OVER THE LAST YEAR, our team at Endeavor Insight and Endeavor Mexico studied the rapid growth of Monterrey’s technology sector. We define tech companies as for-profit business, whose primary activity is software development for enterprises or consumers and internet-based or mobile-based retail or services, excluding hardware manufacturing and firms providing services using third-party software. Our goal was to understand the current state of the tech entrepreneurship ecosystem and where critical opportunities exist to drive the sector’s growth in a way that allows its current companies to reach high levels of success and reinvest this success into the next generation of companies.
In the process, we created a dataset on the tech entrepreneurship ecosystem in Monterrey which combines data from CrunchBase, LinkedIn, and the portfolios of VCs, incubators and accelerators with more than 300 local tech entrepreneurs. Our analysis reveals three key findings.
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In the last 20 years, Monterrey has seen significant growth in their technology sector, which has positively impacted the local economy, especially from 2013 to 2017 when the number of tech companies led by local entrepreneurs grew by 188%. Today Monterrey’s tech-sector includes between 300 and 350 entrepreneurial companies. On average, one in three companies in Monterrey have a founder who starts a second company. These companies employ over 28,000 people. Roughly, 70% of investment activity has taken place in the past few years, with more than 35 million dollars invested in Monterrey’s tech sector from local VC’s & family offices and 1 million dollars from angel investment.
THE MAJORITY OF MONTERREY’S VENTURE CAPITAL ACTIVITY DEVELOPED IN THE PAST TEN YEARS.
Very little venture capital investment took place before 2010, and the sector has seen an exponential jump in investment activity since then. Angel Investment (from tech founder to tech founder) has had very little impact in the ecosystem, and has been invested primarily in early-stage businesses. On the other hand, Venture Capital firms based in Monterrey mostly invest in local company, however, the median amount invested is relatively low (roughly US$110,000) compared to investments in companies based in other parts of Mexico (roughly US$457,000) or other countries (US$1M).
PRODUCTIVITY AMONG TECH ENTREPRENEURS IN MONTERREY IS DRIVEN BY A SMALL NUMBER OF COMPANIES THAT REACH SCALE.
Overall, Monterrey’s tech sector has a relatively high level of productivity, generating over 28,000 jobs from roughly 300 companies. However, this productivity is driven primarily by its three largest companies: Softtek, Axtel, and NEORIS, which alone account for more than 70 percent of employment in the sector. While this highlights the massive impact larger companies have on the ecosystem, it also suggests a relatively high level of concentration and the fact that the sector may be relying too heavily on three companies. Nonetheless, Monterrey has a group of smaller but fast-growing tech companies that have the potential to become the next generation of scaled companies. Most companies in this category are fairly new, with about five to six years of operation.
ENDEAVOR, established in 1997, leads a global High-Impact Entrepreneurship movement and promotes economic growth and job creation by selecting, mentoring, and accelerating the world’s best High-Impact Entrepreneurs.