Tip:
Highlight text to annotate it
X
[ MUSIC ]
MATHYYSEN: Hi.
I'm here with Rogelio de los Santos from Mexico.
He is a founder and managing partner with Alta Ventures Mexico and the Kickstart Seed Program.
Welcome, Rogelio.
DE LOS SANTOS: Thank you.
How are you?
MATHYYSEN: Pleasure to have you here today.
Can you tell us a little bit about Alta Ventures Mexico,
its mission, and the Kickstart Seed Program?
DE LOS SANTOS: Of course.
Alta Ventures is a fund manager company that started operations in late 2008 in Mexico,
with the mission or the objective of getting...first getting an understanding
of who were the key ecosystem players in the country and then putting up an investment thesis
for a corporate person, family offices, and transnational investors that were interested
in building the early stage investment ecosystem of the country.
Inside of our fund we envisioned that there's not only space to invest
in what we call the venture capital area but also in the seed space.
And we decided to launch within Alta Ventures our kickstart seed fund program
that has the objective of doing very early stage investments into ideas or innovation even
on paper with investments that can range from $50 to $150,000.
MATHYYSEN: Do you typically see like university students participating in the kickstart program,
or are these seasoned entrepreneurs or is it a combination?
DE LOS SANTOS: I see a lot of deals, around 400 to 450 a year.
And normally I would say seasoned entrepreneurs that are working on their next idea.
And in some cases, entrepreneurs that are interested in licensing a technology from one
of our universities or something that he has already detected in the market.
MATHYYSEN: Oh, that sounds very interesting.
So, can you tell us a little bit more about what types
of technologies are trending in Mexico right now?
What's important to the market?
What should startups be focused on developing?
DE LOS SANTOS: Well, I have a general list focus as a fund.
With Alta Ventures we are looking into the technology space and the biotech spaces.
But within the IT space we have seen a lot of opportunity, investment opportunities
in this social networking and mobile spaces.
Those two areas are trending.
There's a lot of interest of the entrepreneurial community to build and come up with solutions
that can address important market needs in Mexico and outside of Mexico.
MATHYYSEN: Okay.
DE LOS SANTOS: In the biotech or in the health area, we look more at medical devices --
medical devices that can tap into the world markets.
And they have several competitive advantages of with low regulations they can get them approved
and into market easier or faster and with less investment.
And there's one third area that it's also interesting.
It's in the cleantech space, but there we're more focused on or we see more the solar energy
or solar-driven solutions for the mass markets.
MATHYYSEN: Okay.
A lot of that sounds like it fits real nicely in the IBM Smarter Planet framework.
DE LOS SANTOS: I know.
MATHYYSEN: So there seems to be a lot of synergy there that seems worth exploring.
How do the demographics in Mexico fit into these trends?
DE LOS SANTOS: It's very interesting, because we have just...we're a very young community.
We have a little bit over 100 million people in Mexico and over 20 million Mexicans
that live abroad, mostly in the U.S. We are starting to shift
from a population pyramid to a population diamond.
And we have what everyone calls a demographic bonus that is going to take shape here
for the next 15 years where every year from now on all of these kids,
we have like a million kids entering the workforce for the next 15 years.
So, that creates a market opportunity that we would have to service
because this is...these are new households that are being formed and that drives a lot
of need for other services as well.
MATHYYSEN: Well, that's kind of a brand-new perspective, I think,
that the country of Mexico has to consider in terms of how it funds companies
and how it shapes the future of its technical offerings.
DE LOS SANTOS: And also how it prepares for the next phase,
that we will end up having an older generation coming up,
but we still have 20 years to plan for that.
And it's also very important to see when I say young, our average is less,
50 percent of our population is 27.2 years or younger.
So we're younger than any of the BRICs.
And together with Central America and the Caribbean, you're looking at a market
that is a little bit over 350 million consumers.
That's important.
MATHYYSEN: That is important.
So how does the government play into innovation and the venture capital and startup community?
How do they support it and what types of programs do they have in place?
DE LOS SANTOS: It's important that you ask that question, because I would say
that entrepreneurship as a whole and the early stage investment was not in the agenda
of our government in Mexico in the last 15 years.
And five years ago they started putting incentives in place
and putting money to work to create fund of funds.
Today, we've experienced three main events that are critical for Mexico.
The first one is that in July of 2009, for the first time our pension funds can now invest
in private equity and venture capital.
That happened in the U.S. in 1978, and that increased it 14 times the amount
of resources available for early startups.
Also we just had a renovation to the science and technology law
that allows what will be the similarity to your Bayh-Dole Act
where now innovators inside universities, public universities
or research centers can work towards a commercialization of the technology
and can share the benefits with the university and with the different players
that are involved in licensing that technology.
MATHYYSEN: Excellent.
DE LOS SANTOS: And the third most important item that happened recently is
that for the first time our securities and exchange law in Mexico allows us
to invest early stage and have minority rights built
within the legal structure of our corporate entities.
Before that, you could not invest as a venture fund
with preferred benefits and that was a limitation.
MATHYYSEN: Definitely.
So that is a big change.
DE LOS SANTOS: Yes.
MATHYYSEN: So in terms of the funds that are available to startups in country,
what do the demographics of the funds look like?
Is it predominantly local VC firms?
Are there funds coming in from other countries?
Can you tell us a little bit about that?
DE LOS SANTOS: It's an ongoing process and it's maturing very fast.
At the end of 2008, there were only two groups investing in early stage in Mexico.
One of them was a private company.
They didn't even have a fund, and the other was the government, funda prendadores,
to our national development bank called Nafin.
Since then, we've seen at least a dozen efforts of bringing venture funds into the market.
And the most interesting part about that is that these venture funds are not coming
from the outside, they're being built within Mexico, with Mexican families supporting them.
And that was the next phase.
And it has been a difficult environment to fund raise.
So of those dozen efforts, I would say that so far three
or four are already investing in the space.
Now, the next step or stage that I'm already seeing in the market is
that we have now pension funds looking to invest
into alternative assets now they are attracting the interests of world-class funds out there
that are looking at this as an opportunity to bring in not only resources from the outside
but to have local resources to complement their investment strategies.
And more than a Mexico focused effort,
they're looking for a regional focused effort in Latin America.
MATHYYSEN: That makes sense.
Do you feel that impacts in a positive way the risk profile of the funds themselves?
DE LOS SANTOS: Definitely.
Definitely.
Because you can...most of these efforts are looking after creating funds of funds.
And through them, they can start either identifying the correct funds in the market
that have the capabilities to execute on the strategy, or they can start building the funds
that the market needs and they're more vocationally oriented.
And the profile...the risk profile is managed very well because they can invest
in different stages and in different regions within Latin America.
MATHYYSEN: Absolutely.
So one last question I had for you was, if U.S. companies were listening to this
and startup companies, and they wanted to engage with either Mexican startups
or maybe a combination of Mexican startups, what is the best way for a U.S.-based company
to engage with Mexico and the entrepreneurial community there to create a win-win situation?
DE LOS SANTOS: Emerging markets are really offering a growth and expansion opportunities
for many of these U.S. corporations.
For the first time, I have seen U.S. companies seriously taking a look
at the Latin American market as their next priority,
and they're looking for financing into the market.
And they can get either connected with the local players through the trade associations
in our case is the AMEXCAP Association or they can also connect with research,
the market they want to go in and understand mostly all of these funds
and entrepreneurs will be around the universities.
So try to access the business incubators or accelerators that are down there
to identify potential resources that you can get aligned with to have a very deep understanding
of what's the market opportunity, how can you capture value in that market and with
which partners because it's difficult to scale in a country
where you don't have the infrastructure that you're used to operate
in the U.S. MATHYYSEN: Absolutely.
DE LOS SANTOS: You will have to preselect a trusted network of maybe entrepreneurs
that can help you drive the business down there.
They need to have the local expertise.
But also local partners that might have the infrastructure
that you need to accelerate your growth.
MATHYYSEN: So it sounds like great advice for a startup from any country,
even outside the U.S. DE LOS SANTOS: Pretty much any country can do that.
But right now for the U.S. it's more relevant because it's just
in some cases an hour or two hours' drive or flight.
It's on your same time zone, and you also have many similarities in our cultures.
And a lot of us down there do speak English and we can communicate more efficiently that way.
MATHYYSEN: Exactly.
DE LOS SANTOS: But it's important, Mexico is not only a market
that has the size in terms of economic size.
It's a trillion dollar economy we have in the size of population or consumers.
But it's important to consider that Mexico has a very stable environment.
And our governments and financial system is totally supportive
of the building this early stage entrepreneurial ecosystem.
Right now, just as a tip here, we're building with all
of our institutional investors a strategy to allocate...you'll be impressed to see
that Mexico has a lot of savings.
We're not only unleveraged, we have a lot of savings.
All together, we have a little over $300 billion --
that's bigger than or even equal to the Sovereign Wealth Fund of China.
And if we can convince them to invest into early stage or alternative assets and turn
that into early stage, we can pretty much invest for the next six years or seven years in Mexico
and pretty much duplicate the size of the financial system of our country,
and that will create the many jobs that we need
and also those jobs will become consumers of many U.S. products as well.
MATHYYSEN: Wow.
It sounds like if there's entrepreneurs and investors listening,
that they better do a little bit of homework and get on the train.
DE LOS SANTOS: I think that the train is leaving, and you don't want
to be arriving to a market that is already hot.
You have to be there early on to capture the best alternatives or opportunities.
MATHYYSEN: Thank you for sharing this information with us.
Appreciate you coming, Rogelio.
DE LOS SANTOS: Thank you very much.
MATHYYSEN: I've been talking to Rogelio de los Santos.
He's a founder and managing partner with Alta Ventures
in Mexico and the Kickstart Seed Program.
[ MUSIC ]