Anyone who assumes Latin American founders are worse off than their amigos in Silicon Valley has it wrong.
The region’s ecosystem is growing rapidly to support entrepreneurs in every sector, said Didier Quiroz, a 500 Mexico City Associate who joined the accelerator in March 2016. Quiroz, a self-described chilango who was born and raised in Mexico City, provides “a lot of portfolio support” in addition to research, analysis and event planning.
“Six years ago, there were a couple of hundred people doing entrepreneurship in tech in Mexico,” Quiroz said. “Now, there’s opportunities for CTOs that have an idea, as well as junior developers who have an ability to build and construct things,” he added. “Seniority doesn’t affect them; if they have an idea, they go on and do it.”
Cultivating LatAm Talent To Solve Big Problems
According to USATODAY, Mexico saw $1B in tech investment last year and counts more than 500K IT professionals.
Although regional founders are just as passionate and driven as American entrepreneurs, they’re also playing for much higher stakes, said Quiroz.
“Latin American founders, given some of the situations that our countries live in, tend to be really hungry for success and are really passionate about their startups and what they’re doing,” he said.
“I know in the US there are passionate people working on everything everywhere, but here, there’s this sense of changing the reality of the people around them because you’re always aware of poverty problems, health problems and finance problems,” Quiroz explained.
In the last six years, 500 Mexico City has invested in 86 startups that collectively generate more than $40M each year.
As diverse as the portfolio is, you won’t find companies offering frictionless laundry service or parking spot reservations. There are two services that facilitate the sale of secondhand clothing, however: Unbisne and Ropanroll.
Several edutech firms connect students across the continent with information that was previously only available in urban classrooms. Misión Admisión offers college prep, LaMusiquta provides music instruction, and Exploiter teaches professional computer security training.
“We have gaming companies, and drone companies and 3D printing for toys, but there’s a lot of people trying to solve bigger problems that we know our government is not solving right now.”
“Great entrepreneurs here in Mexico tend to look at pressing problems in general,” said Quiroz. “Those sectors that are more related to the core problems in our countries are the first that have impact,” he added. “We have gaming companies, and drone companies and 3D printing for toys, but there’s a lot of people trying to solve bigger problems that we know our government is not solving right now.”
“Fintech is very very hot in the world, but in Latin America, it’s even more important because debit and credit card penetration is very low,” said Quiroz. “To buy tech products and services, you need a way to pay over the internet.”
Quiroz, who previously founded a mobile health startup called Disculpe Doctor, said that sector still holds a personal interest. “There’s a lot of things you can do there, especially in countries where you don’t have coverage for a lot of people,” he said. “You need telemedicine or mobile health to heal all these people who are not connected to the system.”
Born in LatAm, Relevant Everywhere
Although the founders he’s working with are from Latin America, they also intend to compete globally, said Quiroz, who also wants to develop more homegrown media startups.
“We need to cultivate more of our outlets in Spanish,” he said. “I know it’s not the global approach, but these companies can can also compete in the US, Europe or Southeast Asia.”
Companies seeking entry to 500 Mexico City need to have their sights firmly set on Latin American growth, Quiroz added. “We want to see that the first step is to approach the whole region from Mexico to Argentina and Chile, and then to take over the world.”
To be clear, applicants aren’t required to be regional natives; they just need to have a damned good idea for a product or service that can connect with Latin American users. “If there are two people from Germany doing a tech startup for the Mexican market, that’s not a barrier to entry.” Quiroz noted.
Un Trabajo Importante: Educating LatAm Investors
Although there’s more access to capital than in many other developing ecosystems, few Latin American investors have any personal experience working with tech startups.
“Most of those people come from a very traditional background, so they don’t understand high-growth startups and how to invest in them,” said Quiroz. “They’re expecting quick returns and revenue, healthy cash flow, and a lot of things that really don’t happen in startups right away.”
Without a frame of reference, “they don’t understand exponential growth,” Quiroz explained. “They know traditional growth that’s backed up by formal corporations with all these departments, but they don’t really understand how a team of three people can grow from zero users to a million or from $10,000 to a million in no time.”
“A lot of people approach these guys who are doing a technology startup and say, ‘OK, you have nothing, here’s 65 grand US, and you need to give me, like, 45% of your company in equity right away,'” said Quiroz. In many cases, these same investors don’t have a local network to support founders down the road, even if they do strike gold, he said.
After a potential VC or LP wraps their head around delayed ROI “and why startups need to reinvest in marketing or growth hacking or product development,” they can be warmly welcomed into 500 Luchadores, the regional fund named after the legendary masked Mexican wrestlers.
After some internal discussion, Quiroz said the Mexico City team decided to change its name.
“We’re calling it ‘500 LatAm’ to make it more regional,” he explained. “Argentinians are very different than Mexicans, so having something in common other than the Spanish tongue can be hard.
Maybe it’s our love of soccer.”
Featured photo: carnagenyc/Flickr