Día de los Muertos decorations in Toluca. Photo credit: The Haphazard Traveler.
A spirited melody fills the air, marigold petals cover the streets, and the aroma of traditional Mexican cuisine wafts through the vibrant alleys. It's the enchanting season of Día de los Muertos, a time when Mexico dons its most colorful attire to celebrate and honor departed loved ones. While this festival traditionally pays homage to the dearly departed, it also reflects the vibrant energy of Mexican entrepreneurship.
So as the world is captivated by Mexico’s spirited traditions, we want to focus on a less explored aspect of Mexican culture: its burgeoning startup scene. We"ll dive into this fusion of festivity and innovation, and celebrate the accomplishments, the challenges, and the resilience of Mexican tech.
The Rise of Mexican Startups
When we think of startups in the Americas, Silicon Valley is at the top of everyone’s minds. However, outside of the US, there are a multitude of leading startup hubs from Montreal all the way to Buenos Aires.
With a population of 128 million, Mexico is one of the biggest markets in Latin America. This offers its startup ecosystem a significant edge in terms of scaling businesses domestically. Located just south of the US, it has close access to the North American market while maintaining strategic ties with the rest of Central and South America.
With relatively low production costs, Mexico is a great location for local entrepreneurs to begin and scale operations. The largest concentration of startups are located in Mexico City, Monterrey, and Guadalajara. The country has even seen six successful unicorn valuations in the last few years.
The first Mexican unicorn Kavak emerged in late 2020 with a valuation of $1.15 million USD after just four years of operations. Since then, the car buying and selling platform has become a reference point for many Mexican scale-ups.
Mexico City Metropolitan Cathedral and the Mexican flag. Photo credit: John Coletti, Getty Images
The Enablers of Success
In a country where community is not just a tradition but a way of life, it's no wonder that Mexican startups find their strength in unity and support.
Several incubators and accelerator programs exist across the country to help entrepreneurs get their ideas off the ground. For example, Startup Baja, based in Ensenada, Baja California, is an incubator for startups and acts as a second co-founder. They help build startups from scratch when the specific idea or team doesn’t exist yet.
Given that startups have the ability to boost employment and the economy, the Mexican government has also taken action to assist startups through a number of incentives to support their expansion and success such as grants, tax exemptions, and incubator initiatives.
Startup México, supported by the Mexican government, is the first innovation campus for entrepreneurs in Mexico. It houses startups, seed capital funds, corporate implants, and entrepreneurial services all under the same roof. They’ve already helped over 1,200 graduated startups in their programs.
Ranked 37th in the top startup ecosystems globally and 1st in Central America, Mexico has become a leader in several startup markets notably fintech, e-commerce, and transportation.
Almost 750 fintech startups exist in Mexico. Bitso, a recently crowned unicorn, is the country's leading crypto-based financial services company. Klar has become the go-to digital bank, giving Mexicans better access to financial services like savings accounts, money transfers, and bill payments.
Over 900 Mexican e-commerce startups are bringing goods and services right into online shoppers" hands. Rappi not only delivers food but also provides access to medicine and groceries for underserved communities in Mexico. GoTrendier boosts the circular fashion economy with its online marketplace for new and secondhand clothes and accessories.
Almost 500 transportation startups in Mexico are helping the country move better. Urbvan is an app-based shuttle aggregator platform that gives businesses and travelers access to shared van transportation. Nowports is using AI to optimize the freight forwarding industry.
Map of Mexico. Photo credit: New Haven Register
As Mexican startups set their sights on the horizon, the future looks bright, but it's not without its share of challenges to conquer.
Mexico City is not only the country’s capital, but it’s also Mexico’s startup ecosystem center. However, with 81% of all startup funding funneling into this city alone, the rest of the country’s startup resources are spread thin. Such a high concentration of funding in one city hinders the growth of startups in other regions.
What’s more, in 2023 overall funding in Mexico has seen a 75% decrease compared to the same period in 2022, a trend we’ve seen transpiring in startup ecosystems around the world. However, as we discussed in this article about startup evaluations, the surge in investments in 2021 and 2022 was unsustainable, and current levels are returning to pre-COVID norms. This funding dip shouldn"t deter Mexican entrepreneurs from seeking new investment rounds.
Finding tech talent is also a struggle for many Mexican startups. With the borders of Mexico so close to the US, about 10 million Mexicans emigrate there every year. A large majority of young professionals decide to move to the US where the salaries are higher.
Despite these challenges, Mexican entrepreneurs remain resilient. The opportunities to grow in this ecosystem outweigh the current difficulties.
Specifically, new foreign investors—such as Sequoia Capital, Andreessen Horowitz, Goldman Sachs, Temasek, and Softbank—have been joining the ecosystem in recent years. With new investments come new opportunities for entrepreneurs to expand their business, scale with the market, and attract top talent.
Viva Mexican Innovation
In Mexico, innovation is deeply ingrained in the culture. This relentless pursuit of new ideas, combined with the determination to overcome challenges, propels the Mexican startup ecosystem to new heights. With a growing influx of foreign investments and a rich tradition of resilience, Mexican entrepreneurs are crafting a future where innovation thrives and knows no bounds.
So as Mexico celebrates its centuries old tradition of remembrance today, we’re reminded that it's the unique blend of honoring the past and innovating for the future that's shaping Mexico's identity in a remarkable way.