This week’s Startup Nomad interview is with Santiago Zavala, a Venture Partner with 500 Startups Mexico – one of the most active funds in the world, especially in emerging markets – and a former Founding/General Partner at Mexican.VC.
Unlike with many of my other interviewees, Santiago and I spent more time speaking about the development of entrepreneurial ecosystems throughout Latin America than just the situation in his native Mexico. He sees many similarities between all of the cities in the region vying for their place in the world’s startup ecosystem, but he also recognizes the distinctiveness of each.
“I think that we all have in common great talent. We’re really hungry, we’re really resourceful, and we’re really hard-working,” he said. But, “I would say every city…has a very specific context that makes them do things in different ways.”
“The economy in Argentina changes the way you target a market. Colombia, has a very specific culture that makes them think more on a city level rather than a country level and makes them more city oriented than continent oriented. Similarly with Mexico: very specific things in different parts of Mexico lead to different entrepreneurs and different startups happening in different places. So there are differences everywhere and I think anyone who is trying to hide that and just saying that they have access to the whole Latin American region because they have offices in one or two places is probably wrong.”
Because of these differences in cultures and economies, Santiago recognizes that Mexico City may not be the ideal city for every entrepreneur, though it certainly has a lot to offer to many.
“Anyone who is thinking that they can make their city or region or country the go-to place for everyone is probably going to have a really hard time,” he said. “It’s different for every entrepreneur.”
If an entrepreneur is building a company targeting the Spanish-speaking market, however, Mexico City can provide an abundance of opportunities. “We’re in a city of more than 20 million people,” Santiago explained, “so the odds of you being able to find your customer here are pretty big. The odds of you being able to validate with a big corporation here are pretty big, since most of the world’s major corporations have offices in Mexico City.”
If, however, you can acquire your customer online or your target customer is not in Mexico City, there may be other, better options for you for where to base your business.
“If you are building a product that you can acquire your users through the internet,” Santiago said, “and you can tell me that you’ll have a longer runway somewhere else…that’s fine. We don’t have the accelerator here because we think all companies should start here.”
As far as Santiago is concerned, each company has different needs and part of learning to be a good entrepreneur is being able to make the decision that is right for your startup and not necessarily the one that is most popular at the moment.
Despite not claiming that Mexico City is the spot for every new entrepreneur, Santiago is confident that the local ecosystem here will continue to grow and mature over the next few years.
“I’m literally betting everything on it being an awesome ecosystem,” he told me. “We have the same challenges as any other emerging market and we need to face them very clearly,” he continued.
“We are not sophisticated in almost every part of what it takes to build a successful startup because we haven’t seen any success stories…Every city, every entrepreneur needs to start thinking how we’re going to get more sophisticated…The goal is in 3 years to have companies in the Series A/Series B stage…
…I’m sure there will be 1 or 2 cities in Latin America that will have a very vibrant ecosystem in the next few years. I’m not sure if it’s going to be Mexico City. If not, I will have to move.”
Santiago also had an interesting take on the idea that the majority of startups in Latin America are “copy-cat” companies: companies recreating a business that’s already proven successful in another part of the world.
“Of course we see a lot of people that are trying to solve problems that are already solved in other places,” he said. “That’s the reason that you want to invest in emerging markets: there are still problems to be solved…I see a lot of people trying to solve similar problems but the solutions are so different [so] I don’t think there are copycats at all…
…All entrepreneurs need to be building on the shoulders of giants and there is absolutely no reason to reinvent the wheel, [but] the reason that the market was not using [the solution that exists in another region] was that it was not possible to use [the other solution] as it is in this geography…Anyone who thinks that you can just copy a great company is going to realize that it’s really, really, really hard…and when you try to do it in a very different place you are going to realize that there are very different challenges.”
Finally, what’s Santiago’s advice for aspiring entrepreneurs?:
“Try to understand what’s right for you,” he said.
“You need to make sure that you have a very clear compass. One bad decision is not going to lead you to serious problems – you will be able to figure a way out of it – but many bad decisions are going to take you to a place where it’s really hard to solve it and that’s why I think people need to be more sophisticated.” He urges entrepreneurs to really analyze the needs of their startup and not get swept up in the glitzy grant or accelerator programs that abound if they don’t actually add anything to your company.
“Try to talk with a lot of other people in your region about what is the right thing for your startup right now,” he said. And then, “work really, really, really, really hard and make sure that you know why you are doing it.”