What is the deep tech revolution, the phenomenon that Latin America and the Caribbean are taking advantage of?

August 21, 2023

Advanced technology startups, or deep tech, are gaining momentum in Latin America and the Caribbean. Colombia is lagging behind.

deep tech, advanced technology companies, artificial intelligence, technology startups, Más Colombia

Never before has it been so easy to create advanced technology companies, known as deep tech, in Latin America. This is according to a recent study by the Inter-American Development Bank (IDB), in association with several private organizations, entitled Deep Tech, the new wave.

The report highlights the significant progress and promising future of advanced technologies in Latin America and the Caribbean (LAC), and stresses that deep tech can play a crucial role in efforts to overcome the economic, social and environmental challenges facing the region.

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Advanced technology companies in the region are creating plants that produce animal protein and make a leather substitute from mushrooms, to give just two examples.

Deep tech advances in LAC

Fourteen Latin American and Caribbean nations have ventured into the creation of deep tech startups. Argentina, Brazil and Chile have emerged as leaders in the sector, with 30%, 30% and 19% of these companies, respectively, according to the IDB report. Thus, they account for almost 80% of the companies in the sector in the region.

Likewise, these three countries account for 71% of the market value of advanced technology or deep tech startups in the region. While Argentina leads in terms of the number of companies, Chile leads in terms of their value. Chilean startups are worth 25% of the deep tech sector in LAC; those of Brazil and Argentina, 23% in each case.

According to the IDB publication, the success of these three countries is due to the fact that they have built a solid ecosystem for entrepreneurship, both in terms of the economic environment and financing, and have a good number of specialized researchers.

Deep tech in LAC covers a variety of sectors

The information provided by the IDB highlights that biotechnology is the most prominent sector among deep tech startups in the LAC region, representing 61% of these companies.

In this sector there are developments such as the company Moolec, from Argentina, which genetically modifies plants to produce animal proteins, or the startup Spora, from Chile, which seeks to replace animal and synthetic leather with a fungus-based material.

It is followed by the Artificial Intelligence (AI) sector, with 11% of deep tech companies. In this sector there are companies such as NotCo, from Chile, which creates plant-based alternatives to replace animal-based food. Or the startup Egg, from Argentina, which uses Artificial Intelligence to reduce education costs.

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The IDB study also notes the presence of other emerging deep tech sectors, such as nanotechnology (6%), clean tech (5%), space tech (4%), advanced mobility (4%), robotics (2%), advanced manufacturing (2%), health technology (2%), advanced materials (1%) and medical devices and others (less than 1%).

Several deep tech companies in LAC are consolidating

The IDB counts a total of 340 deep tech startups in Latin America and the Caribbean.

Of these, only 3 companies in the region have market values above US$500 million. Establishment Labs, a Costa Rican company dedicated to manufacturing cutting-edge medical devices, stands out in first place. This company is listed on NASDAQ, the second largest stock market in the United States, with a value of US$1.8 billion.

There are two other companies, in addition to Establishment Labs, that have managed to surpass the $500 million value. One is Chile’s NotCo, which specializes in food technology, and the other is Argentina’s Bioceres, which develops agricultural technology.

The IDB report notes that there are 9 companies with market values ranging from US$100 million to US$500 million.

Another 12 startups are in the $50 million to $100 million range, for a total of 24 companies with market values above $50 million.

Colombia lags behind in deep tech

The IDB counts only 9 deep tech companies in Colombia. That means it has 0.2 deep tech startups per million inhabitants, a very low figure compared to Chile, which has 3.4 deep tech companies per million inhabitants.

Colombia’s nine companies represent, in number, 3% of all companies in the region and account for 1% of the total value of all deep tech startups in LAC.

A first reason for this lag is the lack of specialized deep tech funding in Colombia. Another drawback is the lack of researchers, as the country has 2% of the region’s researchers, but concentrates 7% of the population. The IDB research highlights that, despite being few companies, it is positive that they cover different sectors, including nanotechnology, Artificial Intelligence, biotechnology, advanced mobility, advanced connectivity and medical devices.