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How to Invest In Mexico

The Startup Ecosystem in Mexico

Andy Kieffer

on 27 February 2015

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Transcript of How to Invest In Mexico

By funding only AFTER our pragmatic goals are achieved we remove much of the guess work from investing.

*Investors know that the founders are capable
*Founders know what is expected of them
*Both parties know that a market exists BEFORE wasting time or money

It puts us all on stable ground and on the same team!
Startup Investing
In Mexico

Why we want it
1. Distrust of unknown people and ideas
2. Over reliance on titles and pedigree
3. Uncomfortable with failure
4. Successes are not shared publicly
5. No tech/startup history

Only 37% of San Franciscans were born in CA
40% were born in another country
Everyone is new - Deal with strangers or die
This drives a meritocracy
In Mexico...

We are surrounded by our friends and family
No one wants to fail in front of them.
In the US,
Failure ="
Just one step closer to success
-$29.1B in investment
-3,752 Investments
-923 VC firms
Current state of tech investing in Mexico
-$0.2B in investment
-19 Investments
-14 firms
**2012 Dow Jones Venture Source
***2011 Latin American Venture Capital Association
But Why?
How is Mexico different
We have a shared culture
The "Fresh off the Boat" Effect
3. We don't tolerate failure
The Silicon Valley didn't happen overnight*

Tolerance for risk evolves from a lot of small wins.
Lets Review
In Mexico
A lot of talk, not much action
Mexico is attempting to directly import the US Venture model...
...But will it work
1. We tend to invest in people we know (or are related to)
-Successful exits to use as a model

-Entrepreneurs with a track record of success
We succeed in private
4. Without visible success stories, it's difficult to find and follow role models.
2. We rely on pedigree
1. Good family connections
2. University titles
3. Past job experiences
4. Patents and registrations
What do they have in common?

College Drop Outs
with little previous job experience.
Netscape was over 20 years ago!
Can we really just "jump over" that much evolution?
So why am i here?
Because the opportunity in Mexico is ENORMOUS
6.2 trillion dollars of GDP virtually untouched by internet innovation
Advertising market in LATAM is $7.2B usd
The online part of that market is only 7%

But growing at an astounding 30% PER YEAR!
MEXICO may not be a strong innovator, but it's a very fast, and very reliable follower
My Challenge

Create an investment / acceleration approach that could work here.
Agave Lab Ventures

An investment thesis and approach that is designed specifically for Mexico

Thesis: Where we invest
Mexico and LATAM only

Invest in big markets ($1B +) with a pent up demand for innovation

Where money is already in motion

And where exit opportunities (acquisitions) already exist
Mentor companies for a 2 month pre-investment period

Set small goals and IF goals are hit, THEN invest

Startup team moves into the accelerator
Thesis: How we reduce risk
Thesis: How we exit
Invest in companies with the potential for game changing home run exits. . .

but protect ourselves by targeting sustainable profitability.

Evaluate near-term exits in the 10s of millions

While remaining open to larger “home run” exits as the market matures.
Thesis: How we reduce risk (again)
-Companies move into the Agave Lab incubator

-6 months of
, daily, hands on, help

-6-month plan - GET PROFITABLE
*Netscape happened 20 YEARS ago
5. Without a local history to look back on, we lack:

I'm expected to invest in a complete STRANGER?
We have no tech history / or experts to guide us.
Reduce speculation by targeting real-world problems
Reduce risk by investing only AFTER demonstrated traction
Thesis: Where we find deals
Bounded Innovation
1. Pick an industry
2. Define the problems/opportunities
3. Assemble startup teams
4. Enlist the support of the industry experts to act as:
a. Customer
b. Board Member
c. Acquirer
We don't just invest in companies, we build them.
Align exits with local market reality
Upon investment...
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