As the world’s most populous Spanish speaking country, Mexico is well positioned to be a startup power. Since the signing of the NAFTA in 1994, Mexico’s real GDP skyrocketed has risen to $1.3 trillion, placing the country second in Latin America and 15th in the world in terms of GDP.
However, historically Mexico’s economy has been more reliant on its manufacturing industry and on its relationship with its northern neighbor, with the United States accounting for as much as 80% of Mexico’s trade in 2000.
While startup innovation has traditionally been focused in the country’s capital, Mexico City, as well as Monterrey and Guadalajara, in recent years new startup regions have risen, including within the northern city of Chihuahua.
Once known primarily for car manufacturing, the Tecnológico de Monterrey (TEC), often referred to as the MIT of Mexico, and its Chihuahua-based accelerator program have played an important role in driving innovation in the local area.
At the same time, the entrepreneurial ecosystem in the city is still young. For this reason, my colleague Craig Corbett and I put together a guide for entrepreneurs looking to explore Chihuahua’s startup scene.
Startup and ecosystem connectors
Within Chihuahua, Tec de Monterrey and its technological park are looking to create an inclusive ecosystem that sparks an interest in startups within the city’s wider community.
The park regularly hosts events, and in recent years it has received speakers such as Vivek Wadhwa, Distinguished Fellow at Harvard Law School.
According to a 2014 study by the Mexican National Institute of Statistic and Geography, Chihuahua was home to the third highest levels of employment in the information technology and analytical instrumentation sector across the country, with more than 40,000 local tech jobs.
It isn’t only larger technology companies that are boosting the local economies. 0.6% of the total GDP of the city of Chihuahua comes from startups from Orion Startups.
TecLabs Edtech Accelerator, which runs in partnership with Orion Startups, has led to the creation of upwards of 2500 local jobs through locally-incubated companies.
StartupBlink today rates the city of Chihuahua as having the fourth strongest startup ecosystem in Mexico, with strengths in the fields of mobile, retail and social media. A quick look into Meetup.com and Eventbrite reveal a number of active tech communities within the state capital, and as many as 10 local co-working spaces are bringing entrepreneurs together to collaborate on projects.
Startup workshop Lean Startup Machine has also run a number of events in the city, after holding its first three-day workshop back in 2013. Another notable is the Congreso Internacional de Innovación, Emprendimiento y Tecnología, which first came to the city 5 years ago.
In recent years additional support organizations have emerged in the city. Fernanda Hernandez, who had been a part of the Orion accelerator team, today is the head of Generador 30, a startup incubator created by the Universidad Autonoma de Chihuahua that offers a three-month incubation program offering seed funding, as well as mentorship.
Bani Carazco, a TEC alumni and long-term member of the Orion community, today runs the entrepreneurial and employment department of the Chihuahua Youth Institute, which looks to motivate young people to get more involved in technology projects while still in school.
Additional local leaders in the city include Luis Ignacio Bustillo of Intelectix, Claudia Ortega of Tecnológico de Monterrey, Gilberto Elias of Competitive Intelligence for the State of Chihuahua, Luis Miguel Almanza, Carolina Puente Corral and Ulises Elias of Orion Startups, and Carlos Espino of Universidad Autonoma de Chihuahua.
Tec de Monterrey and Orion Startups
Traditionally if one looked at the growth of strong tech ecosystems, educational institutions have played an important role in not only the development of tech talent, but also in community building.
In Silicon Valley, Stanford University is widely recognized as having been instrumental in the growth of its ecosystem. In 1951 the Stanford Industrial Park was opened on the university campus and leased out facilities to early stage technology companies, such as Hewlett-Packard, General Electric, and Lockheed. In the 1950s, Stanford rolled out the Honors Cooperative Program, which allowed employees from technology companies based at the Research Park to pursue graduate degrees at the university.
Encouraging an active, cooperative relationship between alumni, professors, and technology companies has become core to the institution, and in recent years Stanford even introduced its own accelerator program StartX.
While it would be preemptive to compare Tecnológico de Monterrey (TEC) Chihuahua campus to Stanford, there are similarities in how the institution is driving innovation and economic development in the region. TEC’s Chihuahua campus is the only campus from Tec de Monterrey that is home to an on-site accelerator program, Orion Startups, and a technological park.
Founded by the late Don Federico Terrazas, who passed away in September of this year, and current director Dr. Antonio Ríos Ramirez, the technology park has been recognized as one of the most active in the country.
The park’s mission is to bring together professors, researchers, students, and local business leaders, to focus on the creation and sharing of knowledge to drive innovation, and job creation within the state.
Similar to at Stanford, rather than simply studying innovation, students and professors are encouraged from day one to be a part of building real products and companies.
The birth of the Chihuahua campus lies in the region’s roots in the automotive industry, which in the past had provided the lions share of jobs in the region. The Chihuahua park began in 2004 when the Visteon Design and Automotive center began working hand in hand with the students and professors, and over the last 14 years has grown large enough to host as many as 130 small businesses.
The park has been designed to act as an all-inclusive mini startup ecosystem, connecting three academic schools, technical and design laboratories, and also an accelerator.
Through the scholarship program, Orion Startups has helped develop more than 74 startups, which collectively account for more than $42M in sales. The 5-month accelerator program is open to outside applicants from all over the world and has included founders from Canada, Peru, Chile, and India, and offers a $30K investment for 10% of equity.
To date Orion Startups has invested upwards of $800K USD in 23 companies, including Flipd, a digital wellness startup from Canada, which was recently accepted to the TechStars program in Toronto and had raised a $2M investment round.
Other notable homegrown success stories include GreenBTS, which was recently valued at $1.5M, and has two pending patents, and the startup DetectAn.
Over the last decade the Mexican government has been praised for it’s support of local startup ecosystems, much of which comes from the government’s INADEM program, which was formed in 2013 to help small to medium sized businesses prosper within the country.
Just one year after its launch, INADEM was estimated to have awarded as much as $658M to approximately 620,000 entrepreneurs, startups and SMEs, leading to the creation of 6,000 new companies and 73,000 new jobs, according to government statistics.
Through other initiatives such as The High Impact Entrepreneurship Program (HIEP), INADEM offers a matching grant to SMEs and startups.
It is important to note that public spending in the sector is prioritized by region and allocated across five key discretionary frameworks. As such, while INADEM is helping startups and SMEs in the city of Chihuahua, the budget for the area will be less than in technology hubs such as Mexico City, and more of its resources are being directed to larger cities such as Juarez.
For startups looking to launch their products further afield, TechBA, a government initiative launched back in 2004 by Mexico’s Secretary of Economy and the US-Mexico Foundation for Science (FUMEC), aims to help Mexican startups bring their products into foreign markets.
Silicon Valley had to start somewhere, and while Chihuahua is still decades behind in its development, there remains potential for the area to develop into a stronger, sustainable startup hub, in particular when being pushed forward by leader at local universities and in the city.
There remain challenges. While the tech communities are growing, startups and their culture are still reasonably new to the area, and it will take time for VCs and angel investors to fully get onboard.
While the VC and Angel network in Chihuahua is slowly growing, thanks to the focus being placed on the potential of innovation by organizations like TEC and Orion, local investors are still hesitant to put their money behind startups, preferring to stick to more traditional, safer bets such as real estate.
That said, change may be on the horizon, as earlier this year, Angels Nest Latam, the most active network of angel investors in Latin America, organized an event in Chihuahua to discuss the benefits of investing in the area.
With an increasing focus being put on educating, and in engaging the younger generation in the city, we can expect that the institutions themselves, the local startup ecosystem, and the reputation of the area as a startup hub will continue to grow with time.
This article was Co-Authored by Craig Corbett