Mexico’s micro, small, and medium enterprises represent 98 percent of businesses in the country; one of the largest percentages in the world (Federation Official Newspaper). However, 75 percent of new businesses shut down within the first two years of operation (INEGI, 2013).
So what about tech startups in Mexico? There is very little understanding surrounding the circumstances in which tech-based companies operate, as well as the difficulties and problems that they face. What’s more, there’s a lack of research into the personal, organizational, and contextual reasons that cause businesses to fail, as well as the effect of that failure on its founders.
Following a qualitative and a quantitative research methodology, The Failure Institute asked: “What are the causes of failure for Mexican tech startups?”
The results showed that the lack of understanding about the Mexican tech startups comes also from the entrepreneurs themselves. The first common source of failure for tech-based companies in Mexico is Lack of entrepreneurial preparation. Entrepreneurs state that education has poorly prepared them to be business people, and instead prepares them to be employees. They also note that education failed to inform themselves about the creation and running a business before starting out.
Surveyed entrepreneurs said they were not prepared for periods in which 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 studies (10.5 percent doctorates and 31.5 percent Masters) and 42 percent have undergraduate studies, a common theme was “I was educated to work, not to be an entrepreneur”.
Mexican tech entrepreneurs failed (first) by not investigating the failure and (second) by not preparing themselves when starting their own business. But, this fuck up doesn’t end here. The sad news is that less than 6 percent of entrepreneurs decide to recover and prepare to improve their entrepreneurial skills.
At least almost all participants indicated that they did learn from their failure.