Observations of the Peruvian Startup Ecosystem

Last month I had the chance spend several weeks in Peru (Lima and Arequipa) as speaker and guest at
universities, incubators, community events and startup-related organizations. I witnessed first-hand how the
tech startup ecosystem is evolving. I saw very good signs and enthusiasm focused in the right direction. These
are my observations with a unique perspective I was in born Lima, Peru.
Although I am a product of Peruvian private elementary and secondary education, I never attended a Peruvian
university, nor held a job in Peru. I left Peru right after high school and became schooled in Computer Science
and Math in the US. Afterwards, I worked in the US software industry (startups, small, medium, large corps)
for more than 20 years. One could say that I had a Peruvian childhood and a gringo adulthood. And although I
admit spending more time as a gringo, I can still detect the little nuances and idiosyncrasies in the Peruvian way
of thinking. Heres my personal assessment of the ecosystem with one American professional eye and one
Peruvian psycho-analytical eye.
No Technical Cofounders
After one of the events I attended, I stopped by a fairly publicized and recently funded startup. I engaged in
conversation with one of the team members of this startup. So tell me about your tech stack, I asked casually.
Its PHP and MySQL, but its not the best, he replied. Why do you say that?, I countered suspiciously, not
expecting that answer. It was chosen by a third party, he answered. It turns out the startup began without a
technical cofounder and the CEO outsourced the solution to a third party.
Apparently this is more the rule, than the exception. For some reason (which Ill to elaborate later) technical
people tend not to reach the leadership sphere in Perus tech ecosystem. Most startups get launched by their
would-be CEOs. But, they are trying build tech startups right? Would you ever open a restaurant without a
chef?? Would ever outsource your chef?
The startup system itself promotes this because of the emphasis on pitching competitions. Who raises to the top
in a pitching competition? The one with the most concise and eloquent pitch, and charismatic personality,
definitely not traits of a tech person. This emphasis on pitching occurs in US ecosystems as well; however, in
the US there are tech communities that are peer-driven that recognize your work for substanceyour
actual
work (Github, tech conferences), not just presentation. This peer-driven community does not exist, or is very
incipient at best, in Peru.
The Imbalance between Biz and Tech People
Growing up I remember that the most popular careers were Administracin de Empresas (business) and
Ingeniera Industrial (industrial engineering). In both you were groomed to be the next empresario
(enterprise boss) and if you went the colleges with the most reputation, like Pontificia Universidad Catlica del
Peru, Universidad de Lima or Universidad del Pacfico, you were for sure on track to be next the CEO of a
Peruvian enterprise. I asked to myself then, if everybody aimed to be bosses, who is going to be left to be a boss
of? Or if everybody focused on industrial engineering, what industry would they work on? Because there
wasnt a lot of industry back then. Perhaps a whole generation was trained to be bosses, not builders or makers.
At the same time that I was leaving for the US, a number of academies or institutes appeared in the Lima
market. These offered two-year degrees in computacin or informtica, mostly akin to a technical degree in
MIS (management information systems). This is one of the primary reasons I left Peru, because the lack
programs in computer science (CS), the study theory, methods and techniques that make computers work.
Fortunately I had traveled to the US before, and I knew of the existence of CS.
You can see how these two groups interact in the formation of startups. For sure, the union is not one of equals.
Why is this? I asked myself. I have a theory. Back in the 80s, during my college years in the US, I was an intern
at GTE (now Verizon), a major US phone company. I remember that all my bosses seemed to have backgrounds
in business. By the 90s, more and more bosses tended to be have technical background. What happened? The
shift from project-management driven, Gantt charts and waterfall methodology to a more peer-driven, agile
methodology was transforming how tech projects got planned and delivered. It also affected how organizations
were structured around tech teams, giving more responsibility and leadership to tech people. This peer-to-peer
methodology or approach has even expanded beyond single corporations or institutions, to collaborations
across teams and across countries. Moreover, the open source movement and the commercial success of open-
source-driven software has accelerated this way of collaboration.
In Peru, the shift to agile and open source has not happened. In the US, during this transformation, the
leadership (power and responsibility) shifted towards tech people. This has not occurred in the Peruvian
industry, that is why tech people are still second class citizens, still taking orders from business people and
therefore, not getting the chance to rise to leadership spheres.
The Elephant in the Room
One of the things that was appalling to see is how big software package vendors are embedded in the
industry, government and even higher education. The strategy of these software vendors is to create a
dependency early on, at your university for example, on these software packages. The purpose is to perpetuate
the use of these packages later on in your career, thus preventing you from creating anything on your own. On
the government side, it is easy for government officials to shift the responsibility to third parties and have the
option to blame this third party when projects dont work out. In education, the big software vendors
donate a computer center and free licenses to university and schools. In my opinion, an institution of higher
education should be a place of universal thinking, where a particular commercial solution has no place as a
requirement, perhaps as subject or method of study, among others. This is especially important in computer
science or computer related fields where creating something from scratch is so easy. You are just killing
innovative instincts.
What does this dependance on big software packages create? It creates a software community composed of
mainly implementation, maintenance and support engineers. A community that will not create anything from
scratch, because it doesnt know how to. This flaw in the community is insidious and permeates itself into the
startup industry and into higher education. Would you want somebody that does not know how to create things
from scratch in a startup? This is a problem that is a back-breaker in a startup ecosystem. If you are a startup
and you are in need of experienced technical talent (post Series A for example), the Peruvian (corporate)
industry will only offer you less than ideal candidates, well versed in software packages.
This dependance on big software packages rears its head in higher education as well. In this industry, since you
only need implementors, maintainers and support people to fill the corporate ranks, you favor programs that
fulfill that need: Management information systems (MIS) or ingeniera de sistemas as known locally. Most
computer-related university programs are oriented to churn engineers that use software, not to build software.
Only in the last ten years, have computer science programs been created, and of all places, the first one
happened to be in Arequipa, the second largest city of Peru, as opposed to the capital, Lima, where everything
important usually happens. This is an example of successful out-of-the-box thinking, not centralized group-
think.
There are plenty of Problems, where are the Solutions?
When you see a the list of startups at various incubators you mostly see tropicalization (local version) of
foreign ideas (ecommerce, social networks) and lots on me-too or lifestyle-oriented startups. There is a
glimmer of hope as you are starting to see some startups oriented toward problems that are focused on primarily
Peruvian or Latam problems, like non-traditional banking, and gastronomy. However, a lot of roadblocks in the
Peruvian way of thinking conspire against better ideas.
Growing up Peru, I saw a culture of conformity and obedience to authority and the status quo. Also, the
believe that anything good comes from a foreign country. This must be a reflection of a history influenced by
the fact of being conquered by Spaniards for more than 200 years, a regimental Catholic church that influenced
our customs, and more recently, decades of military governments, and restriction of imported ideas and goods.
Lest we forget, that the liberation from the Spaniards came from movements in Argentina and Venezuela, not
from within. Non-conformity or creativity (of ideas) is not only not encouraged in Peruvian culture, but
curtailed from childhood. You see that in the education system, with the emphasis on recitation, memorization
and strict imitation. You almost see an insecurity in the Peruvian psyche, the thinking that it cant be done and
the solution must come from overseas. This is completely opposite from the US philosophy of questioning the
status quo, or thinking is there a better way? This is something embedded in the DNA of the US, the
existence of the United States was based on that thinking, that men and women are created equal, that there is
no king, that church must be separated from state and overall, that their own citizens are responsible for forging
their own future.
Another aspect of Peruvian way of thinking is the emphasis on image, rather than substance. People like to be
associated with famous people in photos. Or, they go to universities or workshops to earn a diploma (el
carton) and think that the piece of paper is their most important achievement. Or, get into debt to buy car and
clothes, to appear more before your colleagues and friends. Or, think that somebody dressed in a suit and tie
is more credible. This way of thinking conspires against the way new companies should be created. You can see
this manifest in startups: the pitch, website and message will be extremely polished, ie. image, but not the tech
stack or business model behind it. This is a reflection of image-first thinking.
Entrepreneurship and ingenuity are not foreign ideas in Peru. You just need to look at the thousands of street
vendors around Lima, or anywhere in Peru. The street vendors have figured out a way to make money, sell
something at higher price than cost, and know how to acquire customers by pounding the streets. Ingenuity, you
could see in many places, even during my childhood times. The Avenida Azngaro was a well-known street
in downtown Lima, for forging any sort of documents to an uncanny reproduction. They even did almost
authentic university diplomas. Ingenuity and entrepreneurship in Peru have been miss-directed for decades, if
not centuries, and have not had the chance to be combined with the right know-how.
Moving forward, some ideas to make the Ecosystem better
If I had a magic wand, here are some ideas on how to improve the startup ecosystem in Peru:
CommunityEncourage
and build grass root efforts, peer-driven communities, not mandate top-down.
Peer communities by nature are self-correcting, because there isnt a hierarchy that becomes ossified,
and new members are added at an equal level.
MeritocracyReward
merit, substance over form. Dont just do pitching competitions, but also
hackathons and Kaggle-style problem solving competitions. Dont just look at diplomas, resumes,
LinkedIn, CV, but also at Github and projects.
Open source and AgileGovernment
institutions should adopt (only) open source technologies and
demand agile delivery of projects. Big software vendors cannot cry fowl, because theyve adopted open
source already in the US. Just dont keep buying 20-yr old solutions.
EducationEmphasize
computer science education from early age, not just MIS, that is, teach
everybody how to program and think analytically, not only use software packages. Focus on creating
more computer science departments in universities, not just MIS, focus on creating not just using.
 Build Exchanges of IdeasLook for ideas from outside first, emulate them and nurture them so that
eventually you can create your own. Invite people with those ideas. Repatriate those who once fled the
country.
Imagination and CreativityGo (or follow) to Disney, volunteer as an Imagineer and see how they do
things. Mix art and science, like how gastronomy mixes chemistry and presentation, or how tourism can
mix archaeology with data science.
Learn from the street vendor or the informal economyMake
startup entrepreneurs work as a street
vendor as a way to learn entrepreneurship. This is akin to selling lemonade, the usual example to
illustrate childhood entrepreneurship.
Learn from the Gastronomy industryYou see a myriad of new dishes and restaurants in Lima and all
over Peru. But they are not just following recipes, correct? They are creating new recipes. So what do
they teach in culinary school? They teach principles of how different ingredients are prepared and
combined to maximize flavors and textures. Do we have an inferiority complex? No. We proudly claim
its one of the best cuisines in the world and weve shown it. Now
Similarly, a computer science department in Peru should teach you the principles and concepts behind how
computers and programs work. So that, the new generation of Peruvians are able to create the new dishes that
solve world problems that we could export to the rest of the world.