Can Latinos Rival Indians in Silicon Valley?

What's to come?
Nov. 23 2012 2:45 PM

It's Not Just Indians and Taiwanese Anymore

A new group may be on the way up in the immigrant-dominated tech world.

Bling Nation Co-Founder Wences Casares.
Wenceslao Casares, an Argentine native who is the unofficial leader of the Latin American diaspora in Silicon Valley

Photograph courtesy Stanford Ecorner/YouTube.

While Silicon Valley is an immigrant-friendly place—witness Russian-born Sergey Brin’s triumph at Google or Hungarian-born Andy Grove’s success at Intel—there are signs that immigrants’ influence in the tech mecca may be plateauing. A study released last month by AnnaLee Saxenian of Berkeley and Vivek Wadhwa of Duke found that 43.9 percent of Silicon Valley startups launched in the past seven years had at least one key founder who was an immigrant. That’s a big number, but it’s a drop from 2005, when 52.4 percent of startups were immigrant-founded.

The composition of immigrants in the Valley has shifted a bit, too. In Saxenian and Wadhwa’s ranking of countries that produced the most U.S.-based techies, Taiwan fell from fourth to 23rd. (The reasons for that drop—and the decline of immigrant-founders across the board—can be attributed in part to U.S. visa issues and burgeoning opportunities abroad.) At the same time, though, some tech insiders have seen Latin American-born entrepreneurs, a previously invisible cohort, begin to make their presence known in Silicon Valley.

Their numbers don’t come close to the Indian, Chinese, or even U.K. diaspora, and as of yet, our southern neighbors haven’t produced a nerdy-household name like India native Vinod Khosla of SunMicrosystems or Jerry Yang, the Taiwanese-born founder of Yahoo. There is, however, a nucleus of innovators from places like Argentina, Chile, and Colombia who have started companies aiming to create customized travel advice, digital wallets, and more. Like the Chinese and Indian entrepreneurs who came before, they are fostering interconnectedness between the United States and their native countries. And that’s going to have an impact on the tech scene in both places.

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Globalization—where work is “outsourced” abroad and companies target audiences far from their shores—is often portrayed as a faceless, malevolent, and inevitable, economic trend. But those connections are largely driven by individuals, particularly by men and women with roots in both the United States and a foreign country. The feet-in-two-worlds crowd can end up serving as a bridge, bringing together communities that otherwise would exist in separate spheres.

Consider the role Wenceslao Casares, an Argentine native who is the unofficial leader of the Latin American diaspora in Silicon Valley, has played in putting his home continent on Silicon Valley’s radar. In particular, two years ago, Casares persuaded Dave McClure, the former Paypal executive and founder of the accelerator 500 Startups, to take dozens of Silicon Valley types through Latin America. (McClure has been doing “Geeks on a Plane” trips for years, leading engineers, entrepreneurs, and venture capitalists through Asia and Europe for 10-day stints.) Casares achieved renown for selling 75 percent of his company Patagon.com, an online bank for Latin American markets, to Banco Santander for $585 million in 2000, which meant his recommendation carried weight. He’s now the CEO of Lemon.com, which produces an app—currently the most downloaded financial one on iTunes—that allows you to capture both your paper receipts and your credit cards on your mobile phone. It’s well positioned to be a player in the move toward digital wallets, which means consumers will eventually pay for purchases with phones, rather than cash and physical plastic.

The 2011 and 2012 Geeks on a Plane trips to Mexico, Brazil, and Argentina didn't just result in U.S.-based angel investors putting money in Latin American companies. An introduction facilitated by last year's trip led the Buenos Aires-based venture capital firm Companía Argentina de Participaciones to invest $400,000 in AwayFind, a Silicon Valley startup that offers a Web application that identifies and sends important emails to mobile devices.*

Most of the investing goes the other way around, with U.S.- and European-based investors backing companies in Latin America. McClure, for example, acquired a venture capital company, Mexican.vc, in August. Then, in September, the Spanish telecommunications giant Telefónica committed to spending $378 million for a venture fund that will focus on companies based in Colombia, Chile, Brazil, and Spain. The outside investment will help foster a more meritocratic lending culture in Latin America, a place where deep-pocketed investors have often tended to fund their own, rather than recognize talent from outside their ranks.

Consider Casares’ experience attempting to garner cash for Patagon in the early and mid-1990s. Casares grew up on a sheep farm in Patagonia, 100 miles from the nearest town. Potential investors didn’t really give him a hearing because he wasn’t part of the elite. “In the 33 meetings I had, they always asked the same thing, where I’d been to high school, who my family was,” he says. “Hardly anything about the business itself.” It wasn’t until the nonprofit Endeavor Global—which supports entrepreneurship in developing countries—put him on a roadshow in the United States that he was able to raise capital.

Patagon and some of the other first generation tech companies to emerge from Latin America were more or less copycats of U.S. websites. Patagon was a financial services website for Latin America, while the very successful Argentinean-based MercadoLibre is basically the eBay of the continent. Many of the companies emerging from founders from the region today, though, could have sprung from anywhere. The co-founder of Instagram, Mike Krieger, is Brazilian. Colombians are behind the site SnappyGo, which links travelers to locales in the cities they’ll be visiting. Hop.In, which produces an app that allows users to log pictures, websites, and music on the web, was created by a trio of Chileans, one of whom is the son of the billionaire Chilean president (so they probably wouldn’t have had trouble securing capital even under the old Latin American lending regime).

One thing that links a lot of the diverse companies coming from the Latin American expat population is that their founders have met with Casares. Esteban Sosnik, an Argentinean native who heads up the video game production company Atakama Labs, not only did a meet-and-greet with Casares, but got his start in the tech world by working for him. Today, Casares serves as a director at Atakama. The example of a guy from Patagonia making it in tech helped expand his fellow countrymen’s conception of what they could aim for, Sosnik says: “It shows what’s possible for an entrepreneur coming from Latin America.”

The emergence of foreign-born industry leaders can be the vital early step that allows more people from abroad to make their own inroads. Vivek Wadhwa has argued that “visible, vocal role models” like Khosla at Sun Microsystems are a major reason Indians have emerged as such a force in Silicon Valley: One out of four immigrant-founded tech companies there has an Indian behind it. To be sure, Indians’ dominance also has a lot to do with mentoring and networking organizations that were established three decades ago. The mentoring that goes on in the Latin American community emerged a lot more recently, and it is much less formal or widespread. Nonetheless, it’s happening. That will not just eventually offer up a more aps and the like for consumers, but subtlety change opportunities down south, too.

This article arises from Future Tense, a collaboration among Arizona State University, the New America Foundation, and Slate. Future Tense explores the ways emerging technologies affect society, policy, and culture. To read more, visit the Future Tense blog and the Future Tense home page. You can also follow us on Twitter.

Correction, Nov. 27, 2012: This article originally stated that Companía Argentina de Participaciones invested $800,000 in AwayFind. It invested $400,000. (Return.)

Alexandra Starris a fellow at the Center on Law and Security at New York University Law School.

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