After visiting Endeavor Mexico, Josh Ford put me in touch with Scott Wofford, a consultant and project leader at Ashoka who is developing a map of the entrepreneurial ecosystem in Mexico City including development organizations, funding organizations, universities, etc. JACK POT – this is just the kind of information that I am interested in.
Unfortunately, Scott’s report isn’t yet released publicly so I can’t share any lovely links, but Scott was kind enough to grab lunch with me and give me another take on what’s happening in the world of entrepreneurship in Mexico City and where the city’s ecosystem is headed in the near future.
One of the key differences he identifies between the ecosystem in Mexico and that in the United States are that there is more classism for aspiring entrepreneurs to contend with in Mexico and that
“classism impacts many things about being an entrepreneur including raising capital and being part of the right networks.”
Additionally, because of the social stratification, there is more need-based entrepreneurship in Mexico than in the United States. Many people become business owners because it is the only option they have to support themselves or their families, however, these are not the entrepreneurs that have the resources or desire to grow those enterprises into fully functioning, scalable companies.
At the same time, there’s a lack of investment capital – specifically venture capital, in Mexico. Scott believes this lack of venture capital has a few causes: venture capitalists have trouble finding a pipeline; lots of monopolies prevent industries from taking off through a startup because those monopolies have a choke hold and since the startups cannot make it “really big” they are less attractive to investors; and Mexico is missing the qualified talent to manage a successful fund.
Scott also identifies more entrenched corruption in Mexico as something that differentiates the ecosystem there from that in the United States. Because of this corruption, Mexico doesn’t fare well on the ease-of-doing-business index and it can be difficult for entrepreneurs without the right connections to get the proper permits and licenses to begin doing business or to expand an existing business.
On the positive side, however, because the social divisions are so defined,
“Once you’re in, you’re in,” Scott says. “Some of the success stories go through all of the programs – Ashoka, Endeavor, etc. even though they don’t necessarily need the help.”
This is a theme that came up in other interviews in Mexico City as well – because the ecosystem is still at its early stages, it’s a small community in which everyone knows everyone.
Mexico also maintains a strong family structure as a deeply entrenched part of its culture so friends and family “rounds” of investment are more common. Additionally, Mexico has a growing middle class and good macro-economic growth that, combined with its proximity to the U.S., position it well to bring established U.S. models and apply them in Mexico – usually for less risk.
So where does Scott see the Mexican entrepreneurial ecosystem in 5 – 10 years?
“Right now, 80%-90% of entrepreneurs who’ve been invested in or accelerated by one of the big programs will increase 25%-30% per year but only a few will be big success cases in terms of ROI.” In 5 – 10 years, “I think that there will be a couple of big success cases where entrepreneurs become pretty famous.”
Do you have experience in the Mexico City startup scene? If so, please let me know your thoughts on what Scott had to say in the comments sections below. Our next interview will be with Jackie Hyland of Angel Ventures Mexico.