How China’s Didi Quietly Grew into a Latin American Ride-Hailing Giant, 500 Startups-Backed Talkpush Secures Funding to Expand into Latin America, Magma Partners Acquires Rampa to Double Down on Mexican Startups, and More...

Other featured stories include: Coronavirus Pushes Latin America’s Budding Startups into Survival Mode, Latin America’s Copycat Advantage: Not Being First To Market, Riot Police Block Highway as Peruvians Attempt to Flee Amid Lockdown, Itaú Unibanco Announces BRL $1 Billion Donation for Coronavirus Relief Efforts in Brazil, and As U.S. factories in Mexico Remain Open, Workers are Dying Amind Spread of COVID-19.

In January, Chinese ride-hailing giant Didi Chuxing quietly marked its second anniversary in Latin America, where the company operates in six countries across the region, serving roughly 20 million registered users and employing 1 million drivers. Within weeks of this milestone, its home market, China, was in lockdown due to the outbreak of the novel coronavirus, and the company went into crisis mode to respond.

With the lockdowns lifted in China this month, Didi said business in its home country has “bounced back” and that it is making “product adjustments”, including the launch of new services to meet the rising demand for home deliveries from Chinese consumers who are still tentative about shopping in busy markets and shopping malls (South Morning China Post). 

Some of these new services are now being rolled out in Latin America, where the company claims to have a 30% market share. Last month, Didi launched ride-hailing services in Panama, marking the sixth Latin American country where it operates.

Didi’s expansion into Latin America came two years after it emerged victorious in an expensive price war with Uber Technologies in China.

Martin Mao, Didi’s head of its business in Mexico and Central America, noted that his first impression upon arriving in Mexico were the country’s similarities to China, notwithstanding the different language and cuisine.

According to Mao, a common conversation starter among newly arrived Didi colleagues was  “Which city has the worst traffic congestion – Beijing or Bogota?” 

Since Didi pushed Uber out of China nearly four years ago, the company has been on an acquisition spree around the world: investing in Grab and Ola in Asia, Lyft in the US, 99 in Brazil, Taxify in Europe and Careem in Dubai.

The milestone for the company’s active operations in Latin American came in January 2018 when Didi fully acquired 99. Three months later, they entered Mexico with its own wholly owned subsidiary.

Developing markets are expected to form the backbone of Didi’s global expansion. In an internal meeting last Thursday, Cheng forecasted that Didi would be processing 100 million orders per day globally within three years, with a monthly active user base of 800 million, according to a company statement issued on Friday.

Not everything from China works in Latin America, however. Shortly after launching in Latin America, Mao’s team found out that most people used cash for transactions, unlike in China where digital payments were ubiquitous.

Didi responded by entering into partnerships with financial institutions in both countries and issued driver’s with bank cards. For example, Didi card users in Mexico can top up their balance at Oxxo, the country’s largest convenience store chain.

Food delivery services, another trend that is ubiquitous in China, has also been introduced by Didi. DidiFood was first launched in Mexico in early 2019, but has since expanded with the roll-out of 99Food in Brazil in December and a service in Osaka, Japan, that debuted on April 7 this year.

Didi has faced stiff competition in Latin America from early movers like Uber, which generated nearly 14% of its total revenue last year from the region.

In its 2019 annual report, Uber said Didi has made “significant investments” to gain or maintain its position in certain Latin American markets, without elaborating.

However, the era of cutthroat competition between ride-hailing giants Didi and Uber are long-gone, according to Mao.

Magma Partners, an early-stage venture capital firm in Latin America, recently announced the acquisition of Rampa Ventures, a Guadalajara-based startup accelerator. As reported by LatAm List, Guadalajara will be Magma Partners’ base for investing in Mexican startups, in addition to helping other startups from the region and the U.S. open operations in Mexico.

As part of the acquisition, Mak Gutierrez, Rampa’s founder, will join as CEO of Magma Infrastructure. Inspired by a16z, Magma’s internal agency is designed to support Magma’s 75+ startups across Latin America to help generate sales, create partnerships, and scale more quickly.

Rampa’s Alexa Clark Ibarra, will also join the Magma Partners GP team as an analyst, leveraging her experience recruiting startups to Rampa’s accelerator programs.

Magma Partners has invested in 12 Mexican startups, including Albo, Billpocket, and Moons, making Mexico a key part of the firm’s investment thesis.

Guadalajara has become an important hub for technology companies, producing some of the most talented engineers in the region. Its proximity to Silicon Valley in addition to the high concentration of engineering talent makes it an optimal base for Magma’s deepening roots in Mexico.

Magma’s 15-person team between Magma Partners and Magma Infrastructure invests across Latin America from places like Guadalajara, Mexico City, Bogota, Santiago, Buenos Aires, and the United States.

Jose Calderon, the chief executive of Colombian food technology startup Muy, had expected to spend the past few weeks gearing up to raise fresh funding from venture capital firms for an ambitious expansion plan. Instead, Caldron was busy shuttering all 40 of the company’s restaurants in Mexico and Colombia, as the coronavirus pandemic forced lockdowns across the region.

Calderon has cut his own pay by more than half and asked employees to take voluntary cuts six months after raising $15 million. As a veteran entrepreneur, he stated, 

Calderon’s experiences reflect the heavy hit the coronavirus has dealt to startups in Latin America, whose tech sector– with a strong helping hand from Japan’s SoftBank Group Corp in particular- had finally begun achieving billion-dollar valuations after years of struggling to attract international investors.

Around the world, startups have been battered by the coronavirus, which has confined billions of people to their homes and brought much of the global economy to a halt. In emerging markets like Latin America, it’s an especially precarious time for the technology sector’s development, and that could make it harder for entrepreneurs to rebound.

For startups across the region, survival has become the order of the day. In a memo titled “Rules of Wartime,” Argentinian venture capital firm Kaszek Ventures, which has invested alongside SoftBank in startups such as Brazilian used-car platform Volanty and online housing broker QuintoAndar, urged entrepreneurs to assume revenues will plummet to zero and capital will be scarce for the next several quarters.

In some markets, the impact is already stark. In Brazil, funds invested in its venture capital market dropped 85% in March from the year-ago period, according to the market intelligence arm of Brazilian firm Distrito (Reuters). 

However, some deals are still coming to fruition. SoftBank said this month it will invest $48 million in Brazil’s online pet products retailer Petlove, while Brazilian logistics startup CargoX announced it had raised $80 million.

As layoffs and salary cuts ripple across the region, even startups that can still raise money have been forced to do so at fire-sale prices.

Chief Executive of Mexican fintech startup Visor ADL Ruben Sanchez said they had explored a sale, but instead was able to bring in an investor. The company is now finalizing a funding round, though he conceded it is at a discount to the valuation.

Scooter company Grow, once one of Latin America’s most promising startups after high-profile funding rounds, is now in hibernation after the business was sold. The company, which had already been struggling prior to COVID-19, suspended its operations across Latin America in March.

In Mexico, this left crews charged with distributing the scooters out of work. Grow offered the workers help finding new jobs, but they protested by occupying a Mexico City scooter warehouse for about two weeks, according to a person with knowledge of the matter.

Grow said in a statement that after a period of negotiations it reached a deal with the workers, adding it had worked to minimize job losses and was experimenting with new offerings, such as a monthly rental system in Brazil.

For the startups who survive this turmoil, timing is everything. 

Colombian startup Ayenda, a high-tech hotel chain, announced an $8.7 million round in February, just before the crisis hit the region. Chief Executive Andres Sarrazola had figured he would burn through the money by December, but has since hit the brakes. The company has reduced its burn rate by up to 40% by cutting marketing and travel, buying it at least 16 months, Sarrazola said.

Gym membership app Gympass, backed by SoftBank in a $300 million round last June, said it reduced its workforce worldwide by 20% as users stay home. The Brazilian-founded company, now headquartered in New York, is currently offering exercise classes online.

At Colombian delivery startup Mensajeros Urbanos, Chief Executive Santiago Pineda said a funding round has been delayed, putting them on edge even though the company has increased business doing deliveries for pharmacies and supermarkets.

Eric Perez-Grovas, general partner at Mexican venture capital firm Jaguar Ventures, said companies that make it through the crunch could be poised for success.

Calderon, the food entrepreneur, is already laying plans to revive Muy, which runs “cloud kitchens” catering to the food delivery sector and also operates its own restaurants, using artificial intelligence to predict demand. The company had halted operations so it could figure out best practices to keep employees safe, Calderon said, and began reopening locations for delivery orders last week. But it is still difficult to revisit the presentation he planned to share with investors, boasting rosy projections of doubling average sales per store.

Latin America is, most of the time, not a first mover. Contrary to tech powerhouses such as the United States, Canada, and China, the majority of the region’s innovation possibilities have come from adapting or copycatting startups that previously worked (or did not) elsewhere.The advantage to this? Literature, and lots of it.

Latin America has been home to first movers before. Mercado Libre and Taringa! in Argentina, both started very closely (timewise) to Amazon and Facebook. 

However, this is not the norm. For example, SoftBank’s Latin American portfolio is practically a Spanish and Portuguese translation of its Vision Fund and its companies in India, China and the U.S.

Other equivalents include Ayenda from Colombia–thought of as the Oyo Rooms of Latin America; Selina being compared to WeWork; Grow as the Lime of Mexico, and so on. 

But, is there even an advantage to being late to market? According to Crunchbase News, in Latin America, it is not so late. 

While most local tech products are relatively new, these companies have already seen the rise and fall of their foreign counterparts, giving them the advantage of identifying what works and what doesn’t.

Ayenda Rooms is a prime example. After the massive losses experienced by India’s Oyo in 2019, Ayenda’s founders looked at the situation and probably saw it was not the right way to go. 

It has now become clear that 2020 is the year that has forced founders to evaluate their business strategy and reassess their action plans.

Rappi—Latin America’s largest last-mile delivery company—raised $1 billion led by SoftBank last year. Currently, the company is laying off 6% of its entire workforce, and facing competition on its home turf from Domicilios.com and iFood.

COVID-19 has caused worldwide lockdowns, causing many retail businesses to shut down. Many startups were agile and digital enough to avoid the same fate. However, no one will be able to avoid the reduction of income from traditional clients who shut down or paused operations.

Startups will have to stand and endure as the worst happens. The silver lining will certainly be that there will be ever more literature and data points of high- and low-profile business failures to use as references in future scenarios.

Interestingly enough, data suggests that not only is Latin America lagging behind the U.S. and other countries in terms of technological innovation, but the region is also behind when it comes to what stage of the pandemic we’re in.

This means that Latin America can learn from what U.S.-based startups are doing to confront the pandemic:

If there’s a two-month latency window, local startups should make the most of it and learn. 

Newer, more innovative companies will inevitably continue sprouting up, regardless of the macroeconomic conditions. In addition, the under-appreciated diversity of the regional ecosystem has protected many of its most innovative startups in the long term.

It is true that some of Latin America’s first-movers, whose products and business models are new and disrupting, may have a harder time finding precedents to work from.

For example, Chile’s The Not Company is a revolutionary application of machine learning on food’s biomolecular structure. Although not as dramatic as other companies, it too is letting some of its workforce go.

Fortunately, more innovative companies are being launched in Latin America every year. Some of the strongest countries in terms of new products in the region include Mexico, Chile, Colombia, Argentina and Peru, not to mention Brazil.

Nubank becoming one of the world’s largest neobanks, Rappi turning into Colombia’s most valuable tech company and YC’s increasing interest in Latin America, as well as the rapid growth of the local venture capital ecosystem, may trigger a dejà-vu as to what has happened before in the history of other parts of the world.

As the country’s strict coronavirus lockdown entered its sixth week, riot police in Peru have blockaded a major highway and fired teargas into crowds of people attempting to flee the capital city and return on foot to their rural hometowns.

On Monday, local television images showed hundreds of families, including young children, trekking along highways with their belongings on their backs as they made long journeys to family homes.

Poor Peruvians have been trying to leave Lima since last week, many saying they had to choose between hunger or homelessness in the city or risking exposure to COVID-19 as they try to return home.

Despite imposing some of the most stringent quarantine measures in Latin America since mid-March, Peru reported a total of 16,325 coronavirus cases and 400 deaths on Monday. This places the country second only to Brazil in the number of infections in the region. Notably, Brazil has a population seven times larger than Peru.

Yet the response of the Peruvian president, Martín Vizcarra, and his Brazilian counterpart could not be more different. While Brazilian President Jair Bolsonaro has consistently disregarded social distancing rules and downplayed the COVID-19 pandemic, Vizcarra is widely seen by Peruvians to have reacted decisively to the pandemic, deploying troops and the police to enforce a lockdown and a nightly curfew.

According to The Guardian, Alonso Segura, a former Peruvian finance minister, said the mass movements of people to the countryside showed the state response was pushed to its limits, despite having launched a huge stimulus package worth 90 billion Soles ($26.8B USD) equivalent to about 12% of GDP – last month, which included millions of fortnightly cash transfers to poor families.

More than 70% of Peruvians work in the unregulated economy, according to the country’s statistics institute.

Itaú Unibanco Holding S.A. (“Itaú Unibanco”) announced to its stockholders and the general market that it is setting up the “Todos pela Saúde” (All for Health) initiative. The initiative will be funded by the donation of BRL $1 billion for novel coronavirus relief efforts aimed to fight its effects on Brazilian society.

A team of seven renowned experts will be responsible for setting out the actions to be financed by these funds.

The initiative, Todos pela Saúde, will operate by way of four axes of action:

As reported by Yahoo Finance, Itaú Unibanco wants to be part of the solution to this crisis. Against this backdrop, Todos pela Saúde joins other initiatives already disclosed in the last few weeks, such as the amount of BRL $250 million that has been allocated to several different projects for improving Brazil’s hospital infrastructure, in addition to the production and purchase of test kits, protection masks, health equipment, hygiene kits, and food.

Throughout March, even as business and manufacturing came to a halt across much of the world in an effort to contain the coronavirus pandemic, work in foreign-owned factories in northern Mexico has carried on as usual.

As reported by The Los Angeles Times, hundreds of thousands of workers have continued to work side-by-side in Juárez, Tijuana and other border cities: churning out electronics, medical equipment and auto parts. Meanwhile, the virus has continued spreading.

At a plant owned by Michigan-based Lear Corp. that produces textiles for automobile seats, Mexican workers began lining up at the on-site infirmary about a month ago with fevers and coughs. Nurses diagnosed them as having allergies or colds, gave them painkillers and told them to get back to work, according to two employees who spoke on the condition of anonymity.

By late March, it became evident that the Juárez factory was the center of a major COVID-19 outbreak. According to Mexican health officials, thirteen employees at the factory have died of the disease.

Among them was 42-year-old Rigoberto Tafoya Maqueda, who had worked for 20 years at the plant.

The thousands of foreign-owned factories in northern Mexico, known as Maquiladoras, are not accustomed to extended work stoppages. 

Mexico’s undersecretary of health, Hugo López-Gatell, warned this week that the devastation from the virus might be acute in the northern border states due to the fact that some factories had continued operation, despite new social distancing guidelines that called for nonessential businesses to suspend work.

Lear shut down the Juárez factory on April 1, and also stopped production at 41 other facilities it operates across Mexico. A statement from the company expressed regret over the deaths of “several” employees, but failed to address whether protective measures had been implemented, or whether sick workers had been sent back to the factory floor.

Other factories along the border continue to operate, therefore in direct violation of federal orders. 

According to Chihuahua state Labor Secretary Ana Luisa Herrera LasoIn Juarez, at least 28 factories remain open even though they do not provide essential services. She stated that 64 factories had closed, and 33 that are considered essential continue to operate as usual.

In the state of Baja California, home to the  industrial cities of Tijuana and Mexicali, state labor officials have been investigating non compliant factories daily. State Labor Secretary Sergio Moctezuma Martinez said that last week investigators closed a U.S.-owned factory that had been operating illegally and had chains on its doors to prevent its roughly 800 workers from leaving.

Baja California is home to a large number of factories that produce medical supplies — a business deemed essential by Mexican authorities. Several major suppliers in Tijuana have helped make Mexico the top source of medical equipment to the United States.

However, state authorities have grown increasingly frustrated with these companies, which are selling their products to the United States even as Mexico’s public hospitals face a major shortage of surgical masks, gloves and other protective gear.

Baja California Gov. Jaime Bonilla warned last week that local doctors are “dropping like flies”. In addition, Bonilla threatened to shut down a Smiths Medical Inc. factory that makes ventilator parts unless it figured out how to bypass free trade rules and supply local clinics.

The company agreed, and says it is in talks with officials in both countries to amend regulations.

Bonilla, who belongs to the leftist Morena party founded by President Andrés Manuel López Obrador, has been an outspoken critic of factory conditions.

In Mexico and across the globe, governments and businesses are weighing the economic costs of shutting down “normal life” against the risk of the coronavirus spreading. This question is particularly weighty in Mexico, where the economy was suffering even before the coronavirus hit.

Alfredo Coutiño, Latin America director for Moody’s Analytics, predicts that Mexico’s economy will contract 6.5% in 2020 and the country will enter into a recession “deeper than that during the 2009 financial crisis.”

Driving the downturn are losses in remittances, a decline in tourism, and a substantial contraction of the export market.

As reported by The Los Angeles Times, nearly 1 in 5 Mexican taxpayers is employed in the maquiladora industry, and cities like Juárez and Tijuana depend almost entirely on factory jobs. 

There are growing concerns that some of these factories that must close now might never reopen. Many also fear that widespread unemployment could lead to more crime in border cities that have long struggled with violence, citing the increase in killings in Juárez after nearly one-third of factory jobs were eliminated during the 2008 global recession.

Nuvocargo has raised a $5.3 million seed round for a managed marketplace for door to door freight transportation, serving trade routes between the United States and Mexico. 

Investment came from both sides of the border. The round was co-led by Silicon Valley-based NFX and Mexico City-based ALLVP. And Nuvocargo marks the first deal for Antonia Rojas-Eing, the youngest female VC in Latin America, under ALLVP, which she joined earlier this year as a partner. 

As reported by Tech Crunch, the seed round also saw participation from One Way Ventures, Maya Capital, Magma Partners, the co-founders of Rappi, the former CMO of Cabify and other angels. The total includes earlier backing from Y Combinator, when Nuvocargo existed under a different name.

Nuvocargo’s free software digitizes the different steps with timestamps, geo tracking and document housing in a centralized cloud-based dashboard, providing a snapshot understanding of every step of a cross border shipment. Customers can request new shipments using Nuvocargo using a WhatsApp integration, email or SMS. 

In the current age of the coronavirus pandemic, Nuvocargo says it is focusing significant efforts on working with companies that are transporting essential goods to aid in the supply crisis.