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News Article

Mexico’s Virtuous Ecosystem: A Startup Dream

By Cinthya Alaniz Salazar | Wed, 11/10/2021 - 16:58

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In Mexico, “the stars have aligned. Capital access, ambitious entrepreneurs and a diversified talent pool”, all the necessary components for a vibrant and innovative startup ecosystem have emerged, said Nima Pourshasb, CEO & Co-Founder, Minu. These favorable conditions have led to a start-up boom, which has been sustained thanks to a unique community of entrepreneurial mentors who have inadvertently created a self-feeding ecosystem that has drawn investment and talent from all corners of the world.

Before this favorable environment emerged however, Mexico had typically been selected as a starting point for many international businesses based on geographic proximity to the lucrative US market, with whom it shares a free trade agreement with since 1994, in addition to access to the wider Latin American market. Beyond this obvious geographic appeal, internal conditions in the country have also changed, turning Mexico into a favored strategic business entry point for businesses of all sizes.

Previously, access to venture capital was difficult and limited to about US$27 million, which in turn shut out the participation of businesses with the potential to disrupt stagnant industries. Since then, however, this figured has ballooned upward of US$10 billion coming mainly from the US said Alejandro Diez Barroso, Managing Partner, DILA Capital. Consequently, this has allowed start-up businesses to join a market that was previously reserved for large companies. Their entry into the market, coupled with a growing middle class with a disposable income, has generated a dynamic economy in Mexico that has driven innovation at an incredible speed.

Mexico City in particular is an important hotspot, “it is a country within a country. It is possible to build a successful business in one city alone due to the population density. It is as if New York was combined with Silicon Valley. It is very unique” said Sujay Tyle, Co-Founder & CEO, Merama. Other important metropolitan centers include Guadalajara and Monterrey. “If you thrive in these cities, you are sure to thrive in all of Latin America," said Ivan Ariza, Founder & CEO, Cargamos.

The start-up sector has enjoyed sustained growth mainly due a unique sense of community between CEOs and entrepreneurs who, through investment and mentoring, have continued to impulse the sector forward. “Second and third-time founders are coming forward from other successful companies to invest and/or build businesses on recognized market needs that their predecessors failed to address,” said Alan Karpovsky, Co-Founder, Mendel.

Beyond monetary investment, CEOs and founders are mentoring their own employees to develop the business leaders of tomorrow by nurturing their skills and giving them a realistic picture of business environment in Mexico. This fraternity has attracted and successfully drawn in international talent from adjacent business sectors, which inversely has contributed to a more dynamic and innovative workforce.

Within Mexico’s dynamic start-up business sector, fintech has emerged as a leader, driven mainly from popular dissatisfaction with traditional tools to access capital, from which many people have been excluded. Although previously resisted, innovation of the fintech infrastructure has evolved to provide consumers with greater safety and purchase assurance, which has already boosted other domestic sectors such as e-commerce and retail. Undoubtedly the sector got a boost from the COVID-19 pandemic that forced many onto digital platforms, which will continue expanding now that people have recognized their accessibility and convenience.

Cinthya Alaniz Salazar Cinthya Alaniz Salazar Journalist & Industry Analyst