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News Article

Mexico Shows Promise to Become Latin America’s Tech Hub

By Andrea Villar | Thu, 05/27/2021 - 10:17

You can watch the video of this panel here.

Latin America’s entrepreneurs are on fire. Mexico is already home to two unicorns and keeps attracting both local and foreign investment funds. While opportunities for entrepreneurship keep increasing, it is key to address the region's remaining challenges to help startups have a greater impact, agreed panelists during the second day of Mexico Business Forum 2021 Virtual Edition. “It is most impressive that Mexico has achieved all this success in the midst of a pandemic and a global financial crisis. If this is bad, I cannot wait for it to be good”, said Courtney McColgan, Founder and CEO of Runa HR and moderator of the panel.

Getting to this point was not quick or easy. According to Francisco Padilla, Co-Founder of Konfio, the journey started almost 30 years ago with NAFTA, a treaty that opened the borders to trade with the US. "This led to the migration of talent to the US who trained there and returned after a few years, creating a partnership between both countries that at the end of the day has brought us closer to more advanced places like Silicon Valley.” Padilla added that this, coupled with globalization, has led to talent, capital raising and opportunities in the region. 

“Getting to where we are now is a process that has been compounded over many years. It is the joint effort of many people with a long-term vision,” added Fernando Lelo de Larrea H., Partner at ALLVP. He also mentioned that it is important not to get lost in the ecosystem’s hype as investment rounds are announced more and more frequently. “This is a game with a long-term vision. We have to remember that we are creating value and transforming lives in the long term through better companies. What is exciting today is not just a round announcement, it is that we are succeeding in creating products and services that transform lives and bring better solutions to market,” he noted. 

For Javier Mata, CEO and Founder of Yalo, which recently raised US$50 million, another reason why Mexico and Latin America are experiencing the current boom is that the region “imagines a future that does not depend on legacy technologies.” Mata said the lack of digital infrastructure is the region's biggest opportunity and investors are noticing. “They are starting to notice that innovating here can be done faster and the changes that can be achieved are going to have an impact on the whole world,” he pointed out. 

In agreement, Vincent Speranza, Managing Director and Latam Regional Adviser at Endeavor Mexico, said that the current state of the entrepreneurial ecosystem is not a work of magic. To understand the present it is important to remember the first decade of the 2000s, explained Speranza, when Mexico’s entrepreneurial ecosystem was only focused on retail, food and beverages and family businesses, with no public policy, little participation of women and no technology. “This became a great opportunity because we needed to close the gap that was created in that period,” he said. One of the first milestones of the region’s ecosystem was the first round of capital that exceeded US$100 million, made by the Mexican fintech startup Clip in 2019 and led by Softbank, explained Speranza. “This made international funds look at Mexico for the first time. This was a validation of the value of the market in the country and opened a window for others,” he said.

Later, Kavak would become the first Mexican unicorn after reaching a valuation of US$1.15 billion in its latest funding round last month. The SoftBank-backed used-car buying and selling platform has raised more than US$400 million in total since its founding in 2016. In early May, Bitso raised US$250 million in a Series C investment, bringing its valuation to US$2.2 billion to become the first crypto unicorn in Latin America. “The growth of the cryptocurrency ecosystem this year has been remarkable. It took Bitso six years to reach its first million customers. Now - less than 10 months later - we have reached two million,” said Daniel Vogel, Co-Founder and CEO of Bitso, in a statement. Back in 2017, Vogel told MBN that during 2014 the number of bitcoin transactions Bitso saw on a good month amounted to MX$4 million. By 2020, the platform processed more than US$1.2 billion in international payments, including remittances and payments between companies.

Bitso, which successfully replicated part of US-based platform Coinbase's business model, is an example of how projects that have been successful in Silicon Valley can find their way in Latin America. But, according to Endeavor's Vincent Speranza, entrepreneurs who replicate foreign models in the region have been heavily penalized. “Those who know how to see a value proposition in another market and replicate it are to be celebrated. It is not easy,” he said. “I think the next big move will be to look at solutions that are transforming other markets such as South East Asia”.

Andrea Villar Andrea Villar Journalist and Industry Analyst