The CHILEAN SOONICORNS are making their way: global, with charismatic leaders and a lot of fintech: this is the startups that are in the race to be the next unicorns

Source: El Mercurio

A study conducted by the consulting firm MIC Innovation and the ESE Business School of the Universidad de los Andes revealed that there are 25 Chilean candidates with the capital, talent, and solutions characteristics to rise to the top of the highly desired ventures valued at more than US$1 billion.

In just one year, the landscape of the local ecosystem changed drastically. Until June 2021, Chile was considered a reference point for innovation and entrepreneurship in Latin America, but it lacked the first success stories to enter the major leagues of the industry, meaning to propel its entrepreneurs to conquer the major global markets hand in hand with the largest venture capital funds. And finally, it did it and did it with flying colors: today there are already three national unicorns successfully expanding into countries like the USA and Brazil —Cornershop, NotCo, and Betterfly—, in addition to the emergence of a new ‘batch’ of startups heading in the same direction. They are called soonicorns or those technology-based companies that have the potential to become unicorns in the short term.

This group of ventures, in fact, is generating quite a buzz among national and foreign investors, so experts and industry players are committed to predicting that more Chileans will soon reach the top before the end of 2022.

“If we follow global statistics, Chile would have between two and three unicorns per year. We are observing that this is happening because the turning point occurred, therefore, it is important as a country to maintain the same conditions that allowed the emergence of these companies. Chile has sophistication in terms of professionals, technology, finance, marketing, and globalization, which allows for the necessary talent to create global companies,” says Patricio Cortés, senior partner of MIC Innovation and academic at the ESE Business School of the U. de los Andes.

Stefanie Sherman, manager of Digevo Ventures, projects a similar scenario: “I would dare say that at least four startups will become unicorns in the short term (2023). The speed is mainly due to the need for capital injection in an upcoming investment round. Since everyone is seeking accelerated expansion, new rounds will surely come with a valuation over US$1 billion.” She adds that it is good to talk about unicorns and soonicorns because it demonstrates the maturity that the entrepreneurship and investment ecosystem has reached in the country. However, she also warns that it is crucial for investment figures to be truly aligned with the traction and growth they have had.

Andrés Pesce, CEO of Kayyak Ventures, emphasizes that “sometimes this obsession with unicorns can make us lose sight of the central issue.”

What is that core? “That venture capital can make the seeds of entrepreneurship that have been waiting for a long time flourish. The presence of unicorns is evidence that it is possible for emerging companies, driven by entrepreneurs with an expansive mindset, to generate a lot of value for society,” he says.

He also highlights that this is contagious for entrepreneurs and investors. “Unicorns add depth to the venture capital market, making it possible for institutional investors like pension funds to enter the game in the future.”

However, he emphasizes that beyond the opportunities, “the ability of the ecosystem to generate these companies that create great value is important, and that this value is properly shared among society, customers, entrepreneurs, employees, and investors. There are many companies that will never be unicorns and that meet the above.”

Nevertheless, María de los Ángeles Romo, director of Start-Up Chile at Corfo, maintains that the topic of soonicorns tends to be interesting as long as it becomes a good showcase for entrepreneurs who are in the process and also proves the great interest of investors in the technological development taking place in the region. “But if we only focus on the exclusive showcase, it doesn’t serve much either. The real impact of startups and their growth potential is that they manage, hand in hand with technology, to solve global problems more quickly, in a cost-efficient structure. Pains of a complete society are resolved more effectively.” Therefore, she argues that financing and the showcase are good and relevant, but they are not the end. “Only to the extent that founders achieve the impact goals that the startup has set for itself, including internationalization, which is key (and expensive!), is all the above justified. Now, these ecosystems also resonate with success stories and role models, inspiring others to start up.”

Who they are and where they are

In Latin America, there are several startups that are emerging as soonicorns, and Chile is no exception. For Ángeles Romo, these rankings make sense, in the logic of maintaining the energy and understanding that companies can change the world, and that it is not only the responsibility of current unicorns, but also of all those that will come.

With that perspective in mind, the consulting firm MIC Innovation and the ESE Business School of the Universidad de los Andes conducted a study aimed at identifying the best candidates. The result: 25 possible ventures, considering criteria such as companies that have made at least one public investment round and capital increase, not just debt, although it can be combined.

Mostly, says Patricio Cortés, they are fintech, insurtech, and generally tech companies linked to the financial world, something that, in his opinion, is not strange since Chile is a very advanced and sophisticated country in the world of finance, but it also has talents that understand this market well and also identify the existing pains in the industry. “To have a good fintech, it is not enough to have good technicians and good software, but there must be someone who understands and serves the market,” he says.

For Stefanie Sherman, the firms that are closest to achieving the ‘goal’ are precisely fintech, among which she names Fintual, Cumplo, Xepelin, and Migrante.

In this regard, Andrés Pesce states that unicorns and potential unicorns emerge in large and frictional markets in which technology can make models viable that were not previously. This is the case with financial services, he says, and that is why in all venture capital ecosystems, fintech leads the lists. “The majority of unicorns are fintech. Chile has not been an exception in that sense. Furthermore, given the greater sophistication of Chile’s financial sector in the Latin American context, entrepreneurs are in a very good position to promote fintech or companies with the potential to generate immense value in our continent.”

Another characteristic revealed by the study is that the leaders of these companies are charismatic individuals with a global mindset, focused, bilingual, well-traveled, and generally with work experience abroad. But also, Cortés highlights, they are people who are in tune with the pain of the target group, and that is why their value proposition is incredibly good, because they are also solutions that address cross-cutting and massive problems. “They invented completely radical business models compared to existing ones; they are dramatic transformations of the traditional business model. Their value proposition is very high because they have found niches poorly supplied by current products. Here their solution is not an improvement on what exists, but it is something completely different and superior.”

He also adds that on average they are 35 years old, highly committed, and with the personality of a global entrepreneur: “It is not their company that will be a unicorn, but they are the ones with the potential to turn the project they take on into a unicorn.”

The weak point

Beyond the positive expectations, both the report and the experts agree on the lack of women.

For Patricio Cortés, there is no reason that explains the low presence of women, as entrepreneurship is completely symmetrical.

It is an alert that Andrés Pesce also delves into. “I think, on the one hand, it is a reflection of the relatively low presence of women in executive positions in companies. On the other hand, I think it is a cultural issue. Perhaps women are educated to take fewer risks. It is important to educate our daughters in confidence to take risks, make mistakes, undertake, and re-undertake. Society loses a lot by not having more women undertaking,” emphasizes the CEO of Kayyak Ventures.

“Unicorns and potential unicorns emerge in large and frictional markets in which technology can make models viable that were not previously.” — Andrés Pesce, CEO of Kayyak Ventures

“It is good to talk about unicorns and soonicorns because it speaks to the maturity of the ecosystem; however, it is crucial for investment figures to be truly aligned with traction and growth.” — Stefanie Sherman, Manager of Digevo Ventures