Alejandro Diez
Partner and Director
DILA Capital

Environment Improving for Mexican Entrepreneurs

Tue, 11/01/2016 - 14:36

Life as an entrepreneur in Mexico has not always been smooth sailing. Labor crises in 1982, 1984 and 1992 and domestic economic volatility made things tricky for startups, which found risk-averse investors unwilling to part with their cash against such an unpredictable backdrop. For a country in which over 99 percent of all businesses are micro to medium-sized enterprises (MSMEs), according to the OECD, the good news is that things are beginning to change. Access to capital is a vital consideration for any young company in the infrastructure industry and Alejandro Diez, Partner and Director at venture capital fund DILA Capital, is optimistic about what the future holds for would-be entrepreneurs in Mexico.

“When I was looking for investment for my business in 2005, there were no venture capital funds whatsoever,” says Diez. “Now there are more than 20 investing actively and every year we receive more business and investment opportunities.” Diez also recognizes the impact of the government in removing some of the legal hurdles that young businesses have faced in Mexico in recent years.

“When we started our first business in 2005 we realized that being a small investor was complicated by the fact that we were not protected by law,” says Diez. “Now, various financial instruments have been created, such as anonymous investment promotion societies (SAPIs) and private capital investment funds (FICAPs), which make life as a minor investor much easier.”

Last year, DILA Capital received a total of 450 proposals from businesses throughout the country and in a variety of sectors, from shoe-makers to printer ink suppliers and Diez shares that DILA's portfolio contains promising infrastructure projects. The group completed investments in just nine of the 450 proposals submitted. This 2 percent applicant success rate can be attributed to the group’s stringent, painstaking approval process and investment criteria, which involves a face-to-face interview followed by a series of internal meetings. It can take up to six months for an investment to be approved but, according to Diez, there is one crucial characteristic that connects them all.

“There must always be a link to Mexico,” says Diez. “As Mexican investors, we want to invest in a business that will bring economic development and new jobs to the country.” Supporting startups does not simply offer enticing returns for short to-medium term investors like DILA Capital. Fostering a strong entrepreneurial spirit can also play a pivotal role in the development of Mexico’s economy in the long term by creating stable jobs and boosting big businesses that are often slow to lend a helping hand to startups.