Why This VC is Riding Mexico’s Mobile Wave

As investors step back from Brazil, many are looking at Mexico, with an eye toward startups in the mobile market

In the last two years, Mexico received more than $1.7B in venture capital funding, representing about a third of all VC funding in Latin America. And, according to mobile-tech advocacy group GSMA, almost 70 percent of those investments were in the Internet and mobile sectors.

Brazil’s economic troubles are one reason, but a more compelling one is this—most Mexicans access the Internet via mobile technology. And the country is the second-largest mobile market in Latin America after Brazil, with 88 million unique mobile subscribers, which is 69 percent of the population, according to the GSMA.

“There are so many things working in favor of Mexico,” says Lynne Bairstow, managing partner at Mita Ventures, a VC fund and startup accelerator with offices in Punta Mita, Mexico, and San Francisco that is currently raising a $30M sophomore fund. “Mexico graduates 115,000 engineers per year, more than Brazil or Germany, and a higher number per capita than the U.S. The country also has a young, Internet-active and mobile-savvy population base, which translates to strong growth potential for mobile and web-based business models.”

Mexico also has strong government support for innovation. The government now matches every dollar raised by venture funds in Mexico, up to $5M per fund. Partly as a result of this, the number of VCs operating in Mexico has increased five times in the last two years, to approximately 50 funds, Bairstow says.

“We won’t do the deal if it doesn’t have a mobile strategy,” says Bairstow.

Bairstow believes it’s possible to seed a mobile startup in Mexico and grow it globally. “We’re not interested in the next parking app or grocery-delivery app for the Mexican market,” Bairstow says. “The companies we invest in need to have a global play. There are 22 million people in Mexico City alone, so you can launch a product and have a great test market here.”

Mobile plays in the Mita Ventures portfolio now include Nuve, which offers GPS-enabled systems to help companies like Amazon protect deliveries from theft. Most of Amazon’s deliveries in Mexico City are done by motorcycle, which creates a security concern for the packages. Nuve created a GPS locking device for the back of a motorcycle, so packages cannot be removed until they reach the right delivery address. Those deliveries can also be tracked and monitored via a mobile app.

Another Mita investment is Sunu, a maker of wearable devices that help vision-impaired people navigate. The devices use sonar technology to alert users of upcoming obstacles.

A third investment is Bridgefy, which allows multiple devices to link together to exchange data, without an Internet connection. Bairstow says this technology is a game-changer in places like rural Mexico where cell phone service is very expensive.

The primary challenge for VC funds in Mexico is exits. Another hurdle is attracting the interest of U.S.-based investors to provide larger funding rounds.

“Investors are still uncertain about the quality of entrepreneurship in Mexico, which can be very frustrating,” says Bairstow. “There are entrepreneurs here who, if they lived in Silicon Valley and went to Stanford, would have millions of dollars in funding right now. But I’m still very optimistic that we will have that breakout company very soon and everyone will start paying attention to Mexico.”