Next up in my Mexico remix of Startup Nomad I spoke with Santiago Saviñón of PingStamp, a digital loyalty program for merchants.
While Santiago noted that, “it’s exciting to see,” the entrepreneurial ecosystem in Mexico City rapidly growing and maturing and that, “the market is definitely ready,” to be able to sustain a thriving startup community, he still considers it to be, “a struggling ecosystem.”
“It’s not even close to the sophistication that you guys have in the States,” he told me. “There are definitely many things missing from the ecosystem here.”
Just like many others that I spoke to in Latin America, he feels that access to capital is perhaps the biggest hurdle that the entrepreneurial ecosystem currently faces.
There are entrepreneurs that “know how to get a company and actually make it happen,” he told me, “but sometimes they don’t get the opportunity to do it because there’s no money around…It’s a lot harder to get a next round and just keep the ball rolling…[Latin America] is growing at an incredible pace, internet and smart phone penetration are growing exponentially, but still the money is not coming.”
He continues on to clarify, however, that there are plenty of investors and plenty of money in Mexico. The problem is that most of these investors are not comfortable with early stage investments in tech startups and prefer to focus on bricks and mortar operations who’ve already been able to produce sizable profits. “The money is there in Mexico,” Santiago said, “educated people, and VCs, and angel investors, they’re all there. They’re just not still comfortable…They still haven’t wrapped their minds around the fact that a startup needs a lot more runway.”
That’s at least partly due to the fact that the investors don’t have any major success stories to turn to as examples of the opportunity that lies within early stage investing.
“Not having exits is definitely a problem,” Santiago said. “I think it’s going to take at least a few years to have a few success stories that can maybe lobby their way into some kind of change in terms of legal and banking issues.”
At the same time that Santiago sees access to capital as a major hurdle to the entrepreneurial ecosystem’s growth, however, he does see a number of positives that position Mexico for success as an entrepreneurship hub and indicate that it will continue to develop rapidly over the next few years.
“The companies every day are getting more and more competitive,” he said. “In the last year I’ve seen so many people that have had a foreign company acquire or acqui-hire them.”
While the valuations are still relatively low (“If you went to the US you could probably add another 0 to the negotiation,” he told me), the fact that they’re happening is a sign of development.
Additionally, according to Santiago,
“the funding you have is a lot more efficient [in Mexico]. $300,000 in the US would maybe buy you 6 months of runway. In Mexico, $300,000 could let you run your company for 24 months. We take more advantage of every penny here.”
Because of these signs of growth, Santiago is extremely optimistic about the startup scene’s development and expects to see a mature ecosystem with many of the problems that are currently holding entrepreneurs back ironed out in less than 5 years. “At the rate it’s growing now I think maybe 2 or 3 years,” he said. “There’s definitely a lot going on…The few funds are really pushing everything forward because they’re the guys that know how to break down those political barriers, that know people from other countries that can help, that can really move this forward, because…
…the companies, and the entrepreneurs, and the young people with ideas and potential are definitely there.”
Between the involvement of the few investors that are active in the startup space and that of the entrepreneurs and aspiring entrepreneurs,
“[the startup community] is completely cooperative; it’s really fun,” Santiago told me. “We all know that if you don’t help someone out then the community will never grow as it should. Most of the time it’s a pretty awesome vibe and you feel important because it’s still a really small circle.”
Santiago believes that once Mexico’s startup ecosystem is able to produce a few success stories, that the ecosystem will turn a corner because entrepreneurs and investors alike will have an example to turn to. Interestingly, however, he feels that a few famous failures are just as important to the ecosystem’s development as the success stories are. “Once you get that money you need to know how to use it, what to do with it,” he said.
“There are no success stories like a big exit…but there are also no magnificent fuck ups, which I think is necessary as well: someone to raise money and then burn it all to the ground to add value to let people know that raising money is not the final goal.”
So what’s Santiago’s advice for aspiring entrepreneurs? He has quite a bit actually:
Firstly: “Do it,” he said. “Just take the leap and brace yourself… and get ready for the roller coaster.”
“Surrounding yourself with the right people is key,” he stressed. “It has more of an effect than you could ever imagine, even more so in a community that is just starting out.”
And finally: “A startup that’s focusing on Mexico or Colombia or Brasil is making a mistake; you have to have a regional, a Latin-American view of where you want to go, where you want to be…and that’s a challenge: making something that’s scaleable in Latin America.”