Fundraising in Mexico: Most active states

Ilian Murillo

Entrepreneurship, investment, and financial education remain brand-new ecosystems in Mexico, despite the fact through the pass of the years, governments and the private sector have been promoting them.

For both entrepreneurs and investors, it is important to identify which states of Mexico are the most active in fundraising. We use Crunchbase data to analyze the amount of fundraising by states: it turns out that 29 out of 32 states in Mexico have companies that have capital raised in the last ten years (2010- 2020).

In the following chart, we can see how the capital is distributed in those 29 states. Mexico City, Jalisco & Nuevo Leon are the most active states according to the number of fundraisings they have registered in Crunchbase. Mexico City takes 62.1% of the fundraisings between 2010 and 2020. Then it is followed by Jalisco with 10.3% and Nuevo Leon with 9.3%.

Why does Mexico City have such a big advantage in the ecosystem? There are several factors:

  • The amount of foreign direct investment it receives.
  • The amount of gross domestic product.
  • The financial environment and education they have as a result of all the venture capital firms that have been established in the last years.

Foreign Direct Investment

Foreign direct investment means giving new opportunities to entrepreneurs and advanced technology to be shown. According to an analysis made by a professor in EGADE Business School, in the proportion of total FDI (Foreign Direct Investment) accumulated in the period 2005-2015, Mexico City received 19.9% of the total FDI. There is no doubt that this capital helps projects to go further.

The following years got better, in the first quarter of 2019 the global city was ranked in first place for receiving $2,680.1M USD of Foreign Direct Investment. In December 2019, Mexico City ended up with $ 6,528 M USD according to the data of the Federal Secretary of the Economy. In the chart below we can see that Jalisco and Nuevo Leon are also in the top 5 for receiving the highest amounts of Foreign Direct Investment in 2019.

In this ecosystem, Mexico City is where most of the entrepreneurship events take place. For 14 years AMEXCAP has held the event called "Summit of Private Capital in Mexico" which is focused on spreading investment opportunities. In this event, national and international investors, fund administrators, and entrepreneurs become part of a huge network, giving the global city a big advantage over the rest of the states.

Jalisco is also doing its effort, in August 2019 in Zapopan Jalisco, the “Capital Emprende” event was launched. This initiative had the aim of promoting technology-based entrepreneurship projects while simultaneously, promoting private capital.

These kinds of events really leave their mark, developing and promoting the appropriate investing environment which is what is helping these states to be in the top 3.

Gross Domestic Product

At the same time, the amount of gross domestic product is important data to analyze in order to understand the economic scope of Mexico City in Latin America. According to the SEDECO’s (so called in Spanish: Secretaría de Desarrollo Económico) economic report, a comparison between Mexico City’s GDP in 2018 and other Latin-American countries’ GDP, concluded that if Mexico City was a country, it would be placed above many Latin American countries due to its gross domestic product of $ 214,167M USD.

In this way, according to results presented by the INEGI (Mexico’s National Institute of Statistic and Geography) in 2018, Mexico City produced 16.4% of the total GDP, Nuevo Leon produced 7.6%  and Jalisco 7.1%, while the rest of the entities only produced below 4.5% of the total gross domestic product, with the exception of the State of Mexico with 8.8%. Again the same  3 states are at the top of the list.

Financial Environment

In addition to the reasons previously mentioned, knowing where some of the most important venture capital firms around the country are located is another way to understand why these 3 states are raising most of the investment in Mexico. In this aspect, the global city is at the top too as +13 VC firms have headquarters there, giving them a more developed entrepreneurship ecosystem, benefiting entrepreneurs with capital available to finance their new projects. Jalisco has 4 outstanding VC firms and finally, Nuevo Leon has 3.

As it has been said, to understand the reasons for the distribution of fundraising around Mexico, it is necessary to have a more wide context of the conditions that Mexico City, Nuevo Leon, and Jalisco present. We can say that most of the Mexican companies are born or grown there, and that’s where we find the highest concentration of investors, while the rest of the country continues to discover the vast and challenging ecosystem.

Credits: Ilian Murillo Palma, Luis Miguel Almanza Rueda, Itzel Pamela Becerril Tovar, Rodrigo Alejandro Ibarra Vizcarra, Sara Escamilla Enríquez, Gabriel García Nevárez, Marcos Abraham Rascón Corona, Priscila Elizabeth Terrazas Rico, Ivan Elias Castro Cordero.