It has been proven that Mexico is the preferred country when it comes to developing startups, stay and find out why.
The business world has evolved, in recent years companies have emerged leveraged on cutting-edge strategies and innovative proposals, with great growth potential. This has injected greater dynamism to the markets and has caused a revolution in Latin America, we are talking about startups.
Startups, also known as emerging companies, although they are not all the same, tend to share certain characteristics. One of them is that they use technology to provide solutions, grow and obtain financing. They also seek to create business models that are different from the traditional ones in a simple and creative way, focused on solving consumer needs.
Startups in Latin America
Although it is possible to create a startup anywhere, it is true that there are places with ideal conditions to favor its development. In the case of Latin America, during the year 2021, 8.8 billion dollars were invested in 400 deals, according to the financial data provider PitchBook. This reflects the interest of venture capitalists in the region’s potential.
Historically, the start-up sector that received the most capital was the fintech sector. However, the landscape changed last year when the second-hand car marketplace Kavak obtained the largest investment round. This was followed by Tiendanube (ecommerce) and Rappi (delivery).
Another indicator that the startup ecosystem in Latin America is growing is that regional funds started investing for the first time in certain countries, as is the case of Kaszek in Peru. In addition, others such as Innogen Capital Ventures and Platanus Ventures increased their investment capital.
On the other hand, there was a record number of new unicorns in the region. For example, Mexico became the cradle of unicorns when it started the year with zero and ended up with 7. Chile, for its part, added one more to its list and Brazil stood out with 21.
Mexico, the most interesting country for startups
The Soft Landing in Latin America study, carried out by Endeavor, Mastercard, General Atlantic and Google, recently revealed that Mexico broke the record by obtaining US$ 3.4 billion in private capital in its entrepreneurship ecosystem last year. Thus, Mexico proved to be the most attractive country for the international expansion of emerging companies.
Among the data that can be extracted from the above research, the difference between the number of startups that chose Mexico as a destination country for expansion and the rest stands out:
- Mexico (145)
- Colombia (80)
- Brazil (74)
- Peru (52)
- Chile (51)
- Argentina (49)
It should be remembered that Mexico was the birthplace of some internationally recognized startups such as Cornershop and Rappi. Certainly, these companies are not of national origin, but their business model grew and developed in the Mexican market.
It is also worth mentioning that another proof of the confidence that venture capital firms are having in Mexican innovation is the transformation of Kavak into the country’s first unicorn. As well as the significant increase in terms of the participation of investment funds and accelerators during the last years, showing a growth of 4 times more than the one presented in 2017.
Additionally, Endeavor’s finding related to entrepreneurs managing to capture revealing investment rounds after showing plans to expand into Mexico cannot be overlooked. One of the reasons is that it is the largest market among Spanish-speaking countries, as well as the easiest to access the U.S. market.
Another of the qualities that makes Mexico attractive to startups is that it has more precise regulation than most Latin American countries. Its Law to regulate financial technology institutions, enacted in 2018, undoubtedly set a starting point for the healthy development of the fintech ecosystem in its territory.
Finally, it is convenient to take into account that the cities in Mexico that contain the highest concentration of support platforms for startups are: Mexico City, Guadalajara and Monterrey. To complement this, Puebla, Hidalgo and Querétaro are considered innovation hubs.
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