Mexico: the new start-up frontier

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The second largest economy in Latin America is set to become the latest tech start-up mecca and a powerful force for entrepreneurial spirit in the region.

Mexico is fast putting itself on the map as a tech incubator to be reckoned with. It has been buoyed by increased mobile penetration, thanks to the 2013 telecoms reform opening up the market. This has seen smartphone sales and internet access demand explode to create a new burgeoning digital economy.

Mexico has a population of over 122 million, all hungry for technology, with an economy that grew faster than Brazil last year. So it is little surprise that from Mexico City to Tijuana, clusters of tech entrepreneurs are springing up, looking to design the next greatest mobile app, innovative device and Internet platform.

It is estimated that around 78.2 million people in Mexico now own at least one mobile phone, according to market research company eMarketer. Although this penetration has peaked given economic development and disposable income, there is continuing growth in the smartphones, as users look for more advanced internet-enabled devices. 

“Mexico’s telecoms reforms have introduced more competition, introduced new players and created investment opportunities for foreign countries which has created a more dynamic environment to nurture new companies and ideas,” explained Ali Garcia, Sales Director and Country Manager, Mexico-Colombia Cluster, Orange Business Services. “As more is invested in the mobile infrastructure we will see greater bandwidth and more speed, which are also drivers for innovation”.

New investment in Mexico’s recently de-regulated telecoms market, will provide a stable and robust backbone for existing businesses and start-ups. AT&T, for example, is set to arrive with aggressive plans to install 3,000 microwave stations in the region.  Mexico has an interconnect agreement which means that other networks will be able to hook into AT&T’s deployment.  “This will bring with it new services, new opportunities and enable people in Mexico to really start utilizing the Internet and mobile communications,” explained Garcia.

Location is key

Mexico is well located for a start-up hub.  It is close to San Francisco and Silicon Valley and there are various organizations that enable US and Mexico start-ups to work together.  Start Up Mexico (SUM), for example, located in the heart of Mexico City, is a campus designed to drive collaboration and innovation.  Another group, Latin America Tech Meet Up, aims to create closer ties between Mexico, amongst other Latin American countries, and New York technology ecosystems.

Tijuana on to the US border is looking to re-invent itself as the ‘silicon gold coast’ of the Baja California Peninsula. Projects are opening across the city to nurture tech talent. Hub Stn, for example, billed as the the “first binational co-working space” houses a host of burgeoning tech companies including Ahorro Libre, a social savings network and Epiquerya, a digital agency.

Mexico is doing far better at attracting IT investment than many assume.  Some funders have spotted an early opportunity and suddenly the country has become a hot bet. Global seed fund and tech start up accelerator 500 Startups launched its Mexico-based investment platform 500 Luchadores in November 2012.  It has invested in 79 start-ups in the country through its acceleration program.  The highly active mentoring team includes such hard hitters as David Weekly, product manager at Google and Elaine Wherry, who founded Meebo. 

Mexican VC company Alta Ventures closed a $70 million fund this summer dedicated to investing in tech start-ups in the country.  It started the Kickstart Monterrey and Kickstart Guadalajara seed investment programs. Its home grown portfolio includes Diverza, an e-invoicing provider, Energryn Corp, a renewable energy technology developer and Tactivos, an online collaboration platform.

Government Backing

At the same time the Mexican Government has been working behind the scenes to push the region as an entrepreneurial space.  It has reformed laws to provide tax incentives to foreign investment companies in a variety of industries, including technology and is expected to spend $18 billion dollars funding entrepreneurial projects up until 2018.

Mexico also has free trade agreements (FTA) with 44 countries. To put this in perspective the US has FTAs in place with 20 countries.   At the same time, Mexico is one of the most competitive countries in the world for production and exportation. The next piece in the jigsaw is innovation.

The Mexican government has got heavily behind the start-up culture. It has also launched an institute to support entrepreneurs, dubbed the Instituto Nacional del Emprededor (INADEM) which promotes innovation and works to raise the country’s international profile in the start-up space.

Of course all these start-ups require skills, and in this area Mexico is not short.  According to the World Economic Forum Mexico produces 113,944 engineering graduates a year.  These graduates are looking to build a future for themselves and their country.

The work has started to create a sustainable start tech start up community in Mexico. We are already seeing the likes of restaurant site SeMeAntoja and mobile payment app Conekta carveout a market for themselves. Many others will follow. Now all Mexico needs is big success stories to generate capital and influence to increase investment and the ‘Aztec Tiger’ will be roaring.

Orange Business Services in Latin America

Orange Business Services has more than 50 years of experience in Latin America with over 600 employees in 12 countries and 122 points of presence in 31 countries.

Its extensive experience in the region provides it with a strong understanding of the local market, enabling businesses to navigate thorny issues such as regulation, compliance, security and government. Support is second to none with 250 customer service and operations professionals at its Major Service Center in Rio de Janeiro.

It provides IPv6 support in Argentina, Brazil, Chile and Mexico, together with Business VPN in 31 countries, xDSL in 14 countries and International Ethernet Link in 4 countries. Riverbed, Cisco, Avaya, Blue Coat, Microsoft, PMP and ITIL certification is also available.

Orange also offers ten-fold Latin American network capacity expansion to meet customer demand and ensure business stays connected.

Find out more here on our website.