When Mexico City stormed its way to 1st place in our Regional Unlock Competition late last year, we at StartupBus HQ were taken completely by surprise. Included in a moment of topographical whimsy, this south-of-the-border ecosystem had thoroughly dominated a selection process designed to gauge regional scale and support. Robust community? Latent capacity for talent discovery? Energy out the wazoo? Tick! Tick! Tick!
So it transpired that I found myself on a short plane ride from the king of tech hubs- San Francisco - to one that is as underrated as it is misunderstood. I had arrived at a burgeoning ecosystem undiscovered (or at least untouched) by the riches of Silicon Valley, the bubble of speculation and the distraction of populist hype. Its mere existence is a testament to the charisma and sheer willpower of the many locals who have reinvested their time and experience back into those around them (a special shout-out goes to Santiago Zavala and Cesar Salazar of MexicanVC, and the other linchpins whom I haven’t had the pleasure of meeting yet).
Countless hours of community organizing have finally manifested into a beautiful circumstance where local idealism lives up to the competitive standards of a global marketplace. The purist in me knows this as a marketplace of ideas; the pragmatist recognizes it as a race to execute. In both respects, Mexico is on the map.
Despite first impressions of cultural conservatism, bureaucratic rigmarole and mild-chaos on the freeway, Mexico could represent a gem for any outward-looking investor. It has an under-invested base of talented engineers and designers (for those preferential towards geographic arbitrage, read “under exploited”), and their startups are comparatively less expensive in investment terms - ideal for the spray & play nature of seed and venture capital. Most importantly, Mexicans are culturally innovative, resourceful and inherently entrepreneurial - it’s a fact that they must innovate to survive, both in business and in life.
Yet while the focus of the article appears StartupBus-focused, this isn’t a story about us. We just happened to have stumbled head first into the second wave of the digital age where the cost of factors of production are low, education levels are high, and the disparity between raw ambition and opportunity has never been greater. As developing ecosystems come to the fore, American startups are in for a massive surprise: life is about to become a whole lot more competitive.
Maligned immigration policies may deny entry to foreign workers (a topic for another rant) but ideas transcend such borders. Facebook and Pinterest are not unique to the American marketplace, they are human-centric and appeal to our core desires to communicate and share experience. Foreign engineers are acutely adaptable to the American marketplace - they speak English, were raised on US-exported pop-culture and their very “foreignness” gives them an expanded worldview.
Silicon Valley may be unique, but no bastion is impenetrable. En masse, the tide of innovation is changing: Skype and Spotify are name-brands, Shaker (Israel) won TechCrunch Disrupt and Stripe (Irish brothers) just raised $18m from powerhouse investors including Peter Thiel- but this is just the beginning. As increasing numbers of developing ecosystems come into play – as Mexico has done – the second digital wave will have an increasingly foreign flavor.
So what’s holding them back?
For both seed and scaling, foreign-based startups have less access to capital - this is just a reality. In a Darwinian sense this leads towards a profit-or-die mentality, but in a big-hits world this is prohibitive to allowing fringe-dwelling aberrations to exist until reaching their full potential (hint: the fringe is where the big profits lie). LinkedIn, Twitter and Facebook all required bold capital commitments in order to thrive. De-risking early forays into product discovery is a necessary step to creating big hits in this new-technology paradigm. Investors that get in on the ground floor (seed & pre-seed round) will accrue reputation and portfolio benefits.
Skype is just a key-stroke away - this won’t last long. Experienced entrepreneurs willing to connect with foreign ecosystems will have the most to gain here. Likewise, inflexible Silicon Valley firms have the most to lose.
Developing-ecosystem entrepreneurs have more to lose than most middle-class Americans. StartupChile’s entrepreneurial pull strategy, Tec de Monterrey Zona Norte’s StartupBus commitment and New Zealand’s Kiwi San Francisco-based Landing Pad are all steps in the right direction. This will be the slowest factor to change - interestingly, it will also make the boldest entrepreneurs the easiest to spot in the short term.
Team Mexico’s involvement in StartupBus may be no more than a metaphor for the rise of developing ecosystems, but for all they embody it’s going to be a wild ride. Watch this space (http://startupbus.com) March 5-11 for updates.
* StartupBus Mexico would not exist without the support of Tec de Monterrey Zona Norte. Their bold leadership and willingness to invest in a competition with “fuzzy” networking returns will pay dividends to the Mexican ecosystem for years to come.
* As an Australian, I am unaccustomed to the foibles of political correctness re Mexico/US relations. Please excuse any inferred connotations as purely coincidental.