Thirty-one year old Carlos Mendez commutes to his co-working space in an Uber car, pays for Starbucks with the tap of an iPhone, and communicates with his colleagues in a dizzying combination of French, English and Spanish. He would be at home in any number of international cities, but this young entrepreneur is based out of the La Condesa neighbourhood, an oasis of green in the sprawling urban metropolis of Mexico City.
An area popular with artists, young professionals and international models alike, the tree lined streets of La Condesa are now home to an ever growing cohort of technology start-ups and business incubators. Mexico’s tech industry has grown three times the global average in the last decade and it doesn’t show any signs of slowing down. But for a mega city of so many, it is surprising how little observable evidence of innovation is visible along Avenida de los Insurgentes, the longest avenue in Mexico City, as it runs through the Condesa neighbourhood. When I ask Carlos about this evident lack of modernization and tech development, he laughs and admits that it can be tough.
“There are many obstacles against trying something different or new here in Mexico,” he says, “Mexicans are close minded when it comes to emerging technology, and everyone is just waiting to see how this all works out”. This lack of institutional support and pre-existing framework is making life difficult for the Condesa creator crowd. Capital Pains A recent New York Times article identified Mexico as “the new land of opportunity” and went as far as to proclaim “Europe, dying; Mexico, coming to life”. While there are undoubtedly plenty of opportunities and fresh ideas, securing the funding to finance these plans continues to be an issue. And although Mexico City is considered to be more culturally liberal and socially advanced than the rest of the nation, its entrepreneurs still suffer from the same federal regulations and bureaucratic red tape.
Government has traditionally been slow to offer much in the way of financial aids or incentives. This may be changing with economic initiatives at the Instituto Nacional del Emprendedor (National Institute of the Entrepreneur) and support for young entrepreneurs at Jóvenes Emprendedores (Young Entrepreneurs) amid strong promises from President Enrique Peña Nieto to shift his government’s focus to the economy. And while Carlos is hopeful that all this talk will lead to action, most start ups in Condesa have yet to experience the much hyped changes. Many founders also complain that government assistance is only available to those with insider connections and that a culture of nepotism is holding them back. Banks aren’t much better. Mexican banks are inherently averse to taking risks with new start ups and many strict financial regulations, designed to prevent money laundering from the lucrative narco drug trade, also impede investment.
A conservative lending culture also requires that entrepreneurs put up property as collateral, demonstrate a long term credit history, and pay staggeringly high interest rates on all loans. But where the banks and government have failed to act, private companies are starting to offer pesos to these innovative founders. Equity investment firms such as Beamonte Investments and Bain Capital have set up shop and are seeing returns. The international seed fund and start up accelerator program, 500 Startups, moved into Mexico in 2012 and continues to offer funding to small and medium sized enterprises and additional angel investor groups are taking shape. Carlos secured his project funding at the bank of Mom and Dad, and isn’t as fixated on seeking international backing.
This isn’t the USA” he says “Investors here are not focused on acquisition or on IPOs; we just don’t have the precedent.
His goal is to make a profit, quickly, and not waste time chasing after series A seed funding from what is still a very small pool of investors. Searching in their own backyard “Engineers used to look to across the border or overseas for work, and those that stayed ended up in the established manufacturing sector” said Carlos. But recruiting personnel is getting increasingly easier, and with each local success story, more and more recent graduates are looking at the opportunities closer to home. While many of the Mexican start ups appear to replicate established American or European ideas – Task Rabbit copycat Unamano comes to mind – others are looking to identify and fill gaps in the growing Latin American economy with locally designed technology.
Recent laws in Mexico to limit or break up oil and telecommunications monopolies, combined with a growing middle class and their expendable income, have created a vacuum in the tech industry and the potential for new enterprises to emerge. And while Mexico City is no San Francisco, and La Condesa can’t quite compare with the Bay Area, Silicon Valley is a cheap flight away for mentorship, inspiration and advice. Invites to start up weekends and hack-a-thons are ubiquitous on social media and these collaborative events are occurring on a more frequent basis within Mexico City.
The eloquently named “F***Up Nights” was founded here, and has since spread around the world as part of its Failure Institute. This tongue-in-cheek event takes a more realistic approach to daily life in the start up community, identifying common issues and discussing everyday intricacies and disappointments of working in a start up environment. Attendees share their personal stories, often with a shot of tequila or mezcal in hand, and learn from each other’s mistakes. It should come as no surprise that “F***Up Nights” has identified the number one cause of start up failure in Mexico as “running out of money”. I mention this failure to Carlos as he sips on a locally brewed craft beer at a trendy pub on Avenida Insurgentes. He waves off the financial concerns and steers the conversation to local success stories and a possible new business venture in Texas. As we discuss the Mexico’s new antimonopoly laws and political differences between Mexico and the USA, he boldly proclaims to me,
Here in Mexico… we’re in the wild west, preparing to enter a new frontier in Latin America. I’m just trying to grab the reins.
Point of interest
Startup Mexico : Ignacio Allende : Ciudad de México, D.F. : Mexico : startupmexico.com
External links & references
- StartUp Mexico
- 500 Start-ups: Mexico City
- Start-up Grind : Mexico City : Meetup.com
- Building a Mexican Start-up Culture over a weeken : Cervantes / Nardi : UC, Irvine
- A mindset shift in Mexico : Entrepreneurship.com
- Roma – Condesa Tourism
Featured image credit: Alejandro De La Cruz : CC-Licence