Nearshore Americas

A Mexican VC Reshapes Perceptions of Mexico, One Investment at a Time

Cesar Salazar’s IT odyssey has taken him from hacker house parties to the foremost tech startup seeder in Mexico and part of 500 Startups’ global network, which is leading the way in spreading the Silicon Valley philosophy around the world. Salazar’s journey began a decade ago when he and like minded friends started staging hackathons for software developers and tech creatives. “The idea was to surround ourselves with people who are as passionate as we are about technology and creativity,” he said.

The events’ popularity grew quickly and soon hundreds of people were attending Super Happy Dev House parties in 15 cities around the country. For Salazar and his partner Santiago Zavala, the events were a revelation. “By creating communities and fostering relationships, we started to realize there was a lot of potential that everybody was missing,” he said.

Getting Serious

It was that up close view of stifled potential that pushed the pair into starting their own startup investment company, Mexican VC. “We got to meet a lot of people who were about to start their own companies, they were about to turn their weekend projects into something more serious [but] everyone was frustrated over the lack of capital in the market, nobody was doing seed investments,” he said. “After seeing nobody else was going to solve it we jumped head first into doing this with no real experience doing anything related to finance or investment.”

At first, raising capital for investments was a struggle. “It was really challenging,” said Salazar. “First because almost nobody believed in the market and second because almost nobody believed that we could pull it off.”

The pair’s first pitches relied more than anything on selling their belief they could succeed. “It was like, ‘well we know a bunch of Mexicans who are starting new companies and none of them have capital but we promise they are really talented and they are pursuing big opportunities and we can help them succeed,” said Salazar. “Now when I hear it I’m like, really? People trusted that position?”

The pitch was convincing enough to get Mexican VC off the ground. “Luckily we lined up just enough – it came from some angel investors in Silicon Valley that we already had connections to,” said Salazar.

Hooking Mclure

From those first investments, Salazar and Zavala have not looked back. Mexican VC’s business and reputation grew rapidly and was soon catching the eye of luminaries from 500 Startups, a global network of startup investors with its heart and soul firmly rooted in Silicon Valley. “[500 Startups co-founder] Dave Mclure personally was looking at what we were doing and he felt really compelled to bring us on board because of the capacity we have to operate in Mexico but also because he was one of the first to realize the potential that Mexico has as an entrepreneurial hub,” said Salazar.

“We invest in things that probably sound crazy in the beginning but we prefer to be early and contrarian than late and right. We prefer to be betting on those people or businesses that others are afraid of” 

An initial business relationship grew into a full partnership and Salazar and Zavala now continue what they started by running the 500 Mexico City team. “There was a fit between what 500 was doing at the time and what we were doing at Mexican VC,” said Salazar. “There was  shared investment thesis, we accelerated companies in a very similar way, and especially we believed in the same things – we believed that talent is everywhere, that the best growth opportunities are in emerging markets, [and] we believe in betting on some underdogs that other folks might overlook.”

According to Salazar, his Mexico 500 team still has the independence to follow their investment instincts, but with the added benefit of access to a global support network. “We have access to all the aggregate knowledge of the team, we have people in India, Brazil, China, Malaysia, and we all are sharing what we are seeing in each of our regions,” he said.

Despite the international backing, Salazar’s business philosophy retains its original commitment to the new and innovative and its aversion to risk aversion. “We invest in things that probably sound crazy in the beginning but we prefer to be early and contrarian than late and right, we prefer to be betting on those people or businesses that others are afraid of,” he said. “We care about those mechanisms that allow great individuals and teams to make a change in their communities in their respective industries.”

It is also a philosophy that puts patience before profits, at least in the short term. “We believe in helping others before trying to get any return and that has proved to be a very successful strategy for a lot of years now – try to give before taking,” he said.

So far, Salazar and his team have funded 21 companies – seven of them with Mexican VC. Their current batch of investments includes developers working on platforms for a diverse range of sectors, from real estate to sexual health.

With the rest of the world catching on to the potential waiting to be tapped in Mexico (including a glowing piece by globe-trotting NYC columnist Thomas Friedman), Salazar feels the business environment for Mexican IT entrepreneurs is progressing.  “For maybe the first three years it felt like we were in this startup phase where there are not a lot of people who understand what we are all doing,” he said. “But now I feel like there is a common message, a common understanding about what resources, in terms of capital space and mentorship, entrepreneurs can find out there.”

Over recent years, many well-connected executives have expressed doubts about the potential of Latin America startups, largely because entrepreneurs have traditionally received little cultural or governmental support. This commentary by former Costa Rica president Oscar Arias delivers that message.

In this brave new world of Mexican startups, the challenge for Salazar, remains the same – to unleash Mexican potential – but the obstacles to realizing that have changed. “A startup eco-system needs success stories, heroes and role models that are inspiring the next generation,” he said. “But when you’re starting there are no such role models and its challenging to make people believe that they can build a $100 million business or a billion dollar business.”

To achieve this, Salazar and his team guide their startup protégés through the macro-economic context of their business, grounding their dream in data that proves it could become reality.

“We’ve tapped into a lot of work in order to twist their minds and make them see that opportunity and make them go after that,” he said.

Nevertheless, the key to Salazar’s success remains in getting new entrepreneurs and investors alike to share in one of his most basic beliefs. “[Mexico] is one of the best opportunities in the world these days,” he said.

 

 

 

 

 

James Bargent

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