Launching a startup in Mexico is an adventure that seduces many Spanish entrepreneurs. With markets still in the expansion phase and a population of almost 130 million people, the country with the most Spanish-speakers emerges as a land of opportunity to embark on entrepreneurship on the other side of the Atlantic. «If you are a serious, reliable and long-term person, the returns in your work are much greater than those you can find in Europe»¸ dice Alvaro de Juan, a Spaniard who since 2014 directs the Mexican express courier company iVoy.
While in Europe and the United States many markets are already developed and have reached a certain level of maturity, in Mexico it is still possible to find virgin segments or in which there is hardly any competition.
That’s what motivated Helena Verrón to start his startup The Smart Flat in Mexico, a platform that uses artificial intelligence to provide real estate services. «When I arrived in the country, I identified a brutal opportunity in the real estate sector because the portals are about ten years behind an Idealista», dice.
Using algorithms, The Smart Flat performs intelligent profiling to improve compatibility between properties and clients. «The future of real estate portals is based on artificial intelligence. Here this sector is still not very digitized”, says the Spanish entrepreneur about the opportunity to set up her company in Mexico instead of in Europe. The Smart Flat started operations in June 2021 and already has 55,000 properties on its platform.
“Mexico is geographically close to the United States, allowing startups to expand to this country organically”, dice Agustin Redondo, the director of Wayra Hispam, on another of the opportunities for high-growth companies. Twenty of the 100 active startups that Wayra Hispam has in its portfolio are Mexican. “Mexico has already accumulated an investment by Wayra of 3.5 million,” says Redondo, who heads the Latin American division of Telefónica’s initiative to support entrepreneurship.
Although there are great opportunities to undertake in an emerging market like Mexico, there are also many challenges that entrepreneurs must face, starting with cultural ones. “We speak the same language, but we are different. To do business here you have to camouflage yourself and do business like a Mexican,” he says. Evaristo Babé, Founder of Pulpo, a startup that provides software that simplifies vehicle fleet management.
Babé, Spanish in Mexico since 2013, has seen a multitude of Spanish entrepreneurs arrive in Mexico in the last decade, with success stories and failures. In his opinion, Mexico City currently has a “boiling” entrepreneurial ecosystem, made up of local and international entrepreneurs. Bitso, Clip, Konfío, Kavak and Jokr are some of the startups that are ‘unicorn’, that is, they are valued at more than 1,000 million dollars. “50 unicorns will come out of the next generation of Mexican entrepreneurs. Entrepreneurs here have lost their fear of internationalization,” he says.
However, one of the biggest challenges that startups share is the difficulty in finding talent. This situation, which ranges from developers to senior management, makes many startups compete for the same workers. “Qualified people in Mexico earn more money than in Spain,” says de Juan, CEO of iVoy.
Access to finance is another common challenge. “The normal thing in Mexico is that the funds ask you to show between 6 and 12 months of income to invest in your startup,” says Verrón, from The Smart Flat. However, de Juan says that the situation has improved a lot in recent years. “Many funds have emerged in Latin America due to the proximity to the United States. In addition, the regulatory problems in China have caused many global venture capital funds interested in emerging markets to set their sights on this region”, he concludes.
Although it is not at the level of the United States or Europe, Mexico shows a fairly developed level of digitization compared to other countries in its environment. Smartphone penetration, which was 65% in 2019, is expected to reach 74% in 2025, according to a report by the consultancy GSMA.
66.5% of the Mexican population has access to the Internet, a percentage higher than that of Guatemala (41.4%), but lower than that of countries such as Chile (92%), Argentina (91.2%) or Brazil (74 .8%). It is important to keep in mind that Mexico is a very mountainous country whose surface area is about four times that of Spain. Meanwhile, the use of mobility applications such as Cabify or home delivery applications such as Rappi is common in Mexico City, the capital, but it is also common in the main cities of the country. However, it is not so much in towns or remote areas.
As for ‘ecommerce’, in 2020 sales worth 316,000 million pesos were recorded (13,612 million euros), 81% more than in 2019, according to a report by the Mexican e-commerce association AMVO. The percentage is much higher than the 9% growth registered between 2019 and 2020 by e-commerce sales in Spain, a more mature market in which these businesses reaped 51.6 billion euros in 2020, according to data from CNMCData.
Two of the factors driving digitization in Mexico are its huge young population and the growth in the penetration of financial services. Approximately 25% of its population, some 31 million people, are between 15 and 29 years old. Meanwhile, 53% of adults do not have a bank account and the underground economy is a habitual means for a large part of the population in a country where 43.9% of its inhabitants live in poverty, according to the government agency Coneval .
However, many startups are focused on offering solutions with financial services for those who do not have a bank account. In this way, many people manage to access digital services that they would not otherwise be able to pay for. Likewise, the use of debit and credit cards is becoming more widespread. According to a Visa survey, the number of debit card transactions grew by 4% in March 2021, compared to March 2020.