LatAm List – Although Mexico does not yet have any unicorns, the Mexican startup ecosystem is thriving with more entrepreneurs and investors entering the market each year.
A combination of government support, startup accelerator programs, and increased venture capital activity have all contributed to building Latin America’s second-largest startup ecosystem, where investment in startups more than doubled in 2018 from the previous year. Here is a rundown of the Mexican ecosystem and the top startups you should be watching as we head into 2020.
An overview of the Mexican ecosystem
With a population of 129.2 million people and a GDP of $1.5T, Mexico is the 15th largest economy in the world and the 11th based on purchasing power. Mexico’s GDP has been growing steadily, with a 2.0% increase in 2018 and a further 1.7% in 2019.
LAVCA estimates that the Mexican ecosystem received $175M in 2018, accounting for 20.5% of Latin America’s total venture capital investments. There are 391 fintech startups registered in Mexico, beating out Brazil as the largest fintech market in the region. Mexico’s fintech ecosystem will only continue to grow as companies such as Clip, Konfio and Conekta expand their operations in the region with support from major global investors such as Japan’s SoftBank, which recently pledged $5B to Latin American startups.
It is only recently that Mexico has started to attract investors from across the border. The country has a strong local VC ecosystem with large investment firms such as Jaguar Ventures, Alta Ventures, and ALLVP injecting significant funding and expertise into the market. Jaguar Ventures, based in Mexico and Argentina, is an active seed investor in the region currently with 18 investments in Mexican startups including Konfio, Conekta, and Ben & Frank. Alta Ventures is a VC fund that has invested $210M in Mexican startups including Clip. ALLVP is also an active early-stage player, investing in startups in Mexico and, more recently, Chile.
A number of accelerator programs based in Mexico City are also helping to strengthen the ecosystem. 500 Startups offers a 16-week seed program to Mexican startups as well as funding opportunities. The accelerator has invested in over 1,800 startups from across the region. Other accelerators include Techstars and Hackers and Founders, which offer programs designed to build the Mexican ecosystem and promote cross-border investments.
The Mexican government also supports startups through legislation such as the 30 Day Payment Law in 2019, which requires all businesses to pay invoices within 30 days to target liquidity issues faced by SMEs when payments are delayed. Multiple government-funded initiatives such as Startup Mexico and NAFIN also offer funding and accelerator programs to startups. The Instituto Nacional del Emprendedor (INADEM) has also provided US$658M to over 620,000 entrepreneurs over the past few years to help jumpstart the ecosystem.
With global giants turning their attention towards Mexico, the ecosystem is likely to receive a boost over the next year. These are the top 10 startups in the market to keep an eye on:
1) Clip
Clip is one of Mexico’s biggest startups with a post-money valuation of $350-400M after its last round. Much like Square in the United States, Clip develops mobile credit card readers and aims to help small businesses to accept card payments easily. The company has also caught the eye of Japan’s SoftBank, closing a US$100M Series C round led by the mega-investor with contribution from US-based General Atlantic.
2) Konfio
Proof that Mexico is an increasingly attractive fintech market, Konfio is another Mexican startup to obtain significant foreign investment recently. Konfio provides credit lines through an online system to SMEs who are often overlooked by traditional banks. The startup has received significant investment from eleven investors over seven rounds, including $100M from SoftBank in a Series D round and a contribution from Goldman Sachs in its Series C round.
3) Cornershop
Cornershop is a mobile grocery delivery service that helps Latin Americans get their groceries without ever leaving home. The Chilean-Mexican startup recently made headlines after Uber bought 51% of Cornershop’s shares for $450M. A previous 100% acquisition deal with Walmart was rejected by the Mexican government for potentially breaching antitrust laws. However, the outcome has been positive as Uber’s acquisition of 51% shares has quadrupled the startup’s valuation in four months.
4) Grow Mobility
Grow Mobility is an e-scooter startup that provides alternative transport to more than five million registered commuters across 23 Latin American cities. It became the third largest e-scooter company in the world after Mexico’s Grin and Brazil’s Yellow joined forces to create Grow Mobility. The company also recently merged with the Mexican fintech Flinto in a step to facilitate online payments through the app, and is now considered one of the potential future unicorns in the Mexican ecosystem. Grin is also available through the Rappi app, making it accessible to millions of users in the region.
5) Billpocket
Billpocket is a mobile PoS system that allows any vendor to easily accept and manage credit and debit card payments. The startup recently announced an investment from Axon Partners Group for their Series A. Billpocket aims to help SMEs in Mexico access financial services and grow their sales by up to 30% through streamlined card payments. Mexico’s mobile PoS market is very competitive, with players like Clip using Softbank’s backing to grow quickly. Billpocket will be a startup to watch over the next year as it grows out of Guadalajara.
6) Conekta
Conekta is an online payment processor that allows users without a bank account to easily complete online payments with card or cash in any Oxxo across the country. The company received a $13M investment from the US fund Propel Venture Partners in its latest Series B round, as well as previously having raised funds through the Google Launchpad Accelerator crowdfunding platform.
7) Albo
Albo is the leading Mexican neobank that offers online banking services to 100,000 customers across Mexico. The startup recently raised a $19M Series A extension led by US-based Valar Ventures with contribution from Mountain Nazca and Ark Angeles, bringing its Series A total to $26.4M. With this investment and the current boom in Latin American neobank investment, Albo may become a target for Chinese investment, like Brazil’s Nubank and Argentina’s Uala, over the next year.
8) Jüsto
Jüsto is an online supermarket serving the Latin American region and is the first in Mexico to operate without any physical stores. Despite being a very early-stage startup, the company raised one of the largest seed rounds in Latin American history – $10M – led by Foundation Capital, as well as also previously receiving funding from 500 Startups and Mountain Nazca. Jüsto was founded by Ricardo Weder, the former President of the rideshare company Cabify.
9) Eva Tech
Eva Tech (previously Higia) is a biotech startup focused on early breast cancer detection through the development of biosensors. The company participated in Y Combinator in 2018, and have raised $5.1M to date. Eva Tech is one of Mexico’s most innovative biotechs; the solution was awarded Mexico’s Presidential Medal for Science and Technology in 2017, and was also named one of the ‘30 Most Promising Businesses of 2018’ by Forbes Magazine Mexico.
10) Ben & Frank
Ben & Frank is a fashionable and affordable eyewear retailer based in Mexico City that has used e-commerce to reach a wider market in Mexico. They received $480K in their seed round led by DILA Capital and Jaguar Ventures. Ben & Frank offers high-quality products at a much more accessible price on the Mexican market through designing and producing their products themselves and shipping them directly to customers.
Mexico’s current growth hints at a positive future for the local ecosystem . Eugenio Perea, a Venture Partner at Magma Partners, predicts that certain companies will emerge as dominant players in the market over the next 24 months, possibly even generating Mexico’s first unicorn startup.
Linda Rottenberg, the founder of Endeavor, comments in an interview with Forbes that Mexico is a young ecosystem with the majority of investments coming in at the Seed and Series A rounds, which is potentially a reason for the lack of unicorns so far. However, with the sizeable investments from international players such as SoftBank acting as validation to other global investors, the race for the first Mexican unicorn will start to narrow, with large startups such as Grow Mobility and Cornershop, Clip and Konfio, all contending for first place.
Eugenio also comments that a new startup hub is beginning to emerge in ‘second level’ cities such as Merida and the surrounding region where there is a surplus of entrepreneurial talent. Combined with the increasing access to funding from both within and beyond Mexico’s borders, Eugenio affirms that Mexico is definitely one to watch:
“The entire ecosystem will keep growing, there is no end in sight.”