Co-founder and General Partner at Jaguar Ventures
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Disclaimer: all content within the Startup Ecosystem Summary and Editor’s Guide sections is written by and reflects the personal perspective of the guest editor. The guest editor is not responsible for content within the Country Snapshot and Community sections, as much of this content is compiled from external sources and does not necessarily reflect the guest editor’s view.
The startup ecosystem and venture capital culture started in Mexico around 10 years ago, and, since then, growth has been exponential. Fintech is the current industry leader— having represented nearly half the total number of transactions and total dollars invested in 2018—and logistics and distribution are next in line with solutions for megacities and transportation standing out as two other noteworthy trends.
Next to Brazil, Mexico is the second-largest country for investment in Latin America. In 2018 alone, with US$175 million invested across 95 transactions, invested capital grew by over 119% and the number of transactions grew by 61%. This trend has continued into this year with investors like SoftBank announcing a US$5 billion Latin American fund. Despite the challenges tied to attracting top talent, growing investment means a growing number of opportunities for finding capital in Mexico.
Mexico’s startup ecosystem has an extremely positive outlook, which is made clear by its success stories with companies like Spotify, Uber, Facebook, and Instagram, which have proven it to be one of the industry’s largest and fastest-growing markets. Granted, there are a number of challenges to overcome. First, investment in entrepreneurship is heavily concentrated, with 81% of transactions taking place in Mexico City; the second-largest cities, Guadalajara and Monterrey, only had 4.2% and 3.25%, respectively. Beyond this, entrepreneurs must continue to improve their skills and position their projects strategically to secure venture capital, and finally, they will need the funding that is necessary to attract top talent, especially tech engineers.
Nevertheless, the opportunities far outweigh the challenges. In particular, new international investors are coming into the ecosystem, including Sequoia Capital, Andreessen Horowitz, Goldman Sachs, Temasek, DST and Tencent, and Softbank. Cases like Conekta’s investment in Femsa and Kota’s Petsy project offer examples of the existing potential. What’s more, many of these companies have created their own corporate venture capital funds to invest in entrepreneurs. Another significant factor is Mexico’s high number of internet users: compared to 275 million users in the U.S., there are 438 million users in Latin America, 79.1 million of which are in Mexico. Moreover, mobile growth in Latin America is forecasted to grow three times faster than in China. Finally, the ecosystem has evolved, and Mexican entrepreneurs who began as team members of earlier projects are now branching out to start their own initiatives. Without a doubt, the ecosystem will continue to expand, even further beyond the remarkable 119% growth it saw last year, with new and more substantial investors as well as entrepreneurs who are better prepared and have greater support.
Editor’s choice of the industries with the most potential for technology disruption and growth.
Editor’s choice of the country’s top 10 emerging tech startups.
Editor’s pick of which ‘Featured Startup’ is especially worth following and why.
Editor’s perspective of the maturity level of talent in the ecosystem.
Editor’s commentary on how the country’s culture and history have impacted the ecosystem.
Mexico’s blend of original native cultures combined with that of Spanish colonizers and other international influences has given the country its own way of life that is rich in tradition and creativity. Moreover, the majority of the population is Catholic, which has influenced workplaces with values of dedication and humility toward employers. Along these lines, there is an entire second generation of large corporations whose growth has been vital to Mexico’s GDP; because of this, they have gained the respect of the government and the people, who consider it an honor to work for them.
Furthermore, the persistent large class disparity strongly impacts unequal access to quality education and job opportunities, which has led to widespread social resentment, a massive informal economy, and high rates of emigration. There are currently around 12 million Mexican citizens living in the United States along with remittances that account for 2.91% of Mexico’s GDP. Beyond matters of emigration, Mexico’s economy has historically been closely tied to that of the United States, which has created a dependency that was further reinforced and intertwined when NAFTA was signed in 1994.
In this setting, startups offer an exciting middle ground for motivated young thinkers who want an alternative to the tired expectations of Mexico’s traditional business world or are determined to face the country’s economic challenges by innovating rather than leaving the country.
Interested in becoming more involved in this ecosystem and connecting with local ecosystem leaders? Let us know.
ALLVP (Mexico City): The firm’s main investment strategy is based on co-investing in subsequent financing rounds of portfolio companies at later stages where the Fund’s capital can serve as a critical catalyst to transitioning the company into the next stage of growth. Focus sectors include healthcare, FinTech, smart cities, and the consumer internet sector. (Source: ALLVP)
Asenza Capital (Monterrey): A family equity fund based in Monterrey, Mexico, focused on investments in real estate, public markets and private capital. (Source: Asenza Capital)
Avalancha Ventures (Mexico City): A seed stage investor that typically invests US$50,000, with the potential for follow-on funding. (Source: Avalancha)
Beamonte Investments (Mexico City): A private investment firm founded in 2000 that has specialized in private equity investments and structured lending. Since inception, the firm has executed, as principal and agent, over US$6 billion in transactions. (Source: Beamonte Investments)
Brainstorm Ventures (Monterrey): A seed and early-stage venture capital firm. The partners form a team of seasoned investors and serial entrepreneurs who strive to make the world a better place. Past successes include Zappos, OpenTable, Me.com, and KIO Networks. (Source: Brainstorm Ventures)
Bridge 37 (San Francisco): A Silicon Valley Venture Capital firm with a proprietary platform through which companies exchange innovation and scale. (Source: Bridge 37)
Dalus Capital (Mexico City, Monterrey): An early-stage and growth equity fund focused on supporting the best entrepreneurs creating innovative businesses in Mexico and Latin America. (Source: Dalus Capital)
Endeavor Catalyst Mexico (New York): An innovative co-investment vehicle designed to support Endeavor Entrepreneurs with their equity financing rounds and contribute to the long-term sustainability of Endeavor. (Source: Endeavor Catalyst)
Fondo de Fondos (Mexico City): Since its establishment in 2006, Fund of Funds has promoted productive investment in Mexico and Latin America, to catalyze the development and competitiveness of SMEs, as well as the energy and infrastructure sectors. (Source: Fondo de Fondos)
Founders into Funders (Mexico City): A venture capital fund in the seed phase, built by a group of high-impact entrepreneurs with the objective of transforming Mexico through the creation of new companies of the next generation of entrepreneurs. (Source: Founders into Funders)
Ideas y Capital (Mexico City): An early stage Venture Capital Firm focused on Mexico and LATAM.
IGNIA (Mexico City, Monterrey): Invests in businesses in all stages whose main market is Mexico and led by experienced entrepreneurs who are building capital-efficient B2C companies serving the emerging middle class. (Source: IGNIA)
Innovateur Capital (Mexico City): A Capital Fund focused on making investments in early stages in the financial services and business support services sectors. (Source: Innovateur Capital)
Investo (Mexico City): A seed capital firm that invests both financial and intellectual capital in technology startups. It offers founders 24/7 access to advice and helps them scale their business as well as provide them with key talent they may need. (Source: Investo)
Jaguar Ventures Mexico (Mexico City): A venture capital fund focused on early stage Internet ventures in Latin America. Jaguar invests in companies with the potential to transform their industries and is the only fund in Mexico and the region exclusively focused on Internet ventures. (Source: Jaguar Ventures)
New Growth Fund (Mexico City): A private equity fund that exists to identify, invest, transform, grow and realize private equity investments in small and mid sized companies in Mexico. The firm invests in companies operating in the fast moving consumer goods, business-to-business services, sustainable consumption, green, education and healthcare sectors. (Source: New Growth Fund)
NXTP Labs Mexico (Mexico City): An early stage venture firm focused on generating positive impact at scale in Latam by building the best ecosystem of tech entrepreneurs, mentors, investors and corporates. (Source: NXTP Labs)
Pedralbes Partners (Mexico City): An independent advisory firm and investment manager based in Mexico City. Pursuing a highly entrepreneurial approach, Pedralbes Partners seeks long-term partnerships with outstanding high impact companies in the region through the provision of capital and/or dedicated advisory services. (Source: Pedralbes Partners)
Siembra Capitales (Guadalajara): A private equity fund that was created with the purpose of investing in companies in the expansion stage. (Source: Siembra Capitales)
Soldiers Field Angels (Mexico City): A VC fund based in Mexico City. Formed by Harvard HBS alumni, the fund focuses on investing in high-impact companies at early stages. (Source: Soldiers Field Angels)
Stella Maris Partners (Mexico City, Monterrey): An entrepreneurial capital fund focused on investing in newly created companies that have great potential and a strong desire to change Mexico and the world. (Source: Stella Maris Partners)
SV Latam Fund (San Francisco): The first venture fund born in Silicon Valley with a unique focus on Latin America. Invests in startups that are at the seed and early stage, but also take later stage startups into consideration for investment. (Source: SV Latam Fund)
Toro Ventures (Monterrey): Invests seed money in tech startups who have an interest in the Latin American Markets. (Source: Toro Ventures)
Trebol Capital (Aguascalientes): A Venture Capital Fund for early-stage companies with a business model based on technologies for priority areas for Mexico. (Source: Trebol Capital)
Variv Capital (Mexico City): A venture capital firm that invests in early stage technology companies.
Startup Mexico (Mexico City): The leading organization in Mexico in the promotion of innovation, entrepreneurial culture and economic development both locally and internationally. (Source: Startup Mexico)
Finnosummit (Mexico City): A leading conference for innovation on financial services. (Source: Finnovista)
MIT Inclusive Innovation Challenge Latam (Mexico City): The Inclusive Innovation Challenge awards over one million dollars in prizes to future of work entrepreneurs. (Source: MIT Inclusive Innovation Challenge Latam)
Ciudad Creativa Digital Guadalajara (Guadalajara): Located in the heart of the capital of Jalisco, CCD concentrates creative industries such as film, television, video games, digital animation, interactive media and mobile applications, among others, positioning the state as a relevant production center for a sector that today is vanguard in the global economy. (Source: Ciudad Creativa Digital Guadalajara)
Instituto Nacional del Emprendedor (INADEM): A semi-autonomous branch of the Secretary of the Economy, which is based in the capital. The institute has a national focus, committing over US$600 million to funding startups across the country. (Source: INADEM)
Reto Zapopan (Guadalajara): An initiative of the Government of Zapopan where we seek to promote free of charge entrepreneurs who stand out for their ideas, initiatives, ventures and high impact companies: valuable, relevant, innovative and scalable. (Source: Reto Zapopan)
Promotora Social Mexico (PSM) (Mexico City): An organization of Risk Philanthropy and Impact Investment that promotes initiatives of social entrepreneurs that are aimed at improving the quality of life of the less favored people in society. (Source: PSM)