The Real Magic of Unicorns

In less than a year, Mexico managed to crown two technology startups as unicorn companies, meaning they were valued at over US$1 billion. This is an elite and very select group, with names like Facebook, Xiaomi, Uber, LinkedIn, Airbnb, and Dropbox topping the list. And now, our Endeavor companies from Mexico, Kavak and Bitso, have joined that hall of fame. What’s best: they won’t be the only ones; I’m sure that the next ones are already on the way.

The Mexican moment detonated when, last October, Kavak became the first modern unicorn in Mexico (the Mexican companies KIO Networks and Softek were recognized many years ago). That means that the all-in-one used cars startup, founded by three Venezuelans in 2016, got a valuation of $1.15 billion during its last financing round, supported by Softbank. And, just this last April, the startup reached a valuation of US$4 billion!

Bitso is the new kid in town, and the news is worth celebrating. The cryptocurrency exchange platform that allows users to buy and sell bitcoin and other cryptocurrencies grew its valuation 9x in five months. In December 2020, they raised US$62 million, at a valuation of US$250 million and, at the beginning of May, they raised US$250 million, at a valuation of US$2.2 billion.

It is quite a milestone to achieve these valuations but the impact goes beyond the numbers of a successful investment round. Also, achieving unicorn status is not magic. Rather, it is the consequence of many years of effort and work by the founding team and, broadening the vision a little more, of a Mexican entrepreneurial ecosystem that is beginning to bear fruit from several decades of harvest. Let me go deeper on both points.

A Bit of History

In 2002, when Endeavor arrived in Mexico, we noticed a somewhat uncomfortable truth: the tech entrepreneurship scene had a serious deficit. While at the beginning of 2000 Argentina was already celebrating unicorns like Patagon, Mercado Libre, and Globant, Mexico was just taking baby steps to shape its technology sector. It was not until 2013-2014, with the emergence of startups such as Clip, Kubo Financiero and Kueski that its true development began.

The financial arm also lacked thrust, as venture capital funds emerged in the country at the beginning of the 2010 decade and forward. And it wasn't until 2017 that large international investors, such as SoftBank and General Atlantic, began to turn their sights to Mexico to fund their startups and scaleups.

Of course, the scene looks different now because today venture capital investment in Mexico and Latin America has evolved. Just in 2019, venture capital funds invested $4.6 trillion in Latin America, according to the Latin American Venture Capital Association (LAVCA). And Mexico stands out for having received significant investments from large funds from the US, China, and Europe.

I also want to highlight the phenomenon known as "the Linio mafia." When this company was born in 2012, it began to import talent from abroad to cover the technical skills it needed to operate. Thus, many foreigners came to Mexico to work at Linio, and over the years, it was these same migrants who founded technology startups.

In fact, according to our Linio Mafia report, former Linio employees are responsible for at least 66 companies in Latin America, including some of the most notable tech names in Mexico, such as Apli, Kavak, Luuna, Urbvan, Envíoclick, Petsy.mx, and UnDosTres.

Today, the entire technological ecosystem has matured. We have technical capabilities and local talent, foreigners who want to start companies in Mexico, an incipient private equity industry, and a gigantic market open to digital. But we must remember what has brought us to the celebration of these new unicorns because if we can replicate the successes and know-how to take advantage of this Mexican moment, we can accelerate the transformation and generate even more unicorns in the medium term.

Beyond a High Valuation

Why does Endeavor celebrate the existence of two new Mexican unicorns? We are not only happy for what it means for our Endeavor Entrepreneurs Carlos and Loreanne Garcia, and Roger Laughlin (Kavak), Pablo González, Ben Peters, and Daniel Vogel (Bitso), but also for the great impact that their organizations will leave on the country and the ecosystem.

Firstly, a unicorn company generates economic growth and quality jobs, which can change the lives of many families. In addition, it becomes a source of inspiration for other entrepreneurs and investors, and even for their employees.

Why? By working for them, they closely experience the vision of a high-impact company and they can learn directly from its founders, which could inspire them to start their businesses. Entrepreneurship is contagious.

We are also very excited about the level of innovation and incredible things created around unicorn companies, which serve to transform the world we live in and solve everyday problems. We know that their founding teams have their sights set not on the services they offer today, but on those they will provide in the future. It's understandable: you can't have an airplane that goes at this speed without pilots with a lot of vision, ambition, poise, and an insatiable thirst to transform their industries. That's the real magic of unicorns: their impact, their innovation, and what happens around them.

We are experiencing incredible moments in the Mexican entrepreneurial ecosystem, and the best thing is that the good news will continue to arrive in the coming months. It is truly exciting because these were the first steps taken in large entrepreneurship ecosystems such as Tel-Aviv, Silicon Valley, and Boston.

There is a long way to go to get there, but for now, Mexico is in the eye of the world, and we have a unique window to take our rightful place in the global entrepreneurship scene. We must embrace and capture this moment, and continue working on the transformation that our country needs, hand in hand with our entrepreneurs.