Kevin Xu is an early stage investor and founder of Interconnected, a bilingual newsletter about technology, business, and US-Asia relations.
Mexico was Known as an emerging tech hub and gateway to the Latin American market. As an investor focusing on developer-centric products, open source startups, and infrastructure technology companies with a particular interest in innovation in emerging markets, I wanted to learn something firsthand there.
Despite the ongoing pandemic, I took all the necessary precautions and spent about seven weeks in Mexico from January to March. I’ve spent most of my time meeting founders to find out what they’re building, why they’re pursuing these ideas, and how the entire ecosystem is evolving to support their ambitions.
Knowledge transfer isn’t the only trend flowing between the US, Asia, and Latin America. The competition is also ongoing.
The US-Asia-LatAm Nexus
A fascinating, if not surprising, observation was how much LatAm entrepreneurs Asian tech giants are looking for strategies for product inspiration and growth. Companies such as Tencent, DiDi and Grab are well-known names among the founders. This makes sense because the market conditions in Mexico and other parts of LatAm are more similar to China, India and Southeast Asia than they are in the US
What often happens is that entrepreneurs first look for successful startups in the US in order to emulate and localize them. When they find the product market fits, they seek inspiration from Asian tech companies as they tailor it to local needs.
A good example is Rappi, an app that started out as a grocery delivery service. Its future goal is to become LatAm’s super app: it is aggressively expanding both geographically and productively into delivery for restaurant orders, pharmacy and even COVID tests. New payment, banking and financial services products will also be introduced. Rappi Pay was only launched in Mexico a few weeks ago while I was still in the country.
Rappi now looks more like Meituan and Grab than one of his US colleagues, and that’s not an accident. SoftBank, whose portfolio includes many of these Asian tech giants, has invested heavily in the previous two rounds of Rappi and now has a $ 5 billion fund for the LatAm region. The knowledge and experience gained through Asian technology over the past 10 years is transferred right under the proverbial Silicon Valley nose to like-minded companies like Rappi.
US-Asia-LatAm competition
Knowledge transfer isn’t the only trend flowing between the US, Asia, and Latin America. The competition is also ongoing.
Due to similar market conditions, Asian technology giants are expanding directly into Mexico and other LatAm countries. The one I saw up close during my visit was DiDi.
DiDi’s foray into LatAm began in January 2018 with the acquisition of 99, a Brazilian rideshare company. In April 2018, DiDi traveled to Mexico with its bread-and-butter rideshare service. It was only in April 2019 that DiDi started its food delivery service DiDi Food in Monterrey and Guadalajara – two of the largest cities in Mexico. The expansion has not slowed since then, with an additional 10% profit incentive to attract delivery drivers.
Credit: Kevin Xu
My Airbnb in Mexico City happened to be two blocks from the large WeWork building where DiDi’s local office was. Every day I saw a long line of people responding to the incentives and waiting outside to be hired as DiDi deliverers.
Meanwhile, the Uber office, which was literally a block away, had hardly any pedestrian traffic. As Uber and Rappi fight for wealthier consumers, DiDi works to win low-income users for market share in the hopes that some of those people will one day reach the middle class and become profitable customers.