Editor’s note: Jorge Rios is a Mexican entrepreneur based in San Francisco and co-founder of Bridgefy.
The startup universe revolves around Silicon Valley, but there is life on the other planets, too. Long has the entrepreneur community been used to the term “startup valley of death” and come to fear it. As most accelerators claim, once you make it out of the ditch, you’re on your way to fame and glory. But not in Mexico.
The Southern Neighbor Left Behind
Historically, Mexico has taken good advantage of its Northern neighbor: American university degrees are priceless, more than 10 million Mexicans live (legally or illegally) next door, and everything but all of Mexico’s international trade goes through, to or from the U.S. Nevertheless, Mexicans have much to learn regarding the current startup bubble; funds (both private and public) are scared of taking risks, most accelerators don’t really “marry” the businesses they take under their wings, and true angel investors can be counted with two hands’ worth of fingers.
Here is a snippet from a real conversation my mom had a few months ago:
What does your son do?
He’s in a startup.
Oh. Did he lose his real job?
Instead of being seen as a potential economic motor, entrepreneurs in Mexico are seen as irresponsible daredevils who took a wrong path somewhere, ending up unemployed and working at an imaginary company. The problem is, this isn’t something only mothers believe.
“VC” commonly stands for “venture capital,” but it could just as well stand for “vicious circle.” Along with there being only a handful of really effective seed accelerators in Mexico (and the legally non-existent convertible note), venture capital funds lack real startup investor culture. This trumps real startup growth due to the leap from starting a company to actually having the means to lift it off the ground. Investor funds don’t believe in ideas; they believe solely in numbers that startups have today and (even though most fund committees are supposedly composed of at least one expert per field) refuse to analyze latent potential.
This makes for a vicious circle: Startups need money to make their numbers grow, but nobody will invest unless they see numbers first. This leaves struggling young companies to try to make ends meet on their own, risking loss of momentum for both the enterprise and its founders.
Don’t Be Afraid
Venture capitalists need not be afraid of investing in accelerated startups for obvious reasons: Seed accelerators fully and thoroughly investigate team members, operations plans and market opportunities before drafting their alumni.
One of the perks of being in a society that is afraid of risking capital on unproven companies is that, for that same reason, early-stage accelerators take their time before deciding on which teams will make up their next generation (a perfect example being Naranya Labs, with its effective multiple-filter acceptance process).
Granted, having gone through an acceleration process doesn’t guarantee a company’s readiness, but it does at least give the accelerator complete knowledge of the startup as a whole, which is reflected in how much attention they pay to which company once it has “graduated.”
Venture capitalists and angel investors need to update their hesitant philosophy for the greater good of Mexico’s (and their own) economic development.