Venture Capital Market Heats Up in Mexico
While many venture capital firms in the US are getting pitched the same rehashed ideas for the umpteenth time, a storm of excitement is brewing in Mexico. Now, more than ever before, investors are sitting up and taking note of the tremendous opportunities that exist in emerging markets. The venture capital market in Mexico is relatively new, having started only 10 years ago. Analysts predict that the market could reach US$1 Trillion by 2018, according to the Mexican Association of Venture Capitalists (Amexcap).
Recently, I had the privilege to attend the 3rd annual Foro Capital Emprendedor, a Venture Capital conference in Guadalajara. The room was filled with entrepreneurs, angel investors, and venture capital firms from all over Mexico and abroad. The conference, which packed information into 11 hours of speeches, presentations, panels, and interviews, was truly an eye opener for anyone interested in the startup sector and venture capital in Mexico.
After each panel, audience members had the opportunity to ask the venture capitalists questions. While many attendees knew exactly why they were there and had laser-like focus on their end goal, there seemed to be a number of attendees who were still unclear about what venture capital really is. One question, which was asked multiple times by different people, was “What is the difference between you (the VC) giving me money and a bank giving me money?” The fact that this is only the 3rd venture capital conference of its kind in Mexico, coupled with the confusion in the audience, demonstrates the current infantile state of the Mexican venture capital industry and the imperative need for further education for potential venture capitalists. While veteran venture capitalists from the US might have scoffed at such “newbie” questions, the panelists at Foro Emprendor were very gracious in their answers and did their best to reiterate the differences in venture capital and bank loans. By the end of the conference the message was clear: venture capitalists are part of your team. The shared end goal is to maximize the value of your business so that all parties win.
One of the most interesting topics covered was “What does Mexico have that Silicon Valley does not?” The session explained how Mexican entrepreneurs differed from entrepreneurs in Silicon Valley, and how Mexican entrepreneurs can use those differences to their advantage. Speakers included Jorge Zavala, of TechBA, Doug Von Feldt, of Continuous Improvement and Innovation, Cesar Salazar, a Mexican Venture Capitalist, and moderator Victor Reyes, of The Founder Institute Guadalajara. One of the main advantages of the Mexican entrepreneur, as pointed out by Jorge Zavala, is creativity. If you’ve ever seen a Mexican mechanic or handyman fix something, then you’ve seen this firsthand; Mexicans can create innovative solutions to common problems, regardless of the availability of proper tools.
It is one thing to talk about venture capital in Mexico, but another completely different thing to hear first-hand success stories. Alex Rossi, of the Latin Idea Fund, shared the story of Tecnoidea, the creators of Mexico’s first locally produced sports car, The Mastretta. Carlos Mastretta, one of the founding brothers of Tecnoidea, gave the audience a charming and honest overview of his experience working together with the Latin Idea Fund team. Tim Guleri of Sierra Ventures, a prominent Silicon Valley VC firm, presented the Ooyala success story. Ooyala offers video analytics and monetization solutions, streaming over 1 billion videos to nearly 200 million unique viewers per month. Ooyala’s co-founder Bismark Lepe was also on hand to recount his experience of startup life after leaving his job at Google.
Several Mexican entrepreneurs had the opportunity to pitch the venture capitalists and investors with their ideas. The entrepreneurs were selected out of crowd and each had 10 minutes to sell their idea to possible investors. After presenting, each of them were peppered with questions from a panel of Mexico’s top venture capitalists. The nerves seemed to go out the window and the adrenaline took over as they proudly argued why their individual projects were worthy of investment. A few lucky entrepreneurs were invited to private meetings by the VCs, while the rest of the group went home with a great experience and more motivation to tweak their pitch.
Although venture capital has a long way to go in Mexico, the Foro Capital Emprendedor is a good example of the direction in which things are moving. Investors are opening their eyes to the possibilities of innovative startups in emerging markets, and Mexican entrepreneurs are ready and up for the challenge.