The high-impact of artificial intelligence on entrepreneurship in Latin America
everis & Endeavor study
The use of Artificial Intelligence (AI) is the second wave of digital transformation. Companies around the world are taking advantage of the new capabilities that techniques such as machine learning can provide to optimize their current operations or create new business models. As a result of the proliferation of large amounts of data, the ability to process them inexpensively, open research and massive funding, leveraging AI has become a trend, a virtuous circle that has only been speeding up in recent years.
Thousands of organizations currently use AI techniques as a key factor in their business, or as a complement to it. Entrepreneurship involving AI is booming on every continent. Proposals of all kinds are meant to help other businesses or to change them altogether. Over time, information related to this phenomenon has been emerging, coming from the US, Europe, and recently from China. Unfortunately, these data are very deficient in Latin America. For this reason, everis and Endeavor decided to conduct this study, to shed some light on the ecosystem of IA enterprises in the main Latin American countries.
Our research gathers information on the current situation, the main challenges and the future of more than 240 companies taking part in it. We gathered quality information on 70 projects in Argentina, Brazil, Chile, Colombia, Mexico and Peru based on research and interviews. We hope that our efforts will raise interest and above all, contribute to the development of AI enterprise in Latin America, in addition to leveraging the social and economic development of the region.
Features in AI development in Latin America
One of the main results obtained by the study demonstrates that the enterprise based on the use of AI in Latin America is still at an early stage. Our AI Growth and Impulse Index (INICIA), calculated from variables such as the year of foundation, investments received, AI techniques used, etc., was 32%. As an example, most of the companies are young (63% of them were founded less than 6 years ago) and small-sized companies (50% of them have between 1 and 10 direct employees). Despite its size, the expected percentage growth in income is significant. In 2017, an average AI company in Latin America sold $1.1 million, and expects to close 2018 with a turnover of $ 1.64 million.
The most highly-specialized AI companies in Latin America are found in the software, services, health and media sectors, although a variety of companies are dedicated to education, mining, marketing, logistics chain, retail etc. In order to develop their activities in these markets, 60% of the companies represented in this study received external financing from one or several sources (33% seed capital, 29% private capital, 21% in series A or B financing rounds, and 17% of angel investors).
Undoubtedly, AI is of utmost importance to all companies analyzed. Sixty-five percent state that this type of technique is part of their core businesses and the intellectual property obtained is a competitive advantage. In 87% of cases, technological developments are based on third-party frameworks, and the most popular are Google Tensorflow, Microsoft Cognitive Toolkit and Amazon MXNet. In addition, there is also a set of companies that base the use of AI on the consumption of products from third parties, such as Microsoft AI Congitive Services, Google Cloud AI or IBM Watson.
An important group of entrepreneurs (30%) is currently focused on the development of chatbots, due to the demand and the acceptance that this type of application has been having lately in the market. We also observed an extensive use of techniques, such as natural language processing (53% of cases) and speech-to-text conversion (21%), but other types of techniques are also widely used, such as classification and prediction 59%), or pattern recognition (39%).
Challenges of the AI enterprise in Latin America
The main challenges based on artificial intelligence use in Latin America are:
· AI talent shortage. The labor market lacks professionals with the kind of technical knowledge needed to develop these solutions.
· Lack of information for AI training. Since many of the techniques most used today in AI require information to carry out the learning, entrepreneurs are lacking on a greater data volume to be able of carrying out this learning.
· Lack of acquaintance to AI. Another problem faced by AI entrepreneurs is the fact that clients (both business and individuals) are not familiar with this type of solution, which causes some mistrust regarding the products and services provided.
· Difficulty in raising funds. The majority of respondents have stated that it is too complicated, in comparison with the US, to raise funds for their projects in Latin America.
Efforts to promote AI enterprise in Latin America
Despite the challenges and difficulties faced by enterprises, the application of AI in Latin America is in full swing, with dozens of companies expanding their operations.
At everis and Endeavor, we believe that efforts need to be taken from the business world, the public sector and civil society, in order to support and accelerate the use of AI in Latin America.
In our opinion, four of the areas in which we should all work, related to the challenges that the entrepreneurs present to us, are:
· Talent: Universities and companies should focus on developing the capabilities needed to create AI solutions, promoting diversity from a knowledge standpoint (there are few engineers, but also experts in user experience, linguists, etc.).
· Data. The private sector, and especially governments, should make more data sets available in areas such as health or education, in order to enable learning and therefore the creation of new AI-based solutions.
· Disclosure. Civil society, the business sector, and governments in Latin America should disseminate and support AI by eliminating barriers to adoption and introducing complex issues such as the impact on work activities or data privacy.
· Financing. Latin America should continue developing its ecosystem of economic investment in AI entrepreneurships. We must aim not only to acquire financial and legal mechanisms to facilitate investments in such enterprises, but also to provide appropriate attention to AI, through specialized funds, public and private initiatives, and dedicated awards, among others.
Despite the efforts, AI-based enterprise in Latin America has a great potential for the future.