Blog post by Brian Kantt, LearnLaunch Associate
Imagine being able to sell your awesome edtech product to an addressable market that is about twice the size of the US, has the fastest-growing Internet population worldwide, and unlike the European market’s 24 (!) official working languages, speaks only two. Latin America is an edtech entrepreneur’s new Land of Opportunity, but it is also a Land of Caution. Breaking into the continent can be tremendously rewarding, but it requires a delicate balance of flexibility, resourcefulness and patience.
Additionally, improving education is one of Latin America’s biggest challenges. Be it in K-12, Higher Ed, or lifelong learning, the continent’s edtech space is fertile ground for disruption that can only emerge from passionate, creative entrepreneurs.
The blogosphere is crammed with general advice on expanding your startup south of the Rio Grande, so I’m going to focus on three pieces of practical advice that will save you either hours of research or a huge headache. Don’t underestimate the importance of the following key aspects – understanding each of these differences can either make or break your expansion strategy.
- Localize, localize, localize
We all know that customers are highly unlikely to buy from you if they don’t have pre-purchase information in their own language. However, unfortunately, translating your website to Spanish is just not enough. Latin America is home to at least six major varieties of Spanish, and I can’t stress enough the importance of tailoring your website, ads and all other content to the variety of the country that you are targeting. Otherwise, you run the (very likely) risk of users regarding your website as foreign and thinking it doesn’t apply to them.
While most tech startups seem to fail at this key aspect (I cringe every time Dropbox speaks to me in “Latin American Spanish” – whatever that means), global brands are great at this and have been doing it for decades. Here’s an example of a Coca-Cola ad tailored to Rioplatense (Argentinean & Uruguayan) Spanish.
Although translating to each country’s local variant of Spanish may seem like a daunting task, it really is not. Find a good translator on Freelancer or Upwork and translate your content to any standard variety. Then, get at least two people from each of the countries that you are targeting to proofread and adapt it to their respective variants. You can easily find people that will do this on these countries’ local Craigslist sites, and it’s cheap. For Portuguese, make sure you get a translator and/or proofreaders from Brazil, not Portugal.
Beyond your website, you obviously don’t need to worry about providing support in every regional variety: all Spanish dialects are mutually intelligible (it’s the same language, after all). Ideally, get someone who speaks both Spanish and Portuguese and you’ll be killing two birds with one stone.
Another key aspect of localization is showing prices in the local currency of each country. This is not just because most people won’t know what the day’s USD or EUR exchange rate is (and they also won’t care to find out), but mostly because they will regard your content as irrelevant to them. Ideally, you should also charge your customers in their local currency, but we are going to discuss that up next.
- Payments and buying habits
Over 60% of Latin American adults are still unbanked, which means they don’t have credit or debit cards. Even amongst those who are banked, there are still three things that you must take into account:
- Credit card limits tend to be fairly low, so payments via installment plans are extremely common and largely preferred.
- Many will still feel uncomfortable using their credit card information online, and they might want to pay with an offline method for their first interaction with your company.
- Many credit cards only allow domestic purchases. In Brazil, Latin America’s giant, 70% of all issued credit cards are national purchases-only, but it doesn’t end there: even the remaining 30% of cardholders whose credit cards do allow international purchases are charged a 6.38% tax called IOF on every cross-border operation. Argentina’s current situation for international payments is so messy and complex that it would require a completely separate blog post; and you might as well cross Venezuela off your list.
As you probably figured out by now, you absolutely must offer local payment solutions, and in each country’s local currency (PayPal will only work as a local payment option –i.e. which allows people to pay you in local currency and with local payment methods- in Mexico). Ebanx offers the most comprehensive solution for Brazil, Mexico and Peru, allowing your clients to pay in cash, domestic credit cards (including installment plans!), local bank transfers, and other payment methods. PayU Latam works for Colombia, Chile and Panama.
Although Stripe will work seamlessly for charging in local currency in many countries like Colombia, Chile, and Mexico, your clients in Brazil may have some trouble (their transaction may be declined and if approved, they will still have to pay the IOF tax), and it obviously doesn’t have the installment payment plans or offline payments advantages. I would include it as a secondary/alternative option in every country except Brazil, Venezuela and Argentina.
- Consider inflation and currency volatility
Inflation is a common illness in Latin America, and exchange rate volatility tends to come along with it. Argentina and Venezuela are amongst the countries with the highest inflation rates in the world, and inflation fears now haunt Brazil as well. In this scenario, you must be prepared to act fast and quickly modify your pricing strategies. Raising prices is largely unpopular and in general you might lose a few clients with every hike, but ultimately it is something that people in high-inflation countries are used to and sometimes even expect. It’s a great idea to have a pricing contingency plan ahead of time for every different scenario that you can think of.
Latin America is a breeding ground for entrepreneurs and it is ripe for disruption. But you should only go for it if you are ready to combine sophisticated planning with the ability to cope with unexpected change.