In the last decade, Silicon Valley has grown to be a highly concentrated, costly, and competitive market. These conditions began to push entrepreneurs to look for opportunities in other regions, one of them being Latin America, specifically Mexico.
As we know, one of Mexico’s main advantages compared to other Latin American countries is its proximity to the US. Mexico was also one of the first countries in the region to regulate the fintech sector. In 2017, Mexico passed a law that placed it on par with the international community. This law was a victory for the fintech sector, specifically for startups working in the crowdfunding or cryptocurrency sectors. Another relevant indicator is that ten years ago, the country was already producing graduates in engineering and technology at rates similar to those in the United States.
This article will go through the evolution and principal actors in Mexico’s three most important tech hubs: Mexico City, Guadalajara, and Monterrey.
MEXICO CITY
Mexico City’s metropolitan area is home to over 21 million people – exceeding the population of whole countries in Latin America, such as Chile. Most financial technology and transportation startups are located in Mexico’s capital.
International and local corporations and funds have their headquarters in this city, increasing the size of venture capital in the area. Several government institutions based in Mexico City began funding innovation in technology many years ago. Some examples are the INADEM (National Entrepreneur Institute), and the NAFIN (Nacional Financiera). Mexico City is the center of Mexico’s political, cultural, and economic activity.
However, the size and scale of the city also present a challenge. Mexico City is famous for its disastrous traffic. It is also home to some infrastructure headaches and cumbersome business practices that throw entrepreneurs into the unexpected. It is a resilient city that has overcome a history of violence and is now a melting pot of entrepreneurs that successfully transformed it into one of the leading tech hubs in Latin America, if not the world.
Some venture capital firms based in Mexico City are Avalancha Ventures, Wollef (formerly Jaguar Ventures) and Investo. The largest entrepreneurship organizations in Mexico, such as 500 Startups Latam or Startup Weekend Mexico have offices in this city. Also, some of the most relevant private investment firms are present, such as Telefónica’s incubator Wayra.
Mexico City was the place of birth of the first Mexican unicorn, Kavak, in 2020. The valuation of Kavak is today at $8.7B, and it is Latin America’s most valuable company after Nubank.
MONTERREY
Monterrey is considered to be Mexico’s industrial capital, as large industrial corporations like Coca-Cola, FEMSA, and Cemex have their operational centers in this city. It is exceptionally well positioned for international entrepreneurship, as it is pretty close to the US border, specifically to Texas.
One of the most renowned universities in Latin America is located in this city: the Tecnológico de Monterrey. Several universities in Monterrey and Texas have created programs to transfer knowledge between countries and encourage tech innovation. Today, Monterrey is the third Mexican city with the most startups.
Some of the investment firms and accelerators located in the city are Alta Ventures, Naranya, ImpactHub, and Dalus Capital.
Monterrey is home to some of the most relevant startups in Mexico’s scene, such as Nowports. This digital freight forwarding company raised a $150M Series C round in May 2022, funding that transformed it into a unicorn.
GUADALAJARA
Over the last three decades, Guadalajara has emerged as a center for development, research, and innovation in highly specialized technologies. Actually, Guadalajara has often self-proclaimed itself the “Silicon Valley” of Mexico.
Guadalajara’s transformation into a tech hub was carried out by startups and by large corporations. Since the mid-1990s, companies like IBM, General Electric, Hewlett-Packard, Oracle, and Motorola settled down in Guadalajara. Hundreds of young Mexican engineers, computer programmers, and developers were drawn to the city. The University of Guadalajara is also one of the best engineering schools in Mexico, producing a large portion of the city’s talent.
A particular phenomenon took place in the city some years ago. Trump’s anti-immigration policies resulted in growing numbers of entrepreneurs that were being attracted to Guadalajara’s startup ecosystem. The city is only a 4-hour flight away from San Francisco, and Mexico has been inviting top talent to settle down here for several years.
Startup builders and accelerators such as Agave Lab opened offices in Guadalajara, and US companies like Wizeline have also decided to establish in the city. Several government initiatives, such as Ciudad Creativa Digital Guadalajara and Reto Zapopan, resulted in direct investments in the innovation sector.
Some of the most relevant investment firms in this city are Magma Partners, Redwood Ventures, FWV Ventures, and the Guadalajara Angel Investor Network. Also, many of Mexico’s leading fintechs were born in Guadalajara, such as Kueski, Billpocket, and Yotepresto.
Guadalajara, Monterrey, and Mexico City have robust foundations on which to build some of the world’s most influential tech startup hubs. Mexico City has always been Mexico’s indisputable center for technology innovation and venture capital investment.
Still, both Guadalajara and Monterrey are rising as hotbeds that have the potential to be on par with Mexico City’s scene. A substantial tech talent cluster has been building up for decades, and public and private initiatives have encouraged the creation of a relevant startup ecosystem in these cities. Local investment funds already have a track record of supporting flourishing startups, and global funds are becoming attracted to these cities. In short, Guadalajara and Monterrey will continue to be the place of birth for some of Mexico’s most relevant startups in the future.
