Despite being Latin America’s second biggest economy, right after Brazil, Mexico still doesn’t have a startup that reached the status of unicorn – companies valued at $1 billion. The reason, according to Marcus Dantus, founder of StartUp Mexico – the first super-campus for entrepreneurship in the country, and one of the judges of Shark Tank Mexico, is related to the lack of IPOs, and other types of exits, for these startups.
This week, on the stage of an event by The Founders Institute, the world’s largest pre-seed startup accelerator, in the Brazilian city of Curitiba, the serial entrepreneur and investor shared his thoughts on the Latin American ecosystem of startups and funding. “Mexico can be a gateway to Brazilian companies going global – and the other way around,” he said, shedding light on the potential of those markets. “If you operate in Brazil and Mexico, you are basically conquering Latin America.”
But while Brazil has been increasingly luring investors and creating unicorns – the country ranked third in the number of $1bi valued companies in 2019 – Mexico, on the other hand, didn’t get there yet. “Mexico is in a state of [innovation and entrepreneurship] maturity very similar to Brazil, with the exception that there are no success stories.” The businessman and investor claims that, the reason for this lack of success cases relies on many reasons – from the absence of a high trade volume (low liquidity) in the Mexican stock market – to a behavior of risk-aversion in business.
Dantus doesn’t consider the startup regulatory scenario in Mexico an issue as serious as the ones above. “I don’t think regulation is a problem as serious as the ones I mentioned. It is something that can be greatly improved, sure, but it is not as serious as the others [problems].” In an interview with LABS, he elaborated about the entrepreneurial and investment landscape in the second greatest economy of Latin America – and shared his insights on what the future holds for this market.
LABS: What would you say are the biggest challenges/obstacles in the Mexican startup ecosystem today? In what state of maturity is Mexico in terms of innovation and entrepreneurship?
Marcus Dantus: The main challenge is that there is no government support, nor programs that generate more entrepreneurial culture and more entrepreneurs. The obstacle is that there are no exits for startups.”
Mexico is in a state of maturity very similar to Brazil, with the exception that there are no success stories. And those success stories are essential to close the virtuous circle that generates the balances.
And why are there no such success stories?
Because there isn’t a high trade volume in the Mexican stock market, also because there are not so many mergers and acquisitions activities, because we are more reluctant/risk-averse, because we do not accept failure.
I don’t think regulation is a problem as serious as the ones I mentioned. It is something that can be greatly improved, sure, but it is not as serious as the others.
What are the biggest problems that startups are addressing in Mexico?
The problems that startups are solving in Mexico are very similar to those in Brazil. Mobility problems, environmental problems, problems of corruption, banking, stimulation of savings, distribution of wealth, distribution of telecommunications so that everyone can have access, education.
It is very difficult to know which sectors are the most promising, of course, fintech is one part, another is everything that solves ecological, social, mobility. So far, the internet and technology have solved very superfluous problems, there are still real problems to address. When these real problems start being solved, it will be something very interesting.
With the Softbank fund for Latin America, does Mexico in general and Mexican startups begin to attract more investment?
The simple fact of creating a fund at an already much more advanced stage, which can reward investors at later stages will always generate greater expectations and greater investment, but not as much as, I believe, a financial exit would generate. That is, having a unicorn, two unicorns, more unicorns.
The problem is that the goal is not, you do not earn money, because you do not sell it. Startups in Mexico are not achieving financial exits.
What are now the most promising sectors attracting venture capital in the country?
Everything that has to do with banking and with money – not cryptocurrencies, but blockchain itself. Everything that has to do with making things more transparent – that people can doubt less about institutions – that is a very serious problem in Mexico and Latin America. Of course, also telecommunications, apps in general: most Mexicans access the internet through their phones and not through the computer. All of that has a lot of potential.
What did you mean by stating earlier in the panel “Mexico can be a gateway to Brazilian companies going global – and the other way around”?
There are two countries in the world that geographically have very similar circumstances: Turkey and Mexico, because we cross continents. Mexico is the one connecting the Spanish-speaking world with the English-speaking world. And Turkey connects Europe with Asia. If you look closer, we are similar societies, similar economies, similar populations. There is a very interesting opportunity there: if you target Brazil, which is a very large market and Mexican, that access all Latin America, with that we have the acquisition of a market of 700 million people and that is much larger than the US and Canada. With that, we could generate very interesting success stories