class to progress, businesses need to build the right infrastructure for their regional business landscape so that they can maintain capital sustainability no matter how investment flows change.

Once a company manages to adapt to the product market in its sector, it has the possibility of massive growth, especially with the possibility of exploiting venture capital. Venture studio Polymath helps companies in Latin America do just that by paving the way for them to use their full potential, regardless of their class of origin.

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