With startup hubs across Latin America vying to become the next Silicon Valley, Mexico may be ahead of the game, and carving out its own niche south of the border. In 2015, TechCrunch published an article that argued that Mexico’s transition over to the innovation economy might just turn it into one of the world’s biggest economies in the next decade. Bismarck Lepe, a Mexican-American entrepreneur who pioneered Mexico-Silicon Valley cross border companies with Ooyala and now Wizeline, contends that Mexico is one of, if not the most interesting country in the world over the next decade.
Mexico’s unique geographic and cultural positioning allows it to capture both the US and the Latin American markets, while its size and natural resources allow it to compete with South American giants like Brazil.
Three major cities in Mexico – Mexico City, Monterrey, and Guadalajara – are at the forefront of the innovative movement and each city is contributing intensely to the growth of the startup ecosystem in Mexico.
While Mexico City is the most powerful due to its size and the availability of private and federal capital, Guadalajara and Monterrey are important second cities that are vying for technology and startup leadership. Here’s a deeper look at the startup ecosystems in each of these Mexican cities.
Mexico City: The Capital of Mexican Business
Mexico City is one of the largest cities in the world, with a population of 21 million people. In the past two decades, Mexico’s enormous capital has started to overcome a reputation of violence and is now the center of cultural, political, and economic activity in Mexico.
Mexico took notice of the impact its technology driven economy and is one of the first countries in Latin America to begin regulating the fintech sector through a new law passed by the Mexican Senate in December 2017. This law was considered a victory specifically by the cryptocurrency and crowdfunding sectors, as it put Mexico on par with the international community in terms of fintech regulation.
The Mexican Government has already gone all-in on funding innovation through the Instituto Nacional del Emprendedor (INADEM), a semi-autonomous branch of the Secretary of the Economy, which is based in the capital. Although the institute has a national focus, committing over US$600M to funding startups across the country, INADEM also has a significant impact on the local startup scene.
It’s clear that Mexico’s government has prioritized investing in innovation and the national development bank, Nacional Financiera (NAFIN), also based in Mexico City, recently refocused its investment efforts to support technological innovation and the needs of small businesses as well.
Mexico City is one of Latin America’s private investment hubs. Early-stage investor, Mountain Nazca and Telefonica’s incubator, Wayra, have offices in Mexico City where they invest in promising startups in Mexico City.
Local early-stage VC fund, Avalancha Ventures, also provides up to US$50K to Mexican startups in early rounds, with later rounds of up to US$2M. Jaguar Ventures provides funding opportunities for early-stage startups in Mexico and other Latin American countries. For a more in depth perspective, listen to advice and insights from Cristobal Perdomo from my podcast with Cristobal where we talk about the Mexico ecosystem.
Investo is another seed capital firm with investments in Mexico City-based startups such as Beek, TiZKKA, among others. Finally, Mexico’s major entrepreneurship organizations, like 500 Startups Latam, Startup Mexico and Startup Weekend Mexico, are also based in the capital and therefore direct a significant portion of their resources toward developing the local startup sector. You can hear a more in depth perspective on 500 Startups investments in Latin America and the Mexican market in my interview with 500’s partner Santiago Zavala.
As a result of these government and private initiatives, Mexico City is the birthplace of a majority of Mexico’s international startups. Aventones, a ride sharing app that helps people avoid Mexico City’s terrible traffic, was acquired by Europe’s BlablaCar after becoming Latin America’s most successful rideshare app.
Mexico City is also the birthplace of Clip, a phone attachment similar to US-based Square. Clip raised an US$8M round from American Express in 2015. Clip has since moved to the US to continue growing. Similarly, Cornershop, a Mexican-Chilean grocery delivery startup, raised a US$21M round in 2017 led by U.S. venture capital firm Accel with participation from Creandum, ALLVP, and Jackson Square Ventures.
Mexico City’s importance and economic dominance make it a prime location for startups. With exciting coworking spaces like Centraal and ImpactHub dotting the city, it’s not difficult for entrepreneurs to find a niche here. However, Mexico City’s size can also be a disadvantage. The traffic can be crippling, and entrepreneurs can avoid commute headaches by staying in buzzing startup areas like the Roma, Condesa and other neighborhoods with a high density of startups.
Guadalajara: An Up-and-Coming Engineering Hub
Guadalajara is already well-established as a hub for international tech manufacturing. Companies like Hewlett-Packard, IBM, General Electric, and Kodak have invested heavily in Guadalajara since the mid-1990s, reinforcing its reputation as a center for engineering talent in Mexico.
As one of the best engineering schools in Mexico, the University of Guadalajara is churning out talented professionals that have the potential to become Mexico’s next generation of entrepreneurs or support Guadalajara based startups.
The Government of Guadalajara recently stepped in to shift the city’s focus from production for foreign export to local innovation. Through initiatives like Ciudad Creativa Digital Guadalajara (CCDG) and Reto Zapopan, the local government is providing direct investments in the innovation sector. The CCDG campus is located in downtown Guadalajara and aims to strengthen Mexico’s position in the global economy through creative industries like television, technology, video games, and interactive media. Reto Zapopan is a government-funded incubator and coworking space for high-impact startups working in Guadalajara.
Furthermore, in response to Trump’s increased restrictions on immigration, cities like Guadalajara are trying to attract top tech talent to settle in Mexico instead. Nonprofit StartupGDL has already brought five startups to the city and other tech companies are following suit, with some looking specifically at Dreamers in the US, who may need to search for jobs abroad as Trump lets DACA expire. Just a four-hour flight from San Francisco, Guadalajara is also attracting Silicon Valley tech companies to set up back offices there since Trump restricted access to foreign talent by tightening regulations around the H1-B visa.
VC firms and angel investor networks are also finding a niche in Guadalajara. Angel Ventures, the most influential angel investor network in Mexico, has an office in Guadalajara and Mexico City. Guadalajara also has its own network of angels, the Guadalajara Angel Investor Network, or GAIN for short.
Although the venture capital system in Guadalajara is still nascent, startup builder Agave Lab has chosen this city as their home as they help develop a strong portfolio of Mexican startups from the ground up.
The Mexico branch of international startup accelerator Hackers & Founders, called the H/F Co-Op, was founded in Guadalajara, placing bets on Mexico becoming the world’s 5th largest economy in the next 35 years. Hackers & Founders Mexico now operates in 23 cities and has over 300,000 members. If you want to hear more about Guadalajara and Hackers and founders check out my podcast with Mak Guiterrez and Jonathan Nelson.
The supportive environment of Guadalajara is fertile ground for some of Mexico’s most successful startups. Guadalajara-based online money-lending service Kueski closed a US$35M round last year in what was the largest round ever raised by a fintech startup in Mexico. San Francisco-based startup Wizeline has its largest office in Guadalajara, both because the founder is a Guadalajara native and because they want to capitalize on the tech talent coming out of the city.
Unsurprisingly, the warm climate, low cost of living, and thriving art scene make Guadalajara one of Mexico’s most attractive cities. As a result, Guadalajara has seen dozens of coworking spaces pop up in the past few years, such as Nevermind Coworking, HackerGarage, and Epicnest.
Monterrey: The International Business Hub
Located just a few hundred miles south of San Antonio, Texas, Monterrey is a well-positioned hub for international entrepreneurship across the US – Mexico border.
Several university programs, such as the University of Texas’ Center for Global Innovation and Entrepreneurship, are located in Monterrey to foster cross-border knowledge transfer and bolster tech innovation in Mexico. Also situated in Monterrey is a Startup Grind Community powered by Google that brings together entrepreneurs working in the city.
Most notably, Monterrey is home to some of Mexico’s most dynamic venture capital firms, which have helped place this city on the map. Monterrey is the headquarters of Alta Ventures, a VC firm with offices in Monterrey and Utah, which invests between US$2M and US$10M in Mexican startups.
Other investors in the city include Naranya, an early-stage investor in digital startups across Latin America, and ImpactHub, a social impact accelerator with a network that spans across Latin America and the rest of the world. Startup Mexico, an incubator and accelerator, also has an office in Monterrey.
Monterrey is the home of one of Latin America’s top universities, Tecnologico de Monterrey, which is renowned for turning out talented, hardworking professionals. Monterrey is also the headquarters of startups like DeCompras.com, Mexico’s first e-commerce site, and EnviaFlores, Mexico’s flower delivery app.
Monterrey is one of Mexico’s most modern and fastest-growing cities, with an exciting restaurant scene and infrastructure. There are many places for entrepreneurs to work, including El Cowork, Taller.C, and Parvada Cowork & Co.
The downside is many residents find that the city is growing at an uncontrollable rate, driving prices sky high and bringing in smog. Furthermore, Monterrey is located far from any other major Mexican city, making transportation to and from the city frustrating.
Mexico is one of Latin America’s most important economies and quickly becomming one of the region’s most promising startup ecosystems. The major cities of Mexico City, Guadalajara, and Monterrey are leading the charge; however, Mexico’s enormous size and resources leave plenty of space for other smaller cities to follow suit. Mexico has already seen the benefits of supporting entrepreneurship and will likely continue developing new initiatives to boost its growth.