The Panorama of a Healthcare Startup in Mexico

The startup environment is maturing in Mexico but, is that true for all sectors? MBN interviewees believe healthcare is still an area where startups may face difficulties.

According to Deloitte, the startup environment in Mexico has grown stronger in the last couple of years. The Minister of Economy counts around 35,000 SMES and startups created per month. The main areas of these new companies are finance (23 percent), health (11 percent), tech and communication (8 percent) and education (8 percent). A study made by Contxto describes Mexico as one of the strongest venture capital ecosystems for startups. In 2017, investment in these companies quadrupled, making Mexico the second-largest favorable ecosystem for startups.

The large participation of foreign investment funds, combined with local investors, has been a catapult for many success stories. Investors and venture capital funds such as ALLVP, Angel Ventures, Avalancha Ventures and Dalus capital are among those supporting Mexican startups to develop their projects. Similarly, business accelerators such as Techstars, Rampa and MassChallenge are also joining efforts to consolidate this environment and boost innovation and entrepreneurship in Mexico.

MBN asked Camila Lecaros, Managing Director of MassChallenge Mexico, about the main challenges of health startups in the country: “The health sector is unique because there is a lot of regulation. To sell a product or service you need a lot of permits and acquiring these is a lengthy and tedious process. With medical trials, it can take four to five years before you see whether you have something valuable for the market.” Lecaros explained that due to this, investors need patience with health startups because all those processes need to be cleared out first. “I do not think Mexico has the ecosystem yet for health startups. There are relatively few funds. Those in the health area that do have investors tend to have only a few.”

MBN also interviewed Country manager Gonzalo Núñez of Rokk3r Mexico, a venture builder and co-building platform for entrepreneur. Núñez mentioned that among the challenges for entrepreneurs in Mexico is innovation prejudice. “One of the obstacles for companies is to change a paradigm of wanting to do everything and cover everything, to providing a value-added solution that is innovative. Technologies do not guarantee instantaneous innovation and improvement, it is necessary to have a model and project that support the need for technology to solve or improve a selected process.”

MBN has approached entrepreneurs in the sector to know their views and understand these challenges first-hand. Alejandro Jaime, Director General of GoFarma, an online pharmacy, spoke about regulations. “In the pharmacopeia of COFEPRIS, many digital platforms are still classified as additional services to conventional pharmacies. The reality is that services like ours are not additional, they are a primary service. Many people cannot go to pharmacies and depend on services like this. We believe regulation should be redefined to accommodate this reality. They should allow digital platforms to certify themselves according to certain criteria, so that not just any party can start selling medications out of their home.” The use of technology is still a barrier that many innovative companies face in Mexico, according to Jaime. “We find that most of our clients still prefer to communicate through the phone. The use of the website is growing, but many elderly people are not very comfortable using a website. Another issue we have encountered is the method of payment. Charging a customer through the website involves third-party commissions that can be double that of commissions charged at a regular card terminal,” he says.

Despite the challenges, venture capital funds such as Balero see the startup sector in Mexico transforming. “Health startups are rapidly diversifying and innovating. They no longer focus exclusively on the health sector but are looking for increasingly differentiated niches, services and products,” said Balero’s Founder Arturo Bañuelos. “The real challenge for startups is that the healthcare environment does not evolve at the same pace as startups. Many hospitals want to address digitalization but few are searching for technology-enhancing allies.”