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

ArXiv ID: 2410.03552 “View on arXiv”

Authors: Unknown

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.

Keywords: Startup Valuation, Discounted Cash Flow (DCF), Emerging Markets, TAM/SAM/SOM, Risk Management, Private Equity/Venture Capital

Complexity vs Empirical Score

  • Math Complexity: 2.0/10
  • Empirical Rigor: 3.0/10
  • Quadrant: Philosophers
  • Why: The paper focuses on conceptual frameworks, rankings, and qualitative risk assessment with minimal advanced mathematics. Empirical evidence is based on aggregated market data and industry reports rather than rigorous backtesting or statistical modeling.
  flowchart TD
    A["Research Goal:<br>Evaluating Investment Risks<br>& Potential in LATAM AI Startups"] --> B
    subgraph B ["Key Methodology & Data"]
        B1["Case Study: Online Food Delivery"]
        B2["Metrics: TAM / SAM / SOM"]
        B3["Countries: Argentina, Colombia,<br>Uruguay, Costa Rica, Panama, Ecuador"]
    end
    B --> C["Computational Process:<br>Discounted Cash Flow DCF Valuation"]
    C --> D{"Risk Analysis"}
    D --> E["Political Risks"]
    D --> F["Economic Risks"]
    D --> G["Competitive Risks"]
    E --> H
    F --> H
    G --> H
    subgraph H ["Key Findings & Outcomes"]
        H1["Investment Ranking<br>of LATAM Emerging Powers"]
        H2["Strategic Risk Mitigation Insights"]
        H3["Portfolio Diversification<br>Value Proposition"]
    end