Three Reasons VCs Should Look at LATAM During Economic Downturns

LATAM has much to offer for portfolio companies looking for affordability, new tech ideas, and talent. Especially when they’re forced to change their strategies during an economic downturn. Smart spending is the way to go to meet milestones and keep VCs excited. But, adaptability and the search for new horizons are key when going through a rough patch.

We've explored three possible scenarios portfolio companies might go through during an economic downturn, and show you how LATAM could have the answers to moving forward.

What to expect from Economic Downturns

The 2008 and 2019 economic downturns showed VCs that a startup's strategic planning is essential to make the best out of a tense financial situation. It’s going to be a rough patch for many portfolio companies, and they will have to face some difficult scenarios.

Layoffs are always hard, it's not easy letting someone go. It's a harsh reality, but startups must adapt if they intend to withstand the race. Startups need to consider that losing members of their workforce is a given and a pain to go through with.

There will be less money to spend. Budget management is also something portfolio companies will need to focus on if they intend to come out on the other side of an economic downturn. They will need to adapt to the times if they intend to survive. Change is always hard, and dealing with it and the frustration that comes with it is not easy.

#1 The search for affordability

Founders acting as if nothing is happening around them during an economic downturn will warrant the failure of their business. It's essential for each team to course-correct how they are using their budgets to move forward.

Every startup should cut down their spending and use their budget wisely for at least the next two years. There is going to need to be some spending for them to reach their milestones, but maintaining their U.S mindset won't allow them to find new paths of affordability.

This is where the startup universe should consider LATAM due to the affordability it can represent for tech companies looking to cut down their expenses. The truth is that LATAM countries’ cost of living is lower than what you may expect to find in the U.S.

At Awana, we focus primarily on helping startups access the region's tech talent and hire strong engineering teams. The positive impact we've witnessed on both sides is outstanding.

Developer rates in LATAM are lower without risking the coding quality, commitment, and seniority that companies need to successfully reach their milestones. The same may apply to other needs startups may have during economic downturns; they have to learn how to access what LATAM may offer and be open to searching for solutions to their problems outside of the U.S.

#2 Developing new technology

Founders go through much stress when looking for ways to develop new ideas during a rough patch, but they know their startup's success depends on going through with them. The ability to act during a problematic situation is a good sign and is one of the first things you should expect from portfolio companies.

One of the main struggles could be finding a way to go through with the development of their ideas without putting at risk their business. Customers will keep buying what portfolio companies are selling, and businesses must be ready to explore innovative ways stakeholders can access them.

This is another reason we advise U.S. companies to try to develop their products and technology ventures in LATAM. Affordability is a given, but we would surely add that product development in LATAM may bring impressive results to your ideas.

LATAM candidates have impressive backgrounds, and their experience is sure to bring new ways of solving problems for your team. They are great allies for portfolio companies during their product development phase.

LATAM’s tech hub has been growing steadily and has proved itself to be up to the standards you may expect to find worldwide but with a spice of its own. Expect friendly, empathetic, and committed professionals who will work with portfolio companies with open arms, which may give them unique insights into the technology they need to create to withstand economic downturns.  

#3 Finding new talent

One of the hardest things for portfolio companies under a VCs wing is dealing with employee lay-offs, and this doesn’t seem to be changing anytime soon during this economic downturn. It's tough, and even after HR has had to go through layoffs, teams still have to worry about how they will manage their milestones with a limited workforce.

There may be ideas floating around, but how will each team handle their development with their arms tied to their backs? At some point, portfolio companies will need to look for new talent if they want to fulfill new strategies.

Don't doubt that the competition to hire affordable talent in the states will be ruthless, especially with big corporations scraping the bottom of the barrel. This is where LATAM’s untapped talent has been making waves during the last two years.

A 2022 hiring report shows that LATAM has become a hot spot for those looking to find talent. The numbers show that as each day passes, more and more companies are looking south when they need to hire.

The pandemic allowed remote work settings procedures to be perfected, becoming a solid global standard. We've seen how it has improved with the creation of remote workflow software and even roles inside startups explicitly made to ensure team productivity.

This makes hiring in LATAM a perfect location for those open to remote settings due to its time zone advantage over other continents worldwide. So if a portfolio company is struggling with finding and hiring talent, LATAM might be a smart first choice during an economic downturn.