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Evaluating Investment Risks in LATAM AI Startups: Ranking of Investment Potential and Framework for Valuation

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  • Abraham Ramos-Torres
  • Laura N. Montoya

Abstract

The growth of the tech startup ecosystem in Latin America (LATAM) is driven by innovative entrepreneurs addressing market needs across various sectors. However, these startups encounter unique challenges and risks that require specific management approaches. This paper explores a case study with the Total Addressable Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM) metrics within the context of the online food delivery industry in LATAM, serving as a model for valuing startups using the Discounted Cash Flow (DCF) method. By analyzing key emerging powers such as Argentina, Colombia, Uruguay, Costa Rica, Panama, and Ecuador, the study highlights the potential and profitability of AI-driven startups in the region through the development of a ranking of emerging powers in Latin America for tech startup investment. The paper also examines the political, economic, and competitive risks faced by startups and offers strategic insights on mitigating these risks to maximize investment returns. Furthermore, the research underscores the value of diversifying investment portfolios with startups in emerging markets, emphasizing the opportunities for substantial growth and returns despite inherent risks.

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  • Abraham Ramos-Torres & Laura N. Montoya, 2024. "Evaluating Investment Risks in LATAM AI Startups: Ranking of Investment Potential and Framework for Valuation," Papers 2410.03552, arXiv.org.
    • Handle: RePEc:arx:papers:2410.03552
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    References listed on IDEAS

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    1. Dan K. Hsu & J. Michael Haynie & Sharon A. Simmons & Alexander McKelvie, 2014. "What matters, matters differently: a conjoint analysis of the decision policies of angel and venture capital investors," Venture Capital, Taylor & Francis Journals, vol. 16(1), pages 1-25, January.
    2. Max Berre, 2022. "Which Factors Matter Most? Can Startup Valuation be Micro-Targeted?," Papers 2210.14518, arXiv.org.
    3. Enrico Gonnella & Lucia Talarico, 2023. "The Reputation Factor in the Valuation of Startups," International Business Research, Canadian Center of Science and Education, vol. 16(7), pages 1-56, July.
    4. Abraham Ramos Torres & Laura N Montoya, 2024. "AI Thrust: Ranking Emerging Powers for Tech Startup Investment in Latin America," Papers 2401.09056, arXiv.org.
    5. Theodor Kohers & Gerald Kohers & Vivek Pandey, 1998. "The contribution of emerging markets in international diversification strategies," Applied Financial Economics, Taylor & Francis Journals, vol. 8(5), pages 445-454.
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