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Profile of the young Latin American entrepreneur

They belong to the middle class, have university degrees and on average begin to think about being entrepreneurs at 25, but they do not open their first company until about 5 years later. These are the characteristics that define the young Latin American entrepreneurs, according to a recent study by the Inter-American Development Bank that is the subject of the book Desarrollo Emprendedor (published in Spanish and available in English in the fall).

“The study wanted to identify the factors that influence the creation and the development of new companies in Latin America," according to Hugo Kantis, one of the authors of the report. The entrepreneurs emphasized the desire to be their own boss, to contribute to society, to increase their income and to put their knowledge into practice. And many of them are successful in their endeavors. "They grow fast and in the sixth year they have about 40 employees," affirms Kantis. "Their main clients are usually other companies." Peculiarly, most of those companies are created by teams of entrepreneurs, not by individuals. The majority of entrepreneurs are men; only about 10% are women.

Part of the study gathered in Desarrollo Emprendedor is based on information from 1,000 companies in Argentina, Brazil, Chile, Costa Rica, El Salvador, Mexico and Peru. According to the report, by the third year, the successful companies have an average of 26 workers and annual sales of US$ 800,000.

In most cases, the initial investment required to create a company does not surpass US$ 100,000. In Mexico the average investment is the smallest, while Argentina requires the highest initial investment. Another difference is that in countries with small economies - Costa Rica and El Salvador are good examples -the option to export is explored in greater detail than in countries with larger economies, where the domestic market constitutes the main source of demand for new businesses. In countries such as El Salvador, international sales seem to have benefited from the connections the entrepreneurs have with people of their same nationality living abroad.


Financing

There may not be a lack of creativity, but the same cannot be said about financing sources. Latin American entrepreneurs agree that the greatest obstacle to creating a company is financing. In most of the countries in the region, starting up a business requires own resources. Eighty percent of the entrepreneurs surveyed have used personal or family savings as an important source of financing. Less than 40% had access to banks as a source of start-up capital, and less than 5% counted on private investments or venture capital. 

The results of this study suggest that lack of access to formal financing in represents an important obstacle for the creation, survival and growth of companies in Latin America. The conclusions of the report indicate that when financing sources are not available, entrepreneurs are forced to reduce the initial size of the company, look for new partners or delay the launching of the business, which can entail the loss of a business opportunity.

Desarrollo Emprendedor is edited by Pablo Angelelli, Hugo Kantis and Virginia Moori Koenig.