The pandemic advanced digital transformation in 3 years in Latin America
One of the most talked about phrases during the pandemic – after the “new normal”, “stay at home” and “shut up” – was that there was an acceleration in the digital transformation of people and companies. For the most optimistic, the jump would reach a decade. But the most accurate figure is around 3 years. At least that’s how the staff read it Atlantican early-stage investment fund led by Julio Vasconcellos.
In the latest edition Latin America Digital Transformation Report, its annual study on trends and digital transformation, the manager shows, for example, that e-commerce in Brazil is currently at a level that would only be reached in 2.5 years, representing about 7% of everything sold in the country. And that after they retreated a bit, since at the peak of the pandemic the share went from double digits.
“In addition to online shopping, we have moved to digital banking and telemedicine, which now has regulatory support and adoption by patients and physicians,” says Julio. In an interview with startups, explains that the movement detected in Latin America is different from what is happening in the US and Europe. In the Northern Hemisphere, after the boom seen during the pandemic, there has been a return to previous habits, and the use of digital services has returned to its historical growth pattern.
The explanation for this rise and fall is that, as a good part of the population already knew and was used to using technology, when the isolation measures were eased, there was no change in habits.
In Latin America, because penetration was low before the pandemic, many people had contact with Internet services for the first time. And those who have never eaten molasses, when they eat, they smear themselves. “Whoever uses internet banking and telemedicine once, does not stand in line, does not want to go back to what it was before,” says Julio.
Moving on, he says he doesn’t know how fast adoption will progress, but the trend is that it’s a pace he considers more natural or close to what it was before the pandemic.
The 200-page study provides information on the venture capital market in the region, remote work and a special section that analyzes the development of crypto and Web3, fintech and digitalization of small businesses in Latin America.
As for the venture capital market, it is read that the moment is cautious, but that the perspectives are optimistic. Despite the fact that the volume of investments fell by about 40% in the first 6 months of 2022 compared to the same period last year, there is still capital available for investment.
Furthermore, the current level remains above any other year in history, which reinforces the positive outlook. It is estimated that the region has wealth creation potential that could reach US$1 trillion as digital companies grow and represent a larger share of the economy. Today, that percentage is 1.5% for the region and 3% for Brazil. In the USA it reaches 50%. In China it is 20%.
State of the venture
An interesting piece of information stands out in the assessment of the venture capital market. Foreign investors are pulling money out of the region at a faster pace than local investors. Between January and June, there were 58% fewer greenbacks watering the coffers of Latin American startups. Investors in the region slowed down check signing by 34%.
With less capital available, companies had to adapt. And that goes through the stretching of the box. Therefore, most companies began to look for at least 1.5 years of resources to survive, an extension of about 6 months in the plans. Those who were already looking at the horizon of 1.5 years of reserve, began to think about up to 30 months.
To get there, several steps were taken. At the top of the list is a hiring freeze, followed by a cut in marketing costs, a focus on unit economics and renegotiations and supplier changes. On the other hand, dismissals were only in 5th place.
In 80% of cases, the incisions were below 10% of the frame. In 15%, the level was from 10% to 25% of staff. The most affected area was operations, followed by sales, people, products, technology, customer service, finance and, finally, marketing.
The full study is available on the Atlantic website.
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