Costa Rica’s Entrepreneurial Ecosystem – Ricardo Arce Interview

Ricardo Arce is the co-owner of InterGraphicDESIGNS and Quazar Web Design as well as co-organizer of BarCamp Costa Rica. He fell into entrepreneurship after college when he was doing freelance programming work, loved the freedom of freelancing, and his business took off to the point that he needed to hire employees and build a company. At the time Ricardo started his business, Costa Rica didn’t have a lot of high-quality web-design companies so Ricardo and his partners -Steven Guzman and Pablo Barrantes- were able to develop a solid reputation quickly and build InterGraphicDESIGNS to 35 employees (a mid-size company in Costa Rica). Computer science and programming are where Ricardo’s expertise lie so he has been learning how to be a entrepreneur as his company has grown and merged with others and has a unique take on the tech entrepreneurship world in Costa Rica and some of its issues.

According to Ricardo, Costa Rica has very high-skilled and well-educated people so it’s been attracting companies like HP and Intel who want to access its human capital. This has resulted in competition for programmers – and a steep increase in the expected salaries for those programmers – that’s forced many of these small web design firms out of the market. In fact, Ricardo says, many Costa Ricans who were entrepreneurs are now employees of these larger, mostly U.S.-based companies.

“The competition now is not for clients anymore, but for human resources…Web design is a matter of talent, of skills, so it’s important that you have the best designers.”

This competition has led Ricardo and his business partners to adapt their company’s growth strategy and has shaped the way they do business:

“[Big companies] can hire a lot of people with good salaries because they are selling in bigger markets. So we can do the same,” he says, “but we need some international presence, we have to change our business model, and we are at exactly this point…Some years ago, 90% of our clients were from Costa Rica and now it’s just 40%.”

While international expansion may sound like any entrepreneur’s dream, it also comes with its own set of hurdles. Until now, Ricardo has built his business by reinvesting the profits back into his company, but he’s currently exploring the possibility of raising outside funding to expand his company’s international presence and he’s noticed that access to capital isn’t so easy in Costa Rica.

For one thing, he says, Costa Ricans just aren’t as educated about or comfortable with the concept of equity investing. This seems to be the case in a lot of the Latin American countries I have and will be exploring, but Ricardo thinks Central America is even less educated about it than Mexico or South America. He says:

“If you look in the Latin American ecosystem as a whole, you can find more opportunities, but if you stay just in Costa Rica you will not find a lot of opportunities. You have to go to Colombia, to Mexico, to Argentina, to Chile.”

But while he sees Costa Rica as not on par with Mexico and countries in South America, he does identify Costa Rica as standing out from the rest of Central America:

“I think Costa Rica is a little bit different [than the rest of Central America] because of the talent. We have the same quality of talent as the countries that we’re talking about [Mexico, Colombia, Chile,etc.], but things with funding and investment are a little bit different. We have not developed that type of culture and ecosystem.”

But that culture is beginning to change as organizations like Startup Costa Rica and Carao Ventures try to fill in the gaps in Costa Rica’s entrepreneurial ecosystem (stay tuned for interviews with leaders from both organizations).  Ricardo sees this progress as good and wants multiple stakeholders to be involved in the ecosystem’s growth because – as he sees it –  journalists, the government, investors, and entrepreneurs all have a role to play. But he doesn’t see this growth happening quickly enough. The culture is changing, he says, but too slowly.

“If you grow slowly and the other countries grow faster, you will always have less even though you’re growing. So yes, we are growing, but we are growing too slowly.”

One sign that Ricardo says shows that entrepreneurship hasn’t taken it’s spot as a highly desired career choice: in Latin America there are a lot of entrepreneurs who are entrepreneurs because they have to be, not because they want to be. In Costa Rica right now there are a lot of multinational companies hiring and offering good salaries and benefits, so people are becoming employees and get comfortable not having the risks associated with building a business. This is happening so much that Ricardo predicts Costa Rica will actually have fewer entrepreneurs (as a percentage of total population) over the next few years.

As a lover of entrepreneurship, I can only hope that Ricardo is wrong and that entrepreneurship in Costa Rica continues to expand, not to contract.

 

Do you have experience with Costa Rica’s entrepreneurial ecosystem? Let me know your thoughts on what Ricardo had to say in the comments below. 

Our next interview will be with Jose Callaso of Sabor Studio.