A conversation about Latin America’s startup ecosystem would not be complete without mentioning Mexico. As the second largest country in Latin America, Mexico is at the center of the region’s tech revolution, receiving almost a quarter of all of the venture capital funds in Latin America in 2017. Mexico has also been an entry point and significant market for global tech companies like Uber, Google, and Facebook in Latin America.
Here are facts you need to know about Mexico’s burgeoning tech ecosystem.
1. Mexico was the first country in Latin America to pass a law to regulate fintech.
In March 2018, Mexico’s Congress passed a bill to regulate the fast-growing fintech market in the country. The law will help prevent money laundering and corruption, and clear up uncertainties about cryptocurrencies and crowdfunding technologies. This bill is a sign that Mexico has fully embraced the potential of technology to revolutionize the local economy and solve entrenched problems like financial inclusion.
2. Mexico received almost one-quarter of all VC investment in Latin America in 2017.
According to LAVCA, Mexican startups received the second highest level of investment in Latin America, after Brazil, in 2017. Over 59 deals, Mexico’s 2017 investment total came to over US$80M, down from 2016, but still making Mexico the second biggest player in the region. Most of those deals were in fintech (Konfio), edtech (Yogome), or e-commerce (Cornershop).
3. Mexico is the fifth-biggest user of Facebook in the world.
Based on number of Facebook users, Mexico comes in fifth in the world. Facebook penetration reaches an average of 22.9% worldwide. In Mexico, over 85 million people have Facebook, in a population of just 127 million, meaning more than half of Mexicans actively use the platform.
4. Amazon is rapidly growing its services in Mexico.
In March 2018, Amazon created a debit card for unbanked Mexican shoppers to help push e-commerce growth. Currently, less than one-third of Mexican adults have credit cards, meaning e-commerce development has been slow. This card, called Amazon Rechargeable, is only available in Mexico and is intended to help Mexican shoppers purchase via the Amazon online marketplace. It can be topped up at any convenience store around the country.
In August 2018, Amazon announced it would also launch its smart virtual assistant Alexa in Mexico, its first market in Latin America, as well as a new distribution center in Queretaro, Mexico. The new distribution center is further proof of e-commerce growth in Latin America’s second-largest economy. According to market research firm Euromonitor International, the online market in Mexico was expected to be worth around $7 billion in 2018 and $14 billion by 2022.
5. According to Finnovista, Mexico is the region’s largest fintech market.
Mexico currently has around 238 fintech startups, a 50% increase from 2016. This figure puts Mexico even ahead of Brazil, which tends to lead Latin America in most tech industries. A combination of factors, including Mexico’s growing economy, widespread mobile coverage, low banking penetration, and an underdeveloped lending system, have pushed Mexican fintech to success. Almost 40% of fintech startups in Mexico focus on remittances or lending.
6. Goldman Sachs predicts that Mexico will be the world’s fifth biggest economy by 2050.
Mexico is more than just a regional power; it is well on its way to becoming a global one. With a young, highly-connected population that is transitioning to the middle-class, Mexico has the potential to lead much of Latin America’s tech ecosystem in coming years.
7. Mexico City is the 7th biggest city in the world.
The Mexico City metropolitan area has a population of over 22 million people, second only to Sao Paulo in Latin America. This mega-city is the epicenter of Mexico’s tech ecosystem, with most government funds targeting Mexico City first before reaching out across the country. While Guadalajara and Monterrey are also growing tech hubs in the region, many startups, accelerators, and international companies start in Mexico City, then branch out.
8. The Mexican government has committed over $600M to startups through the Instituto Nacional del Emprendedor (INADEM).
Since 2014, the Mexican government has distributed up to US$658M to over 620,000 entrepreneurs to try to jumpstart the entrepreneurial ecosystem. According to INADEM data, 6000 companies and 73,000 jobs have been created as a result of these efforts.
Mexico’s top universities, including Universidad de Guadalajara and Tecnologico de Monterrey, are pushing hard to create the talent Mexico needs to grow and develop its tech ecosystem. In a country where over one-third of the population is under 25 years old, and three million people are enrolled in university, the educated middle class is growing very quickly. Mexico reportedly graduates over 120,000 new engineers a year and the Mexican government is working hard to create tech jobs locally, through programs like Reto Zapopan, to keep that talent local.
10. The cost of living in Mexico is very affordable.
Mexico is one of the most affordable countries in Latin America. Rent prices in Mexico City are 83% lower than San Francisco, and food prices are 70% lower. Even compared to other cities in Latin America, cost of living in Mexico City is very reasonable. Grocery prices in Mexico City are 30% lower than in Santiago or Buenos Aires, while rent is just 4% higher.
11. Mexico is leading Latin America in mobility innovation.
Mexico is extremely attractive territory for the latest mobility programs. Uber announced it plans to increase its dockless bike sharing and e-scooter service, Jump, in Mexico City. Other local players include Mobike, VBike, Bird, Movo, and Grin Scooters. After going through the prestigious US accelerator program, Y Combinator, Grin Scooters raised an impressive $20 million in the largest-ever seed round for a Latin American startup.
12. Guadalajara is a leading tech hub.
Mexico’s second-largest city is undergoing a technology transformation. In recent years, Guadalajara has turned itself into a global center for research and development, programming, and design. The nonprofit organization Startup GDL is helping to attract Silicon Valley startups to Guadalajara and promoting the city’s many benefits to local startups as well. The state of Jalisco is home to 40% of Mexico’s IT industry and a well-educated population. There are 16 technology institutes and 12 universities graduating more than 8,000 technical and engineering students every year in the state. Global IT companies with offices in Guadalajara include Toshiba, IBM, HP, Oracle, Cisco, and Intel. The city’s proximity to major U.S. cities makes it a no brainer for U.S. companies with ties to Latin America as well.
13. Mexico accelerators are churning out successful startups.
Mexico City is home to 500 Startups only acceleration program outside of San Francisco. The 500 Startups: Latam program provides Latin American startups with funding and mentorship to grow their businesses in a variety of industries. According to 500 Startups’ Partner Santiago Zavalo, startups that have gone through the acceleration program have raised over $300 million in funding to date. Success stories include online lending platform Konfio and mobile payment platform Clip. Other notable accelerator programs in Mexico include Telefonica-owned Wayra Mexico, NXTP Labs, Startupbootcamp, Tec Lean, Numa, and MassChallenge.
Mexico is one of Latin America’s up-and-coming tech giants, and international investors are paying attention. After profitable investments in Konfio, Yogome, and Cornershop in 2017, Mexico will likely continue to receive significant capital to grow its tech ecosystem. There are already 45 funds active in Mexico, and the number of startups is growing exponentially. Mexico will undoubtedly be a tech market to watch over the next decade.