Many creative minds wish Mexico had an economy based on innovation and technology that would enable us to develop as a more balanced and competitive country. Here are some ideas that suggest that innovation does exist in Mexico…
Many creative minds wish Mexico had an economy based on innovation and technology that would enable us to develop as a more balanced and competitive country. Here are some ideas that suggest that innovation does exist in Mexico, and that our entrepreneurial ecosystem is increasingly robust and includes more players.
Last September 17, the Scientific American published an article entitled “Why Can’t Mexico Make Science Pay Off?”, written by Erik Vance. It tells the story of Enrique Reynaud, a professor of molecular biology at the National University (UNAM) who, together with a team of geneticists, created the company Biohominis. With an initial funding of 500,000 dollars, awarded by the federal government, this technology-based company developed various techniques of genetic testing to identify people’s proclivity to hypertension, diabetes, cancer and metabolic problems, among other diseases.
Dr. Reynaud’s innovative company promised to become the type of enterprise that Mexico needs, in order to have sustainable economic development, and the story indicates that it had everything necessary to succeed: technological innovation, a good team, and outside financing. However, the company went bankrupt two years after it was created.
In Vance’s opinion, this case demonstrates that Mexico is the antithesis of Silicon Valley, and that we are very far away from using our talent to create global products, new technologies and startups. Vance’s article illustrates the severity and lack of rigor with which some people judge our country in terms of innovative entrepreneurship. According to estimates of the National Venture Capital Association of the United States, between 25 and 30 percent of startups fail, so it is inaccurate, unfounded and non-scientific to reach conclusions about the entirety of a country’s entrepreneurial ecosystem on the basis of a single unsuccessful case.
Of course, there are unsuccessful cases in Mexico, as in any part of the world, but there are also many that are very successful. The point that we want to emphasize in this article is that in Mexico there has never been a more favorable time like the present for entrepreneurs. We have macroeconomic stability, a variety of government programs that support innovation, virtually all the universities are working to promote a culture of innovation and entrepreneurship, and there are increasingly more angel investor funds and venture capital. According to the Global Entrepreneurship Monitor, the entrepreneurial activity in Mexico increased from 9.6% in 2011 to 12% in 2012, which shows that business ventures do “pay”.
The number of entrepreneurs who find a market opportunity is increasing, although their number is still small for the size of the country’s economy. The most important challenge we face is to create new high-impact companies, i.e., those that have a great product or service, an innovative business model, a competitive advantage difficult to imitate, provide employee advancement opportunities, have the capacity to generate well-paid jobs, and that have made major contributions to the country’s Gross Domestic Product (GDP).
Having a brilliant idea and being able to market it as well is not common, because in reality several factors must be met for an entrepreneur to be successful. According to Timmons and Spinelli (2009), an opportunity must have at least two of the following six critical factors:
License
Patent
Exclusivity
Good team
Revolutionary technology
Complementary assets
Of these critical factors, the most successful startups are those with a good team and revolutionary technology. This is exactly what Vance said that Biohominis had.
After seeing several cases of success and failure, we would add that other critical factors for success are patience, and having an investor who believes in the idea. All companies need time to consolidate and begin to generate profits. Although many experts believe this period takes an average of two years, the truth is that it can be considerably more, particularly when it comes to products with a high content of scientific and technological knowledge.
For example, Tesla, the electric car company, first reported profits in the first quarter of 2013, after 10 years of operation. Its founders, Martin Eberhard and Marc Tarpenning, financed the company for one year. Subsequently, Elon Musk began to invest in it, with the marketing idea of making electric cars accessible to all.
Amazon, the world leader in retail trade by Internet, was created in 1995 and it was not until 2001 that it reached its equilibrium point. Twitter was founded in 2006 and, until it went public on the stock exchange in early October 2013, the company still had losses.
KidZania, the Mexican chain of “education-entertainment” centers, reached its equilibrium point in 4.5 years, even though the business model considers not only the sale of tickets for children to the centers, but also contributions from their sponsors, as income.
Of course, for a newly created company to survive a decade without generating profits it needs several rounds of investment. But, in order to have commited investors, it must have an excellent product or service, a good team, and belief in the idea, so that investors will be patient.
Not all ideas are going to be successful, but the greater the number of good ideas that are put to the test, the better chances there are for success. And to have many ideas, you need an entrepreneurial ecosystem that encourages students, professionals, academics and adventurers to generate concepts with an innovative component. And this is where you see a significant advance in Mexico.
The private sector has created numerous awards and campaigns to promote entrepreneurship, such as the Santander Prize for Entreprenurial Innovation, the Desafío Intel, the Prize for the Student Entrepreneur, the IBM Start Camp, the BBVA Open Talent and Red Innova, among others. To encourage networking among young entrepreneurs, a variety of initiatives have also been created, like Startup Weekend, the Campus Party,, Startup Drinks, and Global Entrepreneurship Week, to mention a few.
For its part, the federal government created the National Entrepreneur Institute (Instituto Nacional del Emprendedor (INADEM), and offers a large portfolio of support programs to entrepreneurs and micro, small and medium-sized enterprises through the Fondo PYME, FINNOVA, PRODIAT, Innavapyme, Innovatec and Proinnova, and the Fund for Technological Innovation (Fondo para la Innovación Tecnológica), among many others.
The number of investment funds has also grown significantly in recent years. Funds like Wayra, Angel Ventures Mexico, Capital Indigo, Mexico Ventures, Venture Institute, Mexican VC, Gerbera Capital, New Ventures Mexico, and Latin Idea Ventures are relatively young and are leading a significant change in the availability of risk capital in our country.
According to a study done by Enrique Wiencke, ofVenture Capital, on average, venture capitalists in Mexico are men, 42.7 years old, with studies toward a Master’s degree, and have invested in companies for only 2.8 years.
This same study shows that these funds have invested, on average, in 3.7 companies, and their capital is worth around 55 million dollars. In the opinion of the majority of these investors, there is more money to invest than good ideas ready for market.
An important number of the good ideas must undoubtedly emerge from research centers and universities. The successful examples of the contributions of Stanford University to the growth of Silicon Valley and of Massachusetts Institute of Technology (MIT) to the development of Information and Communication Technologies (ICT) in Boston’s Route 128 show that universities have gone beyond their traditional roles of teaching and research, to become key actors of innovation for economic development.
The story of Biohominis, and the non-rigorous way it was portrayed by Vance in Scientific American, should not discourage or mislead anyone. On the contrary, it only shows that a good idea and a good team are not enough for a technological innovation to be successful. What is needed is strong managerial talent (about which Vance is suspiciously silent), and an entrepreneurial ecosystem that allows a company access to venture capital funds that support and invest in the idea, so that after some time the business will begin to generate significant revenue.
We do not know the reasons why Biohominis went bankrupt, but it would be interesting to study them so that other entrepreneurs can learn from the experience. What is certain is blaming their failure on the national ecosystem of entrepreneurship shows a lack of rigor, to say it lightly. Not all entrepreneurs succeed the first time they try. And, as Winston Churchill said, “Success is the ability to go from failure to failure without losing your enthusiasm.” If Dr. Reynaud is encouraged to try again, without a doubt his probability of success is going to be much greater.
It is certain that in the next few years we are going to see the creation of a greater number of Mexican high tech companies that are internationally competitive, arising from universities and research centers, and that will contribute significantly to the growth of the GNP of our country. It would be desirable that the numerous success stories that have emerged in recent years deserved the same level of attention and be published in international magazines, showing that the talent in Mexico is generating high value-added products.?
References
Timmons, J. A., Spinelli, S., 2009, New Venture Creation: Entrepreneurship for the 21st Century, 8th edition, Mc Graw Hill.
A Favorable Climate for Entrepreneurs
Many creative minds wish Mexico had an economy based on innovation and technology that would enable us to develop as a more balanced and competitive country. Here are some ideas that suggest that innovation does exist in Mexico…
Many creative minds wish Mexico had an economy based on innovation and technology that would enable us to develop as a more balanced and competitive country. Here are some ideas that suggest that innovation does exist in Mexico, and that our entrepreneurial ecosystem is increasingly robust and includes more players.
Last September 17, the Scientific American published an article entitled “Why Can’t Mexico Make Science Pay Off?”, written by Erik Vance. It tells the story of Enrique Reynaud, a professor of molecular biology at the National University (UNAM) who, together with a team of geneticists, created the company Biohominis. With an initial funding of 500,000 dollars, awarded by the federal government, this technology-based company developed various techniques of genetic testing to identify people’s proclivity to hypertension, diabetes, cancer and metabolic problems, among other diseases.
Dr. Reynaud’s innovative company promised to become the type of enterprise that Mexico needs, in order to have sustainable economic development, and the story indicates that it had everything necessary to succeed: technological innovation, a good team, and outside financing. However, the company went bankrupt two years after it was created.
In Vance’s opinion, this case demonstrates that Mexico is the antithesis of Silicon Valley, and that we are very far away from using our talent to create global products, new technologies and startups. Vance’s article illustrates the severity and lack of rigor with which some people judge our country in terms of innovative entrepreneurship. According to estimates of the National Venture Capital Association of the United States, between 25 and 30 percent of startups fail, so it is inaccurate, unfounded and non-scientific to reach conclusions about the entirety of a country’s entrepreneurial ecosystem on the basis of a single unsuccessful case.
Of course, there are unsuccessful cases in Mexico, as in any part of the world, but there are also many that are very successful. The point that we want to emphasize in this article is that in Mexico there has never been a more favorable time like the present for entrepreneurs. We have macroeconomic stability, a variety of government programs that support innovation, virtually all the universities are working to promote a culture of innovation and entrepreneurship, and there are increasingly more angel investor funds and venture capital. According to the Global Entrepreneurship Monitor, the entrepreneurial activity in Mexico increased from 9.6% in 2011 to 12% in 2012, which shows that business ventures do “pay”.
The number of entrepreneurs who find a market opportunity is increasing, although their number is still small for the size of the country’s economy. The most important challenge we face is to create new high-impact companies, i.e., those that have a great product or service, an innovative business model, a competitive advantage difficult to imitate, provide employee advancement opportunities, have the capacity to generate well-paid jobs, and that have made major contributions to the country’s Gross Domestic Product (GDP).
Having a brilliant idea and being able to market it as well is not common, because in reality several factors must be met for an entrepreneur to be successful. According to Timmons and Spinelli (2009), an opportunity must have at least two of the following six critical factors:
Of these critical factors, the most successful startups are those with a good team and revolutionary technology. This is exactly what Vance said that Biohominis had.
After seeing several cases of success and failure, we would add that other critical factors for success are patience, and having an investor who believes in the idea. All companies need time to consolidate and begin to generate profits. Although many experts believe this period takes an average of two years, the truth is that it can be considerably more, particularly when it comes to products with a high content of scientific and technological knowledge.
For example, Tesla, the electric car company, first reported profits in the first quarter of 2013, after 10 years of operation. Its founders, Martin Eberhard and Marc Tarpenning, financed the company for one year. Subsequently, Elon Musk began to invest in it, with the marketing idea of making electric cars accessible to all.
Amazon, the world leader in retail trade by Internet, was created in 1995 and it was not until 2001 that it reached its equilibrium point. Twitter was founded in 2006 and, until it went public on the stock exchange in early October 2013, the company still had losses.
KidZania, the Mexican chain of “education-entertainment” centers, reached its equilibrium point in 4.5 years, even though the business model considers not only the sale of tickets for children to the centers, but also contributions from their sponsors, as income.
Of course, for a newly created company to survive a decade without generating profits it needs several rounds of investment. But, in order to have commited investors, it must have an excellent product or service, a good team, and belief in the idea, so that investors will be patient.
Not all ideas are going to be successful, but the greater the number of good ideas that are put to the test, the better chances there are for success. And to have many ideas, you need an entrepreneurial ecosystem that encourages students, professionals, academics and adventurers to generate concepts with an innovative component. And this is where you see a significant advance in Mexico.
The private sector has created numerous awards and campaigns to promote entrepreneurship, such as the Santander Prize for Entreprenurial Innovation, the Desafío Intel, the Prize for the Student Entrepreneur, the IBM Start Camp, the BBVA Open Talent and Red Innova, among others. To encourage networking among young entrepreneurs, a variety of initiatives have also been created, like Startup Weekend, the Campus Party,, Startup Drinks, and Global Entrepreneurship Week, to mention a few.
For its part, the federal government created the National Entrepreneur Institute (Instituto Nacional del Emprendedor (INADEM), and offers a large portfolio of support programs to entrepreneurs and micro, small and medium-sized enterprises through the Fondo PYME, FINNOVA, PRODIAT, Innavapyme, Innovatec and Proinnova, and the Fund for Technological Innovation (Fondo para la Innovación Tecnológica), among many others.
The number of investment funds has also grown significantly in recent years. Funds like Wayra, Angel Ventures Mexico, Capital Indigo, Mexico Ventures, Venture Institute, Mexican VC, Gerbera Capital, New Ventures Mexico, and Latin Idea Ventures are relatively young and are leading a significant change in the availability of risk capital in our country.
According to a study done by Enrique Wiencke, ofVenture Capital, on average, venture capitalists in Mexico are men, 42.7 years old, with studies toward a Master’s degree, and have invested in companies for only 2.8 years.
This same study shows that these funds have invested, on average, in 3.7 companies, and their capital is worth around 55 million dollars. In the opinion of the majority of these investors, there is more money to invest than good ideas ready for market.
An important number of the good ideas must undoubtedly emerge from research centers and universities. The successful examples of the contributions of Stanford University to the growth of Silicon Valley and of Massachusetts Institute of Technology (MIT) to the development of Information and Communication Technologies (ICT) in Boston’s Route 128 show that universities have gone beyond their traditional roles of teaching and research, to become key actors of innovation for economic development.
The story of Biohominis, and the non-rigorous way it was portrayed by Vance in Scientific American, should not discourage or mislead anyone. On the contrary, it only shows that a good idea and a good team are not enough for a technological innovation to be successful. What is needed is strong managerial talent (about which Vance is suspiciously silent), and an entrepreneurial ecosystem that allows a company access to venture capital funds that support and invest in the idea, so that after some time the business will begin to generate significant revenue.
We do not know the reasons why Biohominis went bankrupt, but it would be interesting to study them so that other entrepreneurs can learn from the experience. What is certain is blaming their failure on the national ecosystem of entrepreneurship shows a lack of rigor, to say it lightly. Not all entrepreneurs succeed the first time they try. And, as Winston Churchill said, “Success is the ability to go from failure to failure without losing your enthusiasm.” If Dr. Reynaud is encouraged to try again, without a doubt his probability of success is going to be much greater.
It is certain that in the next few years we are going to see the creation of a greater number of Mexican high tech companies that are internationally competitive, arising from universities and research centers, and that will contribute significantly to the growth of the GNP of our country. It would be desirable that the numerous success stories that have emerged in recent years deserved the same level of attention and be published in international magazines, showing that the talent in Mexico is generating high value-added products.?
References