Mexico’s micro, small, and medium-sized enterprises account for 98 percent of the country’s businesses—one of the highest percentages in the world (Official Newspaper of the Federation). However, 75 percent of new businesses close within the first two years of operation (INEGI, 2013). So what about tech startups in Mexico?
Thereis very little understanding of the circumstances in which tech companies operate, as well as the difficulties and challenges they face. Furthermore, there is a lack of research into the personal, organizational, and contextual factors that lead to business failure, as well as the impact of that failure on its founders. Using both qualitative and quantitative research methods, The Failure Institute asked: “What are the causes of failure for Mexican tech startups?”
The results showed that the lack of understanding about Mexican tech startups also stems from the entrepreneurs themselves. The primary cause of failure for tech-based companies in Mexico is a lack of entrepreneurial preparation. Entrepreneurs say that their education has failed to prepare them to be businesspeople, instead preparing them to be employees. They also note that their education failed to equip them with the knowledge needed to start and run a business before they began.
The entrepreneurs surveyed said they were not prepared for periods when the company does not generate income—this is especially important for tech-based companies, as they often require long development periods before the product or service is ready to be sold. Even though 42 percent of tech entrepreneurs in Mexico have postgraduate degrees (10.5 percent hold doctorates and 31.5 percent hold master’s degrees) and 42 percent have undergraduate degrees, a common sentiment was, “I was educated to work, not to be an entrepreneur.”
Mexican tech entrepreneurs failed (first) by not analyzing the cause of their failure and (second) by not preparing themselves adequately when starting their own business. But the mess doesn’t end there. The sad news is that less than 6 percent of entrepreneurs decide to bounce back and work on improving their entrepreneurial skills. At least, almost all participants indicated that they did learn from their failure.
Those who still wish to pursue a career as entrepreneurs should take a step back and explore ways to improve their entrepreneurial skills while focusing on localizing for the Mexican market. There are many factors to consider when deciding to take this path. Tomedes has written a blog post on this topic, discussing the various dialects spoken in Mexico, the culture, the current market landscape, and tips for localizing for the Mexican market.
You can view the full study here, browse the infographic, or learn more about The Failure Institute (www.thefailureinstitute.com)
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