Growing an Impact Startup in Mexico in the 2020s: Good Timing?
STORY INLINE POST
According to the United Nations (UN), food waste is a major contributor to greenhouse gas emissions, and Mexico is no exception. In fact, it's estimated that more than a third of the food produced in the country ends up in landfills. Cheaf's mission is to tackle this issue by providing a platform for food stores to sell their excess food, reducing waste and saving resources in the process.
Cheaf is a tech-for-good startup, which means it uses technology to solve social and environmental problems. In this specific case, the company leverages technology to connect food stores with consumers, providing a solution to the food waste problem while also offering a great value proposition to both parties. Food stores can sell their excess food at a discounted price, generating additional revenue and reducing waste, while consumers can access high-quality food at a lower cost.
Cheaf is not alone in its mission to bring positive change to Mexico through technology. In recent years, the country has seen growth in the number of startups that are focused on environmental and social impact. From carpooling or carbon tax incentives, to recycling or composting, these startups are working to address the environmental challenges that Mexico faces and to create a more sustainable future for the country.
However, and despite the growth of tech-for-good startups in Mexico, the timing of building and growing such a company can still present challenges.
The first is awareness: Mexico's awareness of the food waste or climate change issue is lower than the world average, first and foremost, because the country's large rural population is more preoccupied with its day-to-day economic well-being, as they may struggle to meet their basic needs. Moreover, the media coverage of environmental and climate change issues in Mexico is limited, making it difficult for the public to learn about these topics, and generating a lack of public pressure on the government to address these issues. In turn and to close the loop, this lack of government action and investment in climate change initiatives also contributes to the low level of awareness about these topics in Mexico. The government may have other pressing issues to address, such as economic growth and public security, which can take priority over environmental initiatives.
The second challenge is that Mexico's food industry has yet to fully embrace environmentally friendly practices. Despite the growing global concern for the environment, many food businesses in Mexico are not prioritizing sustainability. Small businesses, in particular, face a tough economic climate and see reducing food waste and implementing sustainable practices as a luxury they cannot afford.
Additionally, the lack of government regulations and incentives for environmentally friendly practices make it a nice-to-have for food businesses, rather than a must. Add to that a low consumer demand for environmentally friendly food options — with consumers focusing more on price and convenience when making food purchases — and you understand why the food industry is not yet in a rush to apply green initiatives.
Last but not least, building and growing a startup (whichever one) in Mexico since 2020 has been a challenging task: The COVID-19 pandemic has only added to the challenges for startups in the country, with disruptions to supply chains, reductions in consumer spending, and difficulties in securing funding. The current economic crisis post-pandemic, which includes inflation and a promised recession, only exacerbates the difficulties that startups face. With the uncertain and unstable economic climate, investors are more cautious about investing in startups and may prefer to put their money into more established businesses. It is then up to startups to switch from a growth-at-all-cost mindset to a profitability mindset, with runway and burn as their main KPIs. It’s a hard goal to accomplish, especially in mission-driven startups, which is a relatively new and disruptive sector that requires a lot of time for experimentation to finally get it right — an uncomfortable situation to be in when capital is scarce and runway needs to be under control. Plus, the employees of an impact startup are culturally motivated by the positive change they produce, and less inspired by the prospect of managing unit economics and a path to profitability, however critical it is for the survival of their company.
It is not all bad though. Despite the challenges, there are also several reasons why it is good timing to build a tech-for-good company in Mexico these days. The global shift toward sustainability and social responsibility is gaining traction in Mexico, and tech-for-good startups are poised to benefit from this trend. With a growing demand for sustainable solutions, Mexico presents emerging market opportunities for companies that aim to make a positive impact.
Additionally, the Mexican government has stepped up its support for tech startups, providing funding programs, tax incentives, and other support mechanisms to create a more supportive environment for innovation and entrepreneurship. This, coupled with the growing technology sector in Mexico, offers numerous opportunities for collaboration and support for impact startups.
Moreover, Mexico's large and growing population presents a substantial market for those startups to make a significant impact. By addressing pressing environmental and social challenges, they can contribute to a better future for all, while also realizing financial success.
As awareness of the food waste issue and the importance of sustainable practices continues to grow, it looks like the tech-for-good sector in Mexico has a potentially bright future in front of it, despite the challenges of building and growing it. Specifically, with the recent North American Leaders Summit leading to a commitment from Canada, the US and Mexico to try and cut food waste and loss in half by 2030, the wave of awareness and action-taking sure seems to be making landfall.