Mexico: A Country with Great Opportunities for Startup Expansion

Find out why Mexico is an optimal destination for the international expansion of companies in the region, and what you need to enter this market.

Mexico has become one of the most attractive destinations in Latin America for the international expansion of startups. The “Soft Landing in Latin America” study by Endeavor shows it. Of the 271 startups surveyed, 145 chose the Mexican market to expand and keep growing, while the rest opened operations in Colombia, Brazil, Peru, Chile and Argentina.

But why is this country appealing for the international expansion of startups? In this article we tell you the attributes and opportunities of the Mexican market that you can take advantage of to open operations in Mexican territory.

Mexico: General data

1. Relevant economy: Mexico is the second largest economy in Latin America, with an annual Gross Domestic Product (GDP) of 17 trillion pesos, according to Statista data. Brazil ranks first and Argentina third among the largest Latin economies.
2. Large market: The country has more than 130 million inhabitants, a market large enough that founders of Latin startups can serve it with their value propositions.
3. Needs to address in childhood: Of the 40 million girls, boys and teenagers in Mexico, 51% live in poverty, 12% suffer from malnutrition and 33% from obesity. Meanwhile, there are 4 million children without basic schooling and more than 40 thousand in migrant situations, according to Unicef data.
4. Internet penetration: According to data from the United Nations (UN), as of February 2022 it is recorded that 74% of the Mexican population uses the internet. Meanwhile, 91.5% of the population has a connection from mobile devices. It is a situation that can leverage the adoption and use of startups’ digital products.
5. Fertile cities for starting a business: Mexico City, Monterrey and Guadalajara stand out as the preferred destinations to do business, according to the Urban Competitiveness Index prepared by the Mexican Institute for Competitiveness (IMCO).
6. Socioeconomic strata: According to data from the National Household Income and Expenditure Survey (ENIGH) of 2020, 64% of the Mexican population is between socioeconomic strata C+ (Average Monthly Family Income of one thousand USD) and D+ (AMFI of 500 USD), while 24% is in stratum D (AMFI of 250 USD). This is an important insight to consider when assessing whether there is a market for your product or service.

Export and incorporation, two options to expand

As you have seen, the ground is fertile for new companies to enter Mexico. However, before doing so, you need to carry out a process of market analysis, adaptation and work together with other companies and entities to make your company’s landing easier. That way you can minimize unforeseen events and mistakes in your expansion plan.

It is also important to analyze whether it is more convenient to export from your home country or create the company from scratch in Mexico. This decision will depend on several factors, such as the regulations tied to the service you plan to sell, customer expectations and the costs tied to taxes, among other aspects. To start sales or distribution of the product, some entrepreneurs decide to open a subsidiary, while others choose to export.

Here is some background on how to do it:

• Start sales without having your company in Mexico: You can sell to your customers by exporting your service from your home country without creating a subsidiary company in Mexico. In these cases, it is important to get advice from a tax expert, since tax rules differ by country of origin.
• Creating a company in Mexico: If you need to create a company, one of the options most used by entrepreneurs is to open a subsidiary of the S.A.P.I. de C.V. type, or Sociedad Anónima Promotora de Inversión de Capital Variable. The parent company or holding will own 99.9% of the subsidiary and a trusted third party 0.1%.

Our recommendation is to first assess the export possibilities for your product or service, since this will let you prospect and start sales with a low investment.

Considerations for opening operations

If your expansion strategy includes your startup starting operations in Mexico, there are certain challenges to face. Most of them relate to the country’s legal and labor aspects, so it is always important to get advice from a lawyer who is an expert on the subject. Here are some recommendations to face them successfully:

Way of working

During the first steps of opening your operations in Mexico, remote work is one of the most recommended ways of working for your employees or collaborators. This not only saves you logistics costs, but also gives your team more comfort.

If you still want a physical space as your operations center, a coworking space is a good alternative. That way you can get a real view of the space’s effectiveness and productivity without having to invest in fitting out or hiring an exclusive space for yourself.

Hiring

In Mexico there is a large working population with the talent and skills to help drive your business. However, if you do not have experience with personnel selection and hiring processes, the best option is to get the advice of a professional recruiter.

Another good alternative is to use job portals such as Hireline, focused on tech profiles, OCC Mundial and Linkedin Jobs. On all of them you can access each candidate’s information, apply knowledge tests and build various selection filters.

Support from other startups

There are companies with products that can make your expansion process easier. For example, Deel and Ontop help you with hiring across countries, and Wise and Global66 speed up payments at a distance in different nations. For legal services, BackStartup is a good option, and Jeeves offers multi-country credit cards.

Spanish adaptation

Every country in Latin America has certain subtle differences in the Spanish used and spoken daily, and Mexico is no exception. That is why, within your expansion strategy, you must consider the correct use of local language. This is something you must apply to aspects as important as your product, the marketing campaign to run and sales scripts. It must also be considered in your communications plan, social media and the web content you create for your regional audience.

Visa

Mexico is a country that offers a lot of ease and accessibility to people and companies that want to do business in its territory. However, it is always important to check the authorities and regulations of your home country and the possible requirements demanded by the Mexican state. Consider that if you plan to move to Mexico, you need to get a residence visa. This can be under the work or investor category. You will need the advice of a lawyer or immigration expert to get the information relevant to your case.

Financial boost

Having a solid and reliable financial boost is often the differentiating factor between success and failure in expanding your startup in another country. Especially for foreign companies, it is also positive to have the advice of a company that already has experience in the local market.

Mexico ranks among the top in the world in the amount of investment made in recent years, so it is a great alternative for looking for funds and accelerators.

In this sense, the Mexican market offers very good alternatives to finance your expansion, but it is always important to compare alternatives and lean toward the one that brings the greatest benefits to your startup.

Accelerators

Accelerators are institutions that drive the development of early-stage startups. These programs can include everything from financial support to mentoring, training and specialized advice.

Some of the best-known accelerators in Mexico and the world are:

• 500 Startups
• Masschallenge

Investors

Investors who can help boost your startup financially can be either public or private. However, if you do not have experience developing calls or attracting potential investors, the best thing is to rely on companies specialized in the field.

Ignia, Dila Capital, ALLVP and Endeavor Catalyst are some of the most relevant funds that have also invested in childtech startups, that is, those focused on girls, boys or teenagers.

How to be competitive in the Mexican market?

Beyond the legal and economic aspects that entering a new international market involves, we must also consider the importance of being a competitive element with a presence in the sector.

Every project needs dissemination, promotion and acceptance from its target audience, and the only way to achieve it is by developing strategies that let you position yourself effectively in your field.

Depending on your startup’s concept and focus, you can implement specific techniques and actions for your audience. However, here are some elements you cannot overlook.

Competitor analysis

Every new entry into a consolidated market requires a competitor analysis. This point does not necessarily mean looking for ways to beat your competitors, but identifying their patterns of action and reach, and based on them being able to optimize your campaigns and your dissemination and recognition strategies.

Having broad knowledge of your competitors (or your “peers”) can give you a lot of valuable information about the field your startup works in, which are the least-served needs in society, and which niche you can anchor in to have a greater chance of success.

Sometimes, the main obstacles to startups’ growth are large, established companies. In these cases, the best thing is to focus on looking for solutions that are more accessible and beneficial for the consumer, and not to wage a “media war” against competitors.

Marketing

Developing marketing strategies is essential to reach in a timely way not only your target audience, but also your potential investors or allies.

Identify the right channels to promote your products and your brand identity. That way you will have a solid, broad base that will back up your outreach. If you do not have experience with this type of action, it is always advisable to have a professional team specialized in it.

Conclusion

Mexico is without a doubt the ideal Latin American country to start your startup’s expansion. It offers a favorable environment for developing growing companies and gives you a wide range of investment options and accelerators specialized in projects focused on social impact.

As is usually the case in the countries of the region, Mexico has a tangible level of inequality in its society, and financial and business momentum contrasts with a vulnerable reality, especially for populations such as girls, boys and teenagers.

In this sense, startups dedicated to protecting and improving quality of life in childhood have a great opportunity in Mexico, since they will not only be able to grow as a company, but will also be able to create a significant and relevant change in their immediate surroundings.

We hope this basic guide to expansion in the Mexican market helps your startup’s growth process and helps lay the foundations to deliver real and timely solutions to millions of children in Latin America.

If you want to expand to Mexico and your startup creates an impact on childhood and youth.

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Author

Carolina Arce

coFounder Impactus Ventures and uPlanner