MEXICO CITY (Reuters) - In a mosquito-ridden hall in downtown Mexico City, hundreds of wannabe Mark Zuckerbergs gather to build the Latin American giant’s newest industry, one app at a time.
“Hola, geeks!” says a U.S. speaker, addressing Mexico’s future tech entrepreneurs at a recent 48-hour “hackathon,” a networking event masquerading as an app-building contest.
Despite its proximity to the United States, Mexico is a relative late-comer to the Internet startup party. With only a handful of operating companies, the country still lags well behind regional leaders Chile, Argentina and Brazil, where government subsidies stoke dynamic local scenes.
But with a huge domestic market, surging connectivity, a stable, growing economy and a new, reform-minded government set to take the reins in December, that might be about to change.
“There’s a big opportunity sitting on the table,” said Doug Renert, a U.S. investor and invited speaker here who runs TandemCap, a mobile startup accelerator fund based near Silicon Valley. “There’s a lot of money here.”
“Within ten years, the industry could be worth 50 to 70 billion dollars,” said Cesar Salazar, a managing partner at Mexican startup venture capital firm Mexican.VC, which was recently bought by 500 Startups, a U.S. accelerator fund.
Entrepreneurs say funding was hard to come by in previous years, but there are now incubators that finance startups, a handful of venture capital firms and a recently established $23 million government seed fund.
And among the iPad-wielding youngsters at the hackathon, who had 48 hours to build a mobile app that tackled Mexico City’s pollution, traffic and public transport problems, the mood was decidedly upbeat.
“The timing is right and we now have the right ecosystem,” said Jose Galvez, 37, who recently won a $70,000 grant from Telefonica’s in-house incubator Wayra to fund his startup, Venddo.com, which links buyers and sellers on social media.
Incoming president Enrique Pena Nieto recently told business leaders that he wanted to boost Mexican connectivity and “reduce the digital gap” between Mexico and its regional neighbors.
“Our country has 31 Internet users per 100 people, while Chile has 45 and the United States 74,” he said.
Even so, Internet usage in Mexico, Latin America’s second-largest economy, grew by 14 percent last year. Roughly 40 million people are now connected, many of them via cellphones.
Mexico is also home to the world’s largest concentration of Spanish-speakers, making it a gateway for entrepreneurs hoping to conquer the Hispanic market. The millions of potential Latino customers living across the U.S. border add incentive.
Mexico’s economy is forecast by the government to expand 3.5 percent this year, while a Reuters poll of analysts put it at 3.85 percent. Brazil, by comparison, has forecast 2 percent growth with a central bank poll of analysts putting it at only 1.6 percent.
In addition, Mexico’s young Internet startup industry is expecting a boost from the incoming pro-reform government.
Major obstacles remain, however. Mexican banks are behind the times in incorporating the latest e-commerce processing procedures, and few Mexicans are used to buying online. Red tape and corruption must also be factored in.
“It’s going to be a while before you see a large wave of investors, but that provides opportunities for those who do want to be adventurous and forward-thinking,” said Renert.
Some at the event, one of four taking place that night across the Mexican capital, dream of following in the footsteps of Facebook’s billionaire CEO Zuckerberg.
“It’s good to see entrepreneurs as rock stars,” said Patricio Buenrostro-Gilhuys, 34, the CEO of Gameversum.com, a game design website. “But you can’t just copy and paste Silicon Valley.”
Reporting by Gabriel Stargardter; Editing by Simon Gardner, Herb Lash, Gary Hill