Over the past decade, Medellín has been working hard to replace a reputation for drugs and violence with one of entrepreneurship and technology. In many ways, it is working. The Wall Street Journal and Citi Group named Medellín as The Innovative City of the Year in 2013, and the world has only continued to take notice ever since.
Now, reinvention and transformation are the words often attached to what was once called the world’s most dangerous city, with the local tech scene becoming a model for the region.
Above: Ruta N’s Alejandro Franco discusses plans with Finance Colombia’s Loren Moss
Startup accelerator Ruta N has been a leading player in recreating Medellín since it was launched in 2009. To find out how it operates and what the future holds — including ambitious goals to make Medellín the most innovative city in Latin America — Finance Colombia recently sat down with Alejandro Franco, the new executive director of Ruta N who took charge in February.
Finance Colombia: What is the goal of Ruta N?
Alejandro Franco: We are trying to do something very important in our city: to transform ourselves into a knowledge economy. And we’re really trying very hard to bring that about. We’re thinking about making a city of knowledge that can be home to the jobs, the businesses, and the sophisticated startups for futures challenges. And if this happens the children will benefit.
Finance Colombia: What is your view about the growth of Ruta N? What is the growth plan?
Alejandro Franco: We want, by 2018, to accumulate nearly 9,000 jobs, and, by 2021, to have generated 295 new businesses established here in Medellín. Those are the clear goals we have to achieve.
We have also set ourselves another very big goal. By 2018, 2% of our gross national product may be based on science, technology, and innovation activities. If, out of every 100 businesses in Medellín, we can get a universe of 30% of the businesses to be in innovative processes, then that gives us approximately 18,000 businesses. We also want to see 40% of jobs in the city come from innovative themes. And we want there to be a capital available of close to a billion pesos — we’re talking about something around US$400 million — available in venture investment for all the initiatives coming out of the city.
For us there are two indicators: the number of businesses established in the ecosystem — which either come here from other places or new ones that are just starting out — and the number of jobs that we are creating. Those are the two indicators have to guide our destiny.
Then there are also complementary activities that govern all this. We made an agreement of intentions with the businessmen in the city to set up an “Innovations Committee” in their companies, name an “Innovations Leader,” and have a minimum percentage of the sales destined towards innovation. This started in 2015 with 1%, and at this rate we’re going to get to 2% in 2018. If we achieve it, we will be an unstoppable city.
Finance Colombia: What other initiatives are you currently working on?
Alejandro Franco: Alongside the great “Agreement for Innovation,” we are developing an Innovation District, which is destined to create a new settlement of businesses and talent to transform our city on the economic and urban level. We have a series of attractions for businesses and talents so that they will come and set up in our city. There’s a whole policy for businesses that want to consider Medellín as a platform to connect to Latin America. They can set up business here.
This strategy has brought about two very important elements: 115 businesses established here in Medellín, and almost 2,000 jobs created only through this strategy. IBM has part of its services center here with around 180 people. What we want is for there to be more companies and at the same time accelerate the job indicator.
The other thing we want to do, looking ahead to the next three years, is to make sure there always is capital, money in circulation, in greater amounts. When I told you that we want to pass from the more or less $100 or $180 million USD that we have today to at least $450 million USD in 2018, that has to come from certain strategies that allow more and more funds from venture capital to find a place here in Medellín to place their monies and invest in the initiatives that we have here. That’s why we talk about strong institutions, circulation of ideas and circulation of capital. If we go about moving those three levers, we will activate an ecosystem of innovation.
Finance Colombia: When investment funds, venture capital funds or institutional investors visit Ruta N, what are the questions? What are the key things that companies — the startups — should take into account when investors are looking at what is happening here?
Alejandro Franco: That is a fundamental subject. These days, global competition is enormous, and we have to have initiatives that comply with three very clear positions. One is your city’s differentiating element. Two is your possible position in the market. And three is your business team.
That hasn’t changed much in the last few years. Those three pillars are still the decisive elements for businesses to reach venture capital. When we talk about differentiation, there has to be a clear ad valorem proposition, and many times that is not so good. It’s important to understand, for example, how intellectual property is a differentiating element — which in a knowledge-economy does have more importance than it does with others. So, for us that is the element of differentiation: an ad valorem proposition, a protection of knowledge. And we are more and more fair in an effort to design a “boutique,” as we call it, so that those initiatives can strengthen their vision and positioning in the market.
There we work very hard to achieve what is called the “work team,” or the managing team. I think that’s the key element. A good manager and a good technical, administrative, and commercial team are the ones that will make those initiatives really get out to the world.
In that respect, in Ruta N, we have been very fair and very sincere when supporting initiatives that prove that those 3 elements have been covered. I think that those are the elements that we don’t negotiate, so to speak. To support initiatives, Ruta N assumes a position or a risk in terms of giving them resources so that they can be funded and set up their business model.
Finance Colombia: How do you chose which startups to accelerate?
Alejandro Franco: In every case we’ve used a very technical and fair way of qualifying the initiatives we get involved in. We have a methodology that we call “innovative scoring,” a score that we give to elements that comply with the pillars that I was telling you about, the team, the market, and the differentiation.
Behind everything, there’s a score and depending on that score, we say if we’re going ahead or not with this kind of project. And that helps to set guidelines for the entrepreneur, to tell him “you didn’t get the score for these reasons” and “improve this.”
Additionally, every time there’s an investor who’s going to get into one of our initiatives, he knows that the proposal got a score and that a technical team checked out that initiative. It went through that scoring, and it is of a high standard. This initiative now it has the seal of Ruta N, so it’s apt to receive capital.
I think that’s one of the biggest achievements we’ve had. We are certifiers, directly, to say which initiatives have — or don’t have — the potential to get to a market and to be beneficiaries of venture capital funds.
Finance Colombia: Ruta N is the mixture of cultures: entrepreneurs, startups, and academia — people from such different backgrounds. You support not only the locals learning how to do business with the rest of the world but also the foreigners who have to learn the business culture in Colombia. What’s the balance like, and what do you do to attract both local entrepreneurs and those from outside of Colombia?
Alejandro Franco: We have a team dedicated exclusively to that. Very important elements have been mixed here. People from here, and those that have come from afar, are our best promoters. If you think about it, one of the main or the best elements that we have today is that there are many businesses that all talk among themselves, converse among themselves, and there are more and more joint proposals, rather than isolated proposals from just one business. I think that’s a super-winning element.
The other thing is that we already have a team that understands which kinds of businesses we want to reach. So the businesses we would like to have in Medellín, we contact them, we visit them, we tell them about Medellín. We tell them about what this city and this ecosystem can do to empower their business initiatives.
Medellín, and in particular Ruta N, have become reference points. I’ll give you an example. The company is Virtualin, a Belgian company that developed an application so that fitness instructors can track workouts and help their students study on that platform. And also, as a sportsman, I can use that according to my weight — to my performance and everything — so it can tell me which workouts I should do.
The interesting thing about this platform is that a guy found out about Ruta N, he liked it, and he came less than a year ago. He developed his market and continues to develop his Virtualin market over there in Europe. And then he passed it to Latin America, he got in contact with someone in Pereira, they came here, and today it’s a business that’s creating a lot of jobs. They have invoiced, in 20 days, about €10,000 euros.
Finance Colombia: After four years, what do you take the most pride in?
Alejandro Franco: The best thing that I can give over to Ruta N in the time I’m here is an organizational culture and help the team to think as a team — as just one institution, just one Ruta N. Our team, with our Ruta N team, is transforming the city. I don’t want us to be thinking about areas. I want us to be thinking as only one unit: Ruta N, which works for the city. I want everybody here at Ruta N to end up with the slogan: “One Team, One City.” That would be my dream.
I also think it would be very important to finish a period before looking at the progress. This region — as opposed to the country and to other cities in Latin America — becoming the 2% of our gross national product in the area of science, technology, and innovation. Goal! Total happiness! Boom! Set off the fireworks because we did it!
There are other subjects that I’d like Ruta N to be very committed to, like the economic and social transformation of the city. Even being a city in the process of transition — an economy in transition to a knowledge-economy — we have to understand the social issue that surrounds our city. There are big challenges that impair our reality.
I’ll give you an example: the issue of asset laundering. It’s a scourge as big as the issue of drug trafficking, which affects our economy. There has been a great scourge of people with money who start to lend it to others and create what, for me, is a new modern-day slavery.
We at Ruta N — examples of mobility, examples of security — have to start off in a macro way and help to solve those problems. That’s to say that Ruta N can contribute to helping people have access to technology, and through access to technology, be able to be access financial instruments. It would be a very great way of taking away the income from asset laundering of our economy, by linking those people in higher income brackets and the lower ones to technologies to be able to participate, in a fair way, in some of the benefits of progress. So I think we have to work very hard on that.
This Q&A has been condensed for space and edited for clarity from a longer conversation.