Exploring Startup Ecosystem in Bogota
Colombia has been quietly working behind the scenes for the last decade, as it reinvented itself and prepared to re-emerge as a powerhouse on the global marketplace scene. Almost imperceptibly, Bogota has crept back into the public awareness as a thriving center of finance, power and innovation. Entrepreneurs around the world have turned their attention to this Latin American country and have begun to realize its potential.
When considering Bogota as a startup hub, it is important to analyze 1) the location, 2) the tax incentives, 3) legal incentives, 4) investors, 5) local resources, 6) specialization of the area, and 7) startups to watch.
The capital city of Colombia, Bogota is home to the third largest population in South America: nearly 9 million people. To keep it in a global perspective, that puts Bogota in the top forty largest cities of the world. It is easy, then, to understand why startups would consider it to be a vital city in the startup market. Located near the center of Colombia, it sits on a plateau in the Andes Mountains. Bordered by the mountains on one side, the Bogota River on another, the city has grown across the plateau and into the hills. The surroundings are beautiful, but there is more to this bustling metropolis than nature.
The immense size of the city leads to several issues that the entrepreneur must deal with. One of the most pressing concerns is in the area of transportation. With over 9 million people in the city, traffic congestion is a way of life. The city has taken steps to accommodate the immense number of people travelling on the roads every day and continues to work on efforts to eliminate traffic in a variety of ways.
While personal automobiles are a primary means of travel, the city has an extensive rapid bus system that is designed to make up for the lack of subway systems. The bus system is composed of two components: a traditional public transportation program and a high speed system that is much more expensive. Between the two components, however, the city is essentially covered with bus stops and the services are convenient to use.
The city is home to an international airport, making travel outside of Colombia easy to obtain. Additionally, the airport serves as a hub for the national airport, so in-country flights are convenient as well.
Advantages of choosing the city
Due to the immense size of the city, the entrepreneur has the opportunity to find everything their startup may need in a relatively short radius. The diverse population provides for virtually every target market, the infrastructure of the city is strong and the potential for growth is high.
In recent years, the potential Bogota offered was overshadowed by the looming fact that it was located in Colombia. The 90s provided the world with the worst possible view of Colombia: the home to a strong drug cartel that ran wild through the country. Government officials began making serious changes in the country and by 2004, the country was transformed. Streets were safe, tourism was beginning to grow and the economy began to boom. In the last decade, Bogota has reinvented itself as an economic powerhouse and entrepreneurs have begun to take notice. The country has a renewed sense of identity, a new purpose and a sense of determination to embrace the future.
Startups that choose Bogota as their headquarters can take advantage of the exploding marketplace: investors are heading to Colombia with their money, and they are looking for companies to invest in. Capitalizing on the current push for entrepreneurship not only puts startups at the front of the economic wave, it offers the chance to establish a presence in one of the largest marketplaces in the world.
Perhaps one of the strongest motivators for selecting Bogota as a startup hub can be found in the impressive tax incentives they offer. Since 2002, the government has made entrepreneurship one of their top priorities and their efforts have paid off. They began to work on an incentive program that developed enterprise zones and free trade zones. Companies established within a Free Trade Zone are also eligible for a preferential income tax of 15%.
To further encourage innovation, they instituted a 175% corporate income tax deduction for companies in scientific, innovative or technological endeavors. For companies that are working toward improving the environment, there is a 100% of investment deduction. There are exemptions available for products developed and produced in Bogota for export, as well. Those production companies are exempt from the aggregated value tax, as well as the local commerce tax.
As Bogota continues to emphasize the push for innovation, the tax benefits for both entrepreneurs and investors will continue to develop. Companies that operate within the Free Trade Zone (FTZ) are eligible for a host of incentives that encourage entrepreneurs to focus on innovation by eliminating high tax liabilities and fees. With a growing economy and a large number of companies entering the global marketplace, their plan seems to be working.
While the tax incentives are appealing, it is imperative that entrepreneurs wishing to establish their business in Bogota seek professional tax advice regarding the tax liabilities they will encounter. Recent changes to the tax law for residents can be intimidating and cumbersome – find a reputable CPA who specializes in foreign startups to address any questions or concerns.
The Free Trade Zone established in Bogota allows for a variety of benefits and incentives. Companies within the FTZ are eligible for duty free importation of materials, purchasing materials, services and capital goods without Value Added Tax (VAT). They also have the possibility of setting up a single company FTZ anywhere in the county, depending on specific targets and criteria.
Government support in Bogota has immense value for the entrepreneur. Initiatives by the leadership of the country have resulted in a streamlined application process for entrepreneurs; now opening a business in Colombia takes half the time than in other Latin American countries. Additionally, the city of Bogota is extremely diverse, and entrepreneurs from around the world can feel at home in the multicultural city.
The establishment of HUBs within the city provides for collaboration and support within the growing startup movement. This allows for entrepreneurs to take advantage of resources such as housing and office opportunities that are specifically designed for them.
Ensuring that the startup is setup properly is a fairly simply process; however it is advisable to seek legal counsel in Bogota to make sure that everything is properly taken care of.
The Colombian government has made a commitment to innovation and is backing their commitment up with the establishment of an investment match program. Investors willing to invest up to half of the capital a startup needs into a company will be matched by government funds, lessening the risk for the investor and providing much needed capital for the entrepreneur.
A unique aspect to the Bogota startup scene is the addition of Polymath Ventures. A startup studio, Polymath Ventures is a full-service startup firm. They design the venture idea from concept to reality. By establishing the venture concept, finding the entrepreneur and talent to spearhead the concept and securing capital, Polymath is creating their own opportunities for investment and working to guarantee their success.
As entrepreneurs establish successful startups and more companies begin to demonstrate successful exits, the number of ‘home-grown’ investors will grow. Entrepreneurs who reach success help to encourage innovation and provide an example of excellence for others to follow. As they begin to give back to the startup community, it becomes part of the innovative culture in Bogota and the numbers will continue to grow.
Currently, there are few angel investors or venture funds. The absence of these type of investors in the city has encouraged investors to being establishing funds in the city. A qualification process is recommended for investors, which would eliminate some of the problems the city has had in the past with investors. Seeking out angel funds and venture capital firms would also increase the number of investors who are established in the city. This allows the entrepreneur to make contact with investors without having to do much self-promotion. As the city’s entrepreneur market grows, doubtless more investors will make their way to the Latin American city.
Bogota has an impressive number of universities, schools and technical colleges. With a large number of people migrating to the state’s capital every year, their education system is flourishing: over 100,000 people graduate every year in a professional or technical field. This annual influx of trained workers creates a wealth of potential employees who are specifically educated for highly advanced fields. Entering the Bogota workforce, these workers are helping to generate excitement about the growing technology market in Colombia.
For an entrepreneur in Bogota, ImpactHUB Bogota is a vital source of information, support and encouragement. A diverse network of individuals operate within the HUB: entrepreneurs from France, Canada and India have all worked together within the innovative project. The HUB offers co-working space, support groups, networking meetings and contacts with investors.
Global accelerator Wayra is another important resource in Bogota. The co-working space offers funding, office space and mentoring to accepted companies.
The culture of Bogota is important when considering the city as a startup hub as well. Studies have shown that cities with a thriving cultural aspect tend to be more successful as innovative centers. With an established number of cultural venues, Bogota has proven itself to be a hotspot of artistic expression. Over 50 museums dot the city’s landscape, along with 60 art galleries and a host of libraries. Their largest library boasts an annual visitor count of over 6 million people. Theaters, opera houses and sporting venues are another important piece of the culture of this large city, and its impact on the world’s culture is being recognized: Bogota is considered one of the world’s most important regions for art development.
The startup market in Bogota is relatively new, having only taken off in the last few years. However, the government of Colombia has made it clear that their future is in innovation. By promoting entrepreneurship in technology, innovation and scientific processes, there is a clear message: tech markets are welcome in Bogota.
Significant natural resources surround Bogota: oil, natural gas and gold are deposited throughout the surrounding areas. Entrepreneurs who develop innovative methods of using resources without depleting them, along with preserving the environment have massive appeal to the Colombian government. Startups that can use innovative technology to tap into these resources are in high demand as the global economy grows.
The large number of graduates from technical institutions in the city lends itself easily to a specialization in the technology sector. Through collaborative efforts, co-working zones and startup hubs, individuals are given the tools to successfully launch a startup in a tech field.
STARTUPS TO WATCH
The number of successful startups in Bogota is growing, but it has not been an easy road. With the new regulations that promote entrepreneurship and a government that is supporting the role of entrepreneurs, there will be an increase in the number of startups to watch. While the first groups of startups seemed to have a global function, the next wave of startups will seem to be more intent on local innovation. The ration of global to local startups has been disproportionate, but recent months have a seen a surge in the numbers.
StartBull: Discouraged by the absence of any financial education tools available in Colombia, Santiago Pineda decided to create his own. Through diligent research, he was able to create a service that eventually became StartBull. With virtual currency, the user can set up a faux stock market account that allows users to negotiate prices, try investment strategies and discover the ramifications of different tax situations.
Nethub: A platform based in the cloud, Nethub allows customers to manage their online marketing interactions. Analytics, business and marketing tools provide clients with all the information they need to analyze and effectively use their online presence in one convenient and easy to use interface.
Codetag: Established to provide developers a connection to coders and gamers. Through interactions and collaboration, users are able to improve their skills and encourage other users. Online interfaces give opportunities to demonstrate what skills the user has mastered.
Oja.la: Online educational videos for adults, completely in Spanish, are the main services of Oja.la. Over 5,000 classes, 200 videos and hundreds of chats, oja.la will be speaking a log of Spanish.
Senseta: An online analytics, Senseta offers users a method of tracking internet usage for marketing purposes. With the use of their analytic program, users can determine where their customers are, find the words that were used to search for them and create marketing opportunities based on the results.
Authy: A two step authorization process app, your phone and apps will be on a secure network with just a few simple keystrokes. With Strong authentication, daily use apps will be kept behind a secure password structure that prevents non-authorized use of either the phone or the app.
For many years, the only reason Bogota was in the news was drug related. With determination and courage, the government reclaimed their city and has begun to establish a new reputation: innovator and trend-setter. Not content to simply allow other companies to expand, the city put a new priority on startups and innovation and backed it by a large budget. These exciting changes have brought a new sense of identity to the city and have invigorated their innovative endeavors. Entrepreneurs and investors alike could benefit from a careful consideration of this historic city.
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