December 13, 2022
Software ate Latin America. Now AI and climate tech are eating software – and that means they're also eating LatAm.
If the region were actually a delicacy, I'd mix its letters and say that LatAm is a tamal, and the Latino climate tech startups are just like tamales. Right now, you must have just screamed a loud and clear ¿¿qué??. But stay with us for a minute – we'll explain.
Climate tech startups and tamales are sometimes wrapped inside green plants that make them look sustainable, and sometimes not. But no matter how green they look on the outside, the thing is that no one really knows if they are good inside.
They can be delicious, or really bad. The only way to know is to open them.
Finally, the world is looking to eat green tamales instead of artificial plastic food – and we need to help them by bringing the corn, the recipe, and the love that is required to conquer the complexity of cooking the perfect tamale (and by that, we also mean the resources and the drive necessary for building outstanding climate tech startups).
It is our responsibility to find out how to create community-based and resilient climate techs that stay far, far away from greenwashing. And then we need to pass that recipe in a digestible way, so that everyone across the region can learn to prepare or at least know what to buy in order to really enjoy green solutions.
Like we do with tamales, we need to build them fast, early, and in teams. LatAm is in a geographically unique position to build the best climate tech startups in the entire world.
We showed that in The LatAm Tech Report, which you can download for free and check some insights into seven industries, including climate tech. But here's a glimpse into how founders can build great climate techs in the region.
First, the importance of climate tech in LatAm
Climate tech startups are an ever-growing need. In The LatAm Tech Report, we showed how the world is emitting 52 billion tons of carbon dioxide every year, and that we'd need to reduce that to 23 billion tons by 2030 to keep with the 1.5°C global temperature reduction goal.
As we learned with the pandemic, new living conditions can put a lot of our old habits aside for a while, with profound economic and social impacts. And climate change can get us into a lot of these situations of uncertainty. We need a diversity of climate tech startups so that we can adapt to the different regional problems yet to come (just like tamales come in all colors).
But the good news is that LatAm could be of incredible value to the world in order to achieve net zero by 2050. LatAm has to celebrate and use the richness and biodiversity of our jungle, in order to attract more capital to keep growing month over month.
It's not new for any of us – or for the millions who visited, visit, or will visit LatAm and The Caribbean – that the outstanding ecosystems in the region are worth trillions.We have been raised looking at the incredible mountains of Monterrey, the richness of the Andes, and the immensity of the Amazon rainforest. When traveling around LatAm countries or when watching a movie about the region, nature is always there. LatAm sits on the most valuable asset in the world. The reserve of carbon and the potential to capture CO2 from the atmosphere can drive more capital than LatAm has ever seen before. It’s not the precious metals era any more – the new substitute for gold and petroleum in LatAm is going to be CO2.
Although LatAm sits on a big carbon reserve due to the Amazon rainforest, this is not our only advantage. LatAm also has incredible water reserves and it's perceived as a “haven in light of its relative water abundance” (WorldWaterWeek, 2022).
The perfect recipe for an outstanding climate tech
Overall, sustainability solutions are super technical and super hard to create. They require deep knowledge and also an ancient level of expertise to craft. Yes: although it's not rocket science, preparing a tamal is still a mix of science and art.
Most first-time founders are going to have a hard time building a good tamal because they lack this technical and practical knowledge to do so. Likewise, climate tech startups often require hyper-specialized and experienced talent to be built.Environmental engineers, certified life cycle assessment specialists, geoscientists, climatologists, environmental lawyers, ecologists, conservation scientists, and many other roles and activities make sustainability a hard task to automate.
And even so, the alignment of resources and talented individuals still does not guarantee that the solution is going to be good for the planet, for the consumer, and that people are going to pay what is needed for this “super green premium tamal''.
As we've mentioned before, good climate techs are also community-based and resilient.
The first requisite is crystal clear for any startup: being customer-centric is essential for any startup. But specifically in climate tech, partnerships and collaborations are particularly important to achieve ambitious goals, including between climate techs. We are going to need climate tech startups that are addressing different special problems for a diverse customer base, from extreme weather conditions to climate migration crises. Unity is essential – just like the whole family comes together when cooking tamales.
These startups also need to be resilient. And for understanding that, we can refer back to our dear tamales. Good tamales are also eaten on unpredictable occasions, when it’s hard to carry food. And that's because their cover does not damage and keeps what is inside safe.
These tamales can be green, yellow, or whatever color you want. It also does not matter from which country comes from – in fact, we need solutions to be hyper-regional like we have never seen before.
What matters is the amount of climate and carbon sequestration potential – which we could translate to the value they can bring immediately to help those that are being affected by disasters like floods, droughts, melting glaciers, warming oceans, and heat waves. The inside has to be reliable, accurate, and targeted with specificity.
But most importantly, we need to recruit talent and capital from all over the world to highlight the importance of Latin American climate-tech startups on our path to net zero – and enjoy the process.
The secret sauce: artificial intelligence (AI)
Besides all these prerequisites, climate tech startups also really struggle to put on paper all of the different concepts that sustainability frameworks keep updating every week and formulating new market strategies based on that.
Taking this into account, we need dynamic and data-driven recipes. Artificial Intelligence (AI) can help in decision-making so that we can build enough climate tech startups to make every customer satisfied. We need this collaboration between man and machine to build more tamales/climate tech startups – and the symbiotic interaction between humans and robots in LatAm is going to be needed faster than everyone thinks. Yes, very #Solarpunk. We'll show you why with a practical example.
AI for sustainability in agtech and agroforestry
Agtech and agroforestry are examples of the many different industries in which climate tech startups working together with AI can help tackle the climate crisis.
According to J.P. Morgan, more than US$ 51.7B was invested in the AgriFoodTech sector worldwide. And according to PwC, over US$ 7B was invested in agtech in 2021 worldwide. Finally, according to LAVCA, US$ 35.4M was invested in LatAm Agtech in 2021, through 15 disclosed rounds, compared to 354 rounds worldwide.
There is a big difference from US$ 51.7B to US$ 7B and to US$ 35.4M. Historically, traditional investors have not bet big in the LatAm agriculture sector.
Yet, Latin America currently accounts for 16% of total global food and agricultural exports in the world (J.P. Morgan). While the world population is increasing, LatAm is well positioned to remain the food basket of the world. And AI can help to fully unlock the potential.
With a fragmented market, agriculture in LatAm has to unify smallholder farms, which hold a large share of farmland across different countries. And it needs to do it through sustained agricultural practices.
Tech solutions can offer a variety of improvements in crop planning and optimization. And after covid-19, more small-holder farmers are open to digitalization and small farmers are starting to lead initiatives to increase crop yield, reduce waste, and consolidate resources.
The end goal is to transition from production models based on unsustainable practices to agroforestry models. These have other revenue channels besides selling crops, such as carbon sequestration and biodiversity protection.
It's not all about revenue though: farms following agroforestry models can also generate social impact via community involvement and the creation of sustainable jobs.
Still, current solutions in the market have not fully scaled through the region, mainly due to adoption and development costs. Software for the optimization and sustainability of agricultural practices needs to improve and get cheaper to meet the increasing worldwide demand for food. So that the agriculture industry can grow 80% by 2050 (J.P. Morgan). And it has to do so at the same time it helps the industry to decarbonize and reach net zero.
And that's when AI enters the stage. Artificial intelligence offers the capability required for handling all the complexity of the Latin American agricultural market, with various metrics to control, from climate conditions to the quality of the soil. Rainwater management, variable rate fertilization, and no-till farming are concrete examples of techniques that could be exponentially improved by AI in order to increase productivity and better control the yield, which would ultimately translate into climate-friendly farming if guided with correct information.
AI plays a role in the development of the agriculture industry, its sustainability, and finally the ability to tackle the region's unique challenges in terms of climate change.
The signs of climate tech's potential
Sustainability as a service, software for optimization, and AI to tackle and prevent climate change is going to help the transition towards a LatAm, and a world, with less GHG emissions.
In the agricultural industry, with algorithms to optimize yield crops under extreme weather conditions. But also in the energy sector, with algorithms that help reduce energy consumption. And in the real estate industry, with algorithms that help buildings optimize water consumption.
Companies like Pachama and NotCo have already demonstrated the feasibility of models that highly rely on AI to do good in the environment and to shift consumer choices. I hope that one day, NotCo's Chef Giusseppe finds a good recipe that can beat the tamal my family makes.
Here's a glimpse into how founders can build great climate techs in the region. Download the full version of the The LatAm Tech Report for free to check the content, trends, and opportunities seen in seven industries, including climate tech.