Interview: Ruta N a High-Tech Investment Opportunity, but don’t Call it a ‘Silicon Valley;’ Part 1

Medellin’s novel “Ruta N” high-tech development center next to Universidad de Antioquia now boasts that it’s hosting some 135-odd companies from 22 countries (see  http://distritomedellin.org/hacer-parte/) that have chosen to locate inside Ruta N itself or nearby.

As part of what the city government calls its “Innovation District,” the seven-year-old Ruta N not only serves as a “landing site” for start-ups — many of them international — but also serves as a gathering place for high-tech innovators and investors; an educational site for training the next generation of local information technology (IT) technicians and innovators; a host site for offices of global IT giants such as IBM and Hewlett Packard; and as a platform for high-tech marketing players such as Huge.

While the “Innovation District” is described as an area encompassing 172 hectares in and around Ruta N, actually only about 42 hectares are available for redevelopment for construction of new IT office buildings or IT research centers. The other areas in the “district” are already occupied by current or potential research-and-development partners for IT entrepreneurs, including Universidad de Antioquia and Hospital Universitario San Vicente Fundacion.

But no matter how others might define Ruta N, just don’t call it a Medellin version of California’s high-tech Silicon Valley, as Ruta N Executive Director Alejandro Franco and Ruta N “knowledge-business” development chief Eduardo Quiroz explained in an exclusive interview July 13 with Medellin Herald.

Rather than imitating Silicon Valley, Ruta N has a distinct mission — tailored to local needs – and tied to attracting local and international high-tech investment.

What follows is Part 1 of a condensed, edited version of that interview:

Medellin Herald: If you say that Ruta N has no pretentions of becoming a kind of Silicon Valley, then what really is Ruta N?

Alejandro Franco: Those comparisons to Silicon Valley have generated a bad taste in some sectors of this city. We do not have the infrastructure, the capital, the capacity or the external conditions that you have in Silicon Valley. Silicon Valley includes [companies and] universities, which have other types of specialists, other types of researchers, including several Nobel Prize laureates, whereas we have other idiosyncracies . . .

The speed of knowledge [development], the infrastructure that exists for research, the time that [Silicon Valley] has been developing their ecosystem, these are totally different from our ecosystem — and that is neither good nor bad.

We have to understand the routes [to high-tech development], the learnings, how we can translate these into our own realities, our capabilities and make an ecosystem as we have today. We have an ecosystem here that has developed a plan of science, technology and innovation, with a goal to establish local and global businesses here. What we are designing is an ecosystem that consists of four key elements: talent, capital, infrastructure and networks. But comparing Silicon Valley to Ruta N is like comparing potatoes to apples.

Eduardo Quiroz: There are huge opportunities [for high-technology development] in Latin America because of our social and economic conditions. We who live in this market must develop additional capabilities to turn those needs into scalable business opportunities, globally.
That kind of business is surely not the [main] interest of the industries that are being developed in Silicon Valley . . .

We have another focus. Our problems are mobility problems, problems of access to finance, nutritional problems, characteristics that are very typical of Latin America, in certain types of countries, certain types of economies . . .

When we see what is happening in Silicon Valley, it’s marvelous, but many of those technologies come with a different profile of investors, entrepreneurs in a different context. So it wouldn’t be logical [for Ruta N] to try to provide solutions to problems that already have many people working-those-out in other places. But we see other [problems and opportunities] that not many people are working elsewhere to solve– and we have the capabilities to do so here.

Franco: I’ll answer this question with an example. Look what happens with tropical diseases, which are viewed like orphans in the ‘developed’ world, because in the ‘developed’ world, these diseases do not happen. But people in the tropics understand these local conditions. This city [Medellin] is making a huge effort to lead an emerging industry that’s seeking answers to tropical diseases such as leishmaniasis, sika, chicunguña and dengue.

Quiroz: Silicon Valley [originally] was driven largely by [new-technology demands arising in] the postwar era and the space race. Our motivation here is to mobilize development for social needs.

Medellin Herald: Route N is a mainly a governmental entity, correct?

Franco: Yes, mainly governmental. Route N is a nonprofit corporation under Colombian law. It has three partners, which are mainly publicly owned: the municipality of Medellin; Empresas Publicas de Medellin [EPM, the local public utility] and Tigo/UNE [one of Colombia’s biggest telecom and internet providers]. Tigo/UNE ownership is majority public [EPM owns 50%-plus- one share] and the other partner [Luxembourg-based Millicom, with 50%-minus-one-share] is private — and its management is private.

Medellin Herald: But while Ruta N is mainly a government organization, actually you’re trying to develop a [mostly private] IT industry here. Isn’t that a contradiction? Private companies are mainly interested in making money, whereas governments are mainly interested in various projects, in public education, in public jobs, etcetera. Everything but making money. So: Isn’t Route N a contradiction?

Franco: No. I say that clearly, because from the beginning, we were conceived as an ambidextrous organization that understands the challenges and problems of our city. But moreover, we are thinking of a future city — 10 or 20 years from now – where we need to transform the urban vocations and be an economically viable city. Our declared pathway seeks three key things: One, improving the quality of life of the inhabitants of Medellin [by furthering] innovation; two, generating income and more higher-quality jobs for the city; and three, helping to solve the problems of the city by articulating the various actors, which will allow us to provide substantial improvements in Medellin.

Here is one example of how we can help do this: We are planning to address the problem of loan-sharking among the poorest sectors of our population. To do this, Ruta N sat down with other interested actors including the Secretary of Economic Development, the Opportunity Bank, the Ministry of Security, and our local Agency for Investment Cooperation (ACI), among others, to address in a systematic way this problem of loan-sharking.

What we are doing is trying to generate alternatives that allow people to access ‘soft’ [low-interest, legally obtained] loans rather using high-interest, illegal loan-sharks.  

We are creating the world’s smallest bank: the Bancuadra (Bank of the Block). We are responding to this [loan-sharking problem] with a technology that can be used in these neighborhoods: a conventional cell phone, not necessarily a ‘smart-phone.’ But as more and more people get smart-phones, then this technology also can be adapted with smart-phones. But in this case [advanced] technology will not be a restriction, because organized crime does not necessarily come with technology. They come with many people. And we will do that the same way. The approach isn’t just technology but also an approach involving people and building trust.

Quiroz: The project has two components that are obviously in evolution: an allocation of [city government seed-money] resources for poor people that need money, and the other is the payment mechanism, to make transactions. These two components can be put together in an account tied to your cell-phone number.

Medellin Herald: How does the merchant record this transaction?

Quiroz: The merchant has another code, so basically these transactions are to be made between users with ‘Bancuadra’ codes.

Franco: The idea is to have Bancuadra branches in every neighborhood, involving community leaders. Here the issue is trust and confidence, generated by the community. The Bancuadra element is based upon trust.

Medellin Herald: This bank already exists?

Franco: We are in the process. [To develop the proposed technology] the city earlier participated in the ‘MassChallenge’ development program among 290 cities. Medellin was selected [for further consideration] among 20 — and we are now in the running to be one of five winners out of those 20.

Medellin Herald: Would this Bancuadra project launch this year?

Franco: Yes. We’ve already started, we’re contextualizing the project, but the Mayor’s office and the Secretary of Economic Development have given initial approvals. We would start with COP$1,000 million [about US$335,000] and eventually funding would be COP$10,000 million [about US$3.3 million]. The mayor has reserved these funds.

Next: Part 2, How Ruta N is focusing on investment, training, development, growth opportunities.