During the past several years Mexico has undergone a dramatic cultural and economic transformation. Two key factors can be considered: innovation and entrepreneurship. According to the World Economic Forum Competitiveness Index, Mexico is considered an “efficiency-driven economy”, meaning the country is primarily focused on improving market efficiency and increasing its technological readiness. However, just as there are some key aspects related to higher education and institutional strength that need to be addressed, there are some aspects related to innovation and sustainability that the government and private sector are currently working on, thus accelerating the transition towards an innovation-driven economy.
At the core of this economic transformation is a renewed impulse the government has given to entrepreneurship. Since 2014 Mexico created the National Entrepreneurship Institute, which has worked hand in hand with the Secretary of Economy, the National Council of Science and Technology and the Secretary of Energy to not only develop a more apt entrepreneurial culture in Mexico, but also to create a new knowledge-based economy capable of dramatically improving the country’s ability to develop and adopt technology, improve efficiency and, perhaps of greater importance, how to do it in a sustainable manner.
The principle behind this government-led effort is simple: technological change (innovation) may lead to the creation and exploitation of previously unnoticed opportunities (entrepreneurship), which in turn may lead to the spread of knowledge and an increase in capital and labor (economic growth). This, in other words, can be re-interpreted as a public policy to promote an economic environment that favors economic growth through the creation of new innovation-driven opportunities and the re-definition of the Mexican workforce.
Empirically speaking, the links between innovation and entrepreneurship, and between entrepreneurship and economic growth are being tested by the Mexican government. The result? A new vibrant economy, driven by young entrepreneurs and startup companies, seeking intervention opportunities to participate in the new Mexican economy.
The new entrepreneurial culture in Mexico has permeated different industries, including the financial and energy sectors, as well as manufacturing, services, and education. Perhaps of greater relevance is the fact that it has given birth to a new clean technology sector, considered today as a key enabler of higher efficiency industries and one of the main sources of intervention opportunities for entrepreneurs. During the past eight years, when the organization Cleantech Challenge first introduced the term “cleantech” to Mexico, the industry has seen exponential growth in terms of new pure-play startup companies, as well as in terms of employment and innovation, measured in terms of intellectual property protection filings.
Specifically, according to GreenMomentum, while entrepreneurial activity has increased dramatically in the biotech and fintech sectors, the increase in participation of entrepreneurs in cleantech has been without precedent. As consequence, the degree of both technological and economic sophistication of Mexican entrepreneurs has increased, as demonstrated by the successful introduction to the Mexican market of energy storage companies like Kinetech Power Systems, which in 2017 was recognized by Cleantech Challenge Mexico as the “top clean technology company in Mexico.”
If we were to characterize the Mexican cleantech opportunity space in economic terms, we could say it is equivalent to the 0.01% of Mexico’s GDP, or one-fourth of the country’s R&D budget (as per CONACYT). The number may seem disproportionate, considering it is a relatively new industry in Mexico; however, this has been aided by yet another important transformation going on in Mexico, namely, the energy constitutional reform.
Mexico’s energy reform, which in 2014 initiated a complete transformation of the energy sector, including electricity and hydrocarbons, has now become one of the most important economic engines in the country, instantiating entrepreneurial opportunities at different points of the industry’s value chain. Specifically, with the liberalization of the industry, and the introduction of new national content requirements, the country has found a way of not only funding the electricity and hydrocarbons industries transformation but also of creating immediate opportunities for Mexican companies specialized in either of these industries.
According to the Global Development Entrepreneurship Institute, Mexico ranks higher than most participating countries in three specific areas that enable entrepreneurship-driven development: opportunity perception, market agglomeration, and economic freedom. These are the result of the proper implementation of public policy, as well as the efficient promotion and institutional support of entrepreneurial development programs.
However, just as it has been indicated in the WEF Competitiveness Index, the Global Innovation Index and the Global Entrepreneurship and Development Index, Mexico needs to improve in several aspects, including market efficiency, innovation policies, and labor force development, however none of them seems to be as pressing as the need to further develop an adequate risk capital industry to assist with the financing of mid and long-term opportunities, as well as with the creation of a larger and more sophisticated market for the highly innovative products Mexican entrepreneurs introduce to the market on a daily basis.
And here is where the work by GreenMomentum becomes not only relevant but also essential.
GreenMomentum started in 2008 working on three very specific pillars: innovation, investment and public policy. Our initial focus was to assist the Mexican and US governments in the implementation of public policy entirely focused on enabling a new, environment-friendly and easier-to-navigate entrepreneurial ecosystem. Our focus has not been the development of public policy, but rather its proper implementation and constant improvement. Since 2010, our focus expanded to include the actual development of opportunities through the involvement of the private sector and facilitating the availability of technological solutions. That is, we focused on expanding and balancing the supply and demand of clean technology in Mexico.
Thanks, in great part to this effort – mostly driven by GreenMomentum´s main subsidiary Cleantech Challenge Mexico – the cleantech entrepreneurial ecosystem has experienced dramatic growth for several years in a row and has led to the development of sophisticated solutions in renewable energy, waste management, energy efficiency, electric mobility and new materials.
However, we understand more needs to be done.
In 2017 GreenMomentum developed a new concept and created P39 Cleantech Center (P39c). The Center was designed to take advantage of the existing conditions prevalent in the Mexican ecosystem – namely talent, technology and capital – to promote greater technological and economic sophistication through the conglomeration of cleantech startup companies, as well as higher intellectual diversity, vital for the development of radical solutions to the four areas GreenMomentum has identified as fundamental for the future: water, energy, mobility and clean hydrocarbons.
P39c is both a physical innovation space created for the development of radical technological solutions to some of the most important problems of our time and a virtual collaboration platform for the creation of international partnerships and the development of new opportunities in a global market. Specifically, it seeks to increase collaboration outputs, maximize creativity through intellectual diversity, improve technological sophistication and increase access to capital. This is meant to create a more efficient market, assist in the development of the Mexican workforce and to actively participate in the development of a new and more focused risk capital industry.
In conjunction with P39c, as well as with Cleantech Challenge Mexico, GreenMomentum plans to continue driving the development of public policy in the right direction, assist in the identification of intervention opportunities and the development of transformative solutions. We will continue working with entrepreneurs and high-risk, early-stage startup companies providing a platform to promote growth, scalability and, most importantly, to increase the speed at which cleantech transformative solutions are developed, financed and adopted by a global market. This, we firmly believe, will have a direct impact on Mexico´s competitiveness, economic development, and innovation policies, as well as in the further refinement of the country´s entrepreneurial culture of sustainable innovation.
Luis Aguirre-Torres is President and CEO of GreenMomentum Inc., a cleantech and energy market intelligence firm focused on the Latin American industry. He is also the founder of Cleantech Challenge Mexico, Latin America´s top green business accelerator program.
Aguirre-Torres has been recognized by U.S. President Barack Obama as Champion of Change, becoming the first Mexican Citizen to receive such distinction. Currently he is Co-Chair of the Mexico-U.S. Entrepreneurship and Innovation Council’s Energy and Sustainability Subcommittee, and President of the Latin American and Caribbean Council on Renewable Energy.
Luis Aguirre-Torres holds a first degree in Computer Engineering from the National Autonomous University of Mexico, a M.Sc. in Computer Science and a Doctorate in Electrical and Electronic Engineering and Telecommunications from University College London.