Lifeselfmastery's podcast I Startups I Venture Capital
00:05:53 · Marcus Dantus, Rohit Malhotra
And that's how we started Startup Mexico, we started incubating about a 100 or a 150 companies a year. And so it does follow a certain pattern, a pattern that surprised even me. But at the end of the day, you know, I followed my intuition, if you will, and stayed with it. [00:06:18] S1: Got it. Super interesting. And you once turned around an underperforming organization by changing its business model. So you know what was some of the first signs that you found that it was broken and what were the hardest call that you had to make to fix that broken business model? [00:06:39] S2: Well I think, Rohit, that it's always the same. You know, at the end of the day, companies need to pivot and adapt. And and, you know, the world changes now faster than ever. Tendencies change, the... Your customer needs and wants change, and if you don't adapt, you die. It's always hard to do this type of adaptation because... And you know Michael Porter says it very well. He says innovation is not difficult. What's difficult is to stop doing what worked before. And that's, you know, something that's really hard for companies. But eventually, I'm always suggesting, I give a lot of conferences on innovation, I'm always suggesting that companies now need a new position, a new COO, which is not the chief operating officer, but the chief obsolescence officer. That's always looking to see when a company will become obsolete. Because I think, you know, with technology appearing so quickly and especially now with AI, you know, lot of business models and companies will need to change.
00:06:39 · Marcus Dantus, Rohit Malhotra
[00:06:39] S2: Well I think, Rohit, that it's always the same. You know, at the end of the day, companies need to pivot and adapt. And and, you know, the world changes now faster than ever. Tendencies change, the... Your customer needs and wants change, and if you don't adapt, you die. It's always hard to do this type of adaptation because... And you know Michael Porter says it very well. He says innovation is not difficult. What's difficult is to stop doing what worked before. And that's, you know, something that's really hard for companies. But eventually, I'm always suggesting, I give a lot of conferences on innovation, I'm always suggesting that companies now need a new position, a new COO, which is not the chief operating officer, but the chief obsolescence officer. That's always looking to see when a company will become obsolete. Because I think, you know, with technology appearing so quickly and especially now with AI, you know, lot of business models and companies will need to change. [00:07:59] S1: Yeah. Yeah, you're absolutely right about AI. There's just so many tools which are coming up and you need to figure out which is going to work and which is not. But you know when you launched Wayra Mexico for Telefonica what did you learn about getting a large corporation to actually work with startups?
00:07:59 · Rohit Malhotra, Marcus Dantus
[00:07:59] S1: Yeah. Yeah, you're absolutely right about AI. There's just so many tools which are coming up and you need to figure out which is going to work and which is not. But you know when you launched Wayra Mexico for Telefonica what did you learn about getting a large corporation to actually work with startups? [00:08:21] S2: Well, look, in beginning when I started with them, I thought it was an amazing idea, you know, corporate venture capital, a big company that, you know, created little companies that it could eventually either absorb or work with, give... Provide them a huge marketing and commercial arm, etcetera. But it does have its negative side. And the negative side is that, you know, corporations move a lot slower than startups. So, you know, the process, for example, to buy a laptop in Telefonica could take four to six months. And in four to six months, a startup could die. So, you know, trying to match those two different timeframes and schedules wasn't easy. And that was probably the biggest problem that I had with Wayra. [00:09:21] S1: Got it. And you've been running Startup Mexico since 2013. So how has the Mexican founder changed in last, you know, thirteen or fourteen years and what still hasn't changed that might frustrate you?
00:09:37 · Marcus Dantus
[00:09:37] S2: So look, in 2012 Mexico created the Mexican Institute of Entrepreneurship nationally. Yeah. And that's provided a lot of support and, you know, money and, you know, it really created the entrepreneurial ecosystem. So between 2012 and 2018, the Mexican ecosystem grew. You know, we started getting a lot of incubators. You know, we went from zero to about 500 incubators in the country, some accelerators. We went, just to give you an idea, from three funds in 2008 to over 150 funds by the end of the decade, the end of the next decade. So I believe that the ecosystem was truly born in that era. We were missing a very important component in the ecosystem, which is success stories, in part because it was such a young ecosystem. Today, it has changed completely. You know, the entrepreneurial institute disappeared in 2018 with a change of government. There is absolutely no support for entrepreneurs whatsoever nationwide. So a lot of incubators have actually died. Many funds have not continued. I think entrepreneurship is still growing. I think that the culture, the entrepreneurial culture is something that's spread out and that's very important. And we also have a positive side because now we have a lot of unicorns that were created in Mexico. So now we have the success stories. So if you ask me where I find it now, I think that as an entrepreneur, as an investor, as an incubator, we are a little bit in a state of confusion. Why, if we were so successful in creating this ecosystem, why aren't we feeding it currently? So I think we still have an opportunity to, you know, take advantage of what was created, but I think we need to move and we need to move fast.
00:12:26 · Rohit Malhotra
[00:12:26] S1: Got it, interesting. And, you know, before the call you talked about Ruta Excel where, you know, you've moved on to this new initiative where you're focusing on traditional SMBs rather than venture backed startups you know so what led you into you know this sort of change where you've moved from Mexico to Ruta Excel?
00:12:54 · Marcus Dantus
[00:12:54] S2: Okay, as an investor, what I can tell you is that there's... I like a balanced, you know, portfolio because at the end of the day, a startup, especially a technological startup, is mostly binary. You either make it or you don't make it. Okay. And most of them don't, but the ones that do probably will return the money that... Or or or or make you money. And and that's interesting. But it's a big risk. Yeah. On the other side, you have traditional SMBs. Traditional SMBs are not binary. They may not grow, of course, as fast and provide the returns that a startup could provide. But most of them won't die. They'll continue operating and perhaps a financial exit could be dividends. So I've always tried to balance, you know, my investment portfolio in those two categories, you know, alongside real estate and other stuff. Now, what I have noticed is a couple of things. First of all, and everybody knows this, SMBs are the heart of an economy, especially in developing countries. For example, in Mexico, 98 of SMEs are micro businesses or super small businesses. And what I noticed is that this is a forgotten side of the economy. Nobody's investing in these businesses. Nobody's professionalizing them. Nobody's helping them, you know, take advantage of all the tools that are currently available for them, which I consider, you know, the great equalizer, you know, allowing us very small company to use tools that a corporation uses in order to really compete. So at some point, I wanted to create a fund that actually invested in these boring companies, if you will. And and and, you know, I started giving a lot of keynotes. And in every keynote, I started being approached by people that would give me their products. And I would start noticing that their products are amazing, but they don't have a online store or online presence. They... Nobody knows them. And and they're missing a lot of elements in order to really grow the companies. And this is how Ruta Excel was born, trying to focus on this specific problem that I think repeats all over Latin America and even in the Hispanic U. S. And in Spain. That's our focus.