For decades, Mexico’s rich parked their money abroad. Now they’re bringing it home and investing in local startups.

Manolo Díaz had the credentials. He had attended Tecnológico de Monterrey (San Luis Potosí Campus), one of Latin America’s top universities, on a scholarship. While at university, Díaz, a natural at math and soccer, had also refined his fiery entrepreneurial spirit, developing business websites for his friends’ parents and creating digital yearbooks for classmates. But none of that helped him find capital after he graduated and turned full-time to entrepreneurship in 2005. Then, in 2012, Díaz sensed change.

Suddenly, his latest venture — Yogome, a tech startup dedicated to creating educational apps for children — started receiving attention from Mexican high-net-worth individuals and funds. He didn’t know it then, but Díaz’s experience was an early sign of the dawn of a new era. For the first time in Mexico’s history, local capital is actively looking to invest meaningful amounts into local startups.



In the U.S., investing in startups reached fever pitch in the late ’90s and has continued to electrify investors since. The reason is simple: Although a risky investment, technology allows entrepreneurs to upend industries and transform an economy. In the U.S., of all publicly listed companies, the combined market cap of those launched with venture capital funding stood at about 21 percent, and their employees represented around 11 percent of that labor pool, in 2015, according to research by economists at Stanford and the University of British Columbia that year.

For decades, that practice didn’t catch on in Mexico. But that’s changing now, after 40 years of demographic and economic shifts that have led to this moment in the country’s journey. The government’s role has been critical. In 2010, a quasi-governmental entity named Fondo de Fondos launched Mexico Ventures I, an investment vehicle that invests 20 percent of its capital directly in startups, and 80 percent in national VC funds. Additionally, in 2013 the government created an entity called INADEM (National Institute of the Entrepreneur), which also helps finance startups via national VC funds.

And in the private sector, families that benefited throughout this period have begun to “institutionalize” their wealth via the creation of family offices (FOs) that are enthusiastic about investing in ideas of local entrepreneurs like Díaz — either directly or through VC funds. Having spent time abroad, the heads of many of these FOs have witnessed the impact of VC in places like the U.S., and realize that when executed properly, investing in enterprising creativity can be powerful.

“Mexican family offices see great potential in investing in local entrepreneurs, but they also realize that it’s a complex task that takes a lot of time and skill, and it’s often best to outsource these tasks to VC funds,” says Julio Kuri, head of KUE Capital, a Mexican FO.

yogome co founders

Yogome co-founders (from left) Alberto Colín and Manolo Díaz.


Mexican FOs are a “relatively new phenomenon that started about five years back,” says Kuri. “Many of the sons and daughters of these families are highly educated and well trained, and they see an opportunity to invest their family’s wealth.”

These new sources of capital have yielded formidable results for the VC industry. According to data from AMEXCAP (Mexican Association of Private Capital), 12 new VC funds emerged in Mexico between the years 2000 and 2008, attracting $412 million in capital commitments. By contrast, between 2009 and 2017, about 73 new VC funds opened doors, attracting $1 billion in capital commitments.

The catalysts for this growing pool of VC money can be traced back to the ’80s and ’90s, when three powerful economic currents merged to set the stage for Díaz’s generation of entrepreneurs. It began with demographics. In 1980 Mexico’s working-age population began a rapid ascent, growing from 50 percent of the total population to about 65 percent today. Not only was the labor pool growing, but it was also more educated, with the literacy rate climbing from 83 percent to about 94 percent during that same period. This was a unique moment in history, and the government sought to maximize this demographic dividend by restructuring the economy.

In an effort to diversify its economy away from oil, Mexico’s government transformed the country into a manufacturing juggernaut via the implementation of the North American Free Trade Agreement, enacted in 1994. Since then, gross domestic product has tripled, from $343 billion in 1995 to $1.047 trillion in 2016. The key now was for the government to encourage this new wealth to stay in the country.

The finishing touch came from Ernesto Zedillo — president of Mexico from 1994 to 2000 — who, after the Tequila Crisis, wrought the necessary institutional changes (such as an autonomous central bank) to engender financial and political stability. This incentivized the investing and business community to reinvest in Mexico, generating a capital-creation feedback loop.

It took time for this new capital to reach entrepreneurs. “It was my family’s emotional and financial support that helped me launch and maintain my first few ventures, and it’s because of them I was able to succeed,” recalls Díaz, of his struggle in 2005. “Raising capital in Mexico was very difficult.”

But eventually, the accrued economic benefits began to spread to all corners of Mexico, including the VC industry, which in turn has galvanized the startup ecosystem.

Yogome recently raised a $26.9 million B round, employs 128 people and has offices in San Luis Potosí, Mexico City and San Francisco. Yogome is not alone; there are hundreds of Mexican startups that are challenging traditional business models. By March 2016, a Progressive Policy Institute study found, the app economy had generated more than 225,000 jobs in Mexico.

“World-class Mexican entrepreneurs with experience in accelerators and in launching companies in Silicon Valley, along with qualified engineers in Mexico’s manufacturing centers, are using software to leapfrog widely underserved markets,” says Jose Bolaños, a partner at VARIV Capital, a Mexican VC firm. “Local and foreign capital sources have already taken notice.”

Many of these startups will fail. But some, with the right funding, hard work and a bit of luck, will thrive and help transform Mexico’s economy. The growth of the VC industry has unleashed Mexico’s entrepreneurial beast. And a new startup generation is on the rise.

  • Alonso Garza, OZY Author Alonso Garza