Building Mexico's Startup Ecosystem with Marcus Dantus on Venture Capital, SMBs, and AI

After Building Mexico's Startup Ecosystem, Dantus Turns to Small Business

Mexico built a startup ecosystem quickly, then let it fall apart. Incubators went from zero to about 500 and funds from three to over 150, but the national entrepreneurship institute closed in 2018 and many of those organizations died. Dantus, who built Wayra Mexico and Startup Mexico, now backs the micro businesses that make up 98% of Mexican SMEs, where startups are binary but ordinary firms survive.

Takeaways

• Mexico's ecosystem was built then abandoned. Incubators went from zero to about 500 and funds from three to over 150, but the Mexican Institute of Entrepreneurship disappeared in 2018 with a change of government. Many incubators died and many funds did not continue. Unicorns now supply success stories.
• He now backs the small businesses nobody funds. Through Ruta Excel he backs traditional small businesses that nobody professionalizes. Startups are binary while most SMBs survive and pay dividends. In Mexico 98% of SMEs are micro or super small, a pattern that repeats across Latin America and Spain.
• Corporate venture capital could not match startup pace. At Wayra Mexico the biggest problem was Telefonica's pace. Buying a laptop could take four to six months, long enough for a startup to die. Wayra accelerated about ten companies a year, while Startup Mexico incubated 100 to 150.
• He backs teams he trusts and honest answers. He looks for a strong founding team with a differentiated answer to a real problem, and values ethics and focus. An early-stage investor's contacts and experience matter more than money. He prefers an entrepreneur who says they will find out to one who lies.
• Latin American angel investing needs exits. He wants more exits and better tax treatment, and says risk aversion holds the region back. The Mexican stock market is not active, so IPOs are difficult, and large corporations rarely buy small companies. Mexican rules stop an investor consolidating losses across ten companies.
• AI is a fifth industrial revolution. He is optimistic about AI and calls it a fifth industrial revolution. He worries that very large AI companies could fall short of their own expectations and cause a financial crisis. In 150 years of technological change only the elevator operator job has disappeared.

Dantus's path from mexico.com to Startup Mexico

1. He encountered the internet in 1993, built a website that became mexico.com and got it funded a few months before the dot-com bubble burst.
2. After separating from that company he started and sold a couple of businesses, then joined a medical device developer later sold to a Mexican fund.