Doing Business in LatAm – Guadalajara, México.

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Back in December 2012, Ooyala was kind enough to host a Sales4Startups event in their Guadalajara, México offices. The event was well taken by the entrepreneurial community, which has been growing in strides since then.

I was gladly surprised when i found out that Bismark Lepe’s new venture, Wizeline, would join the startup community of Guadalajara. But first, a bit of background on him: Prior to Wizeline, he co-founded Ooyala, raised $20 million in venture funding and shaped Ooyala’s product strategy. He remains an advisor for Ooyala, and provides guidance on Ooyala’s monetization business and expansion in Latin America. Bismarck was previously a Senior Product Manager at Google, where he managed the early growth of AdSense display and video advertising and launched more than 25 different Google AdSense products, including Click-to-Play video ads. Bismarck has a B.A. in Economics from Stanford University.

Bismarck has been a great advocate of the amazing talent and opportunities that companies can find not only in México, but all of Latin America. I want to share with our community the text of a very interesting post that appeared on Startupgdl.com on why Ooyala chose Guadalajara, México as the newest office in their international expansion effort. Bismarck presents some hard data backing up the decision, which makes it even more interesting, considering many U.S. companies still look over to the Far East for 3rd party vendors. In addition, let’s consider that Guadalajara, is about a 3 to 4 hour flight from Silicon Valley (all main airports in the Bay Area have direct daily flights to Guadalajara).

This is the first of a Doing Business in LatAm articles, that will be published periodically on the Sales4Startups blog.

In related news, the City of San Jose approved a Sister City Relationship agreement with Guadalajara, México. San Jose’s City Council voted yesterday on this, and was unanimously approved. The new affiliation will strengthen trade and investment relationships between those cities. Detailed information on the topic can be found at this website.

 

Here is the original blog post:

 

In April of 2009, as world economies were emerging from one of the worst economic downturns in history,  Ooyala weathered the downturn by using its core engineering teams to build custom solutions for a handful of its customers. This enabled Ooyala to stay afloat, but it hindered its ability to build its core product. As such, Ooyala was on the lookout for a secondary location that would enable building custom solutions for customers. India, Ireland, China, Philippines, Argentina, Mexico, Canada, Texas (and several other cities and states in the US) and a number of places in Eastern Europe were analyzed. We examined: 1) the number of universities 2) the number of engineering graduates 3) the presence of other technology companies in the area 4) the  cost of living 5) the availability of government grants 6) the  proximity to the US 7) IP protection and finally, 8)  safety. You can view one of the charts we used to make our decision below (Chart provided by Mark Ellis, former Ooyala BD VP and now CEO of LiftOff).  When Mexico was selected, the only unknown was who would drive this effort.  With no immediate answer in sight, we delayed rolling out the office in Mexico and continued to work with our 3rd party vendors in the Far East.

 

The following year, I met Adalberto Flores and Vidal Gonzalez, two entrepreneurs from Guadalajara, Mexico. They were in the Bay Area working to jump-start their own stalled startup — so seeing this as a propitious sign, I asked them to undertake the task of opening up Ooyala GDL, and they agreed.  Vidal and Adal spent the next 4 months at Ooyala HQ in Mountain View, imbibing the culture and learning the ropes.  The rest, as they say — is history.

The Guadalajara office has been a tremendous success.  Today, it’s Ooyala’s second largest office and has the potential of becoming Ooyala’s biggest office. Given its success, it was a no-brainer that Wizeline would set up a presence in Guadalajara.  Vidal Gonzalez left Ooyala and  joined Wizeline as its chief engineer and office head —  and in under a month, Wizeline has hired five top engineers.

1. Talent: There are over a dozen universities in Guadalajara Mexico, including University of Guadalajara (5th oldest University in North America), Tec de Monterrey, ITESO, Autonomous University of Guadalajara… that graduate thousands of students with technical degrees.

What we’ve learned: Although, there are a lot of universities, many of the programs are teaching on Microsoft development platforms and technologies.  The best hires have been the people who started cutting code before going to college. We’ve hired people from Mexican cities like Guanajuato, Monterrey, Mexico city, Hermosillo… to name a few, but also from countries like Colombia, Argentina, Turkey, and Venezuela — and all have been willing to relocate to Guadalajara.

2. Silicon Valley of Mexico: In the 80s and 90s, companies like HP, Intel, IBM, Selectron, and Jabil set up shop in Guadalajara. This brought thousands of technology jobs into the area. Just outside of the airport, there’s a big sign saying that you’ve arrived in the Silicon Valley of Mexico.

What we’ve learned: In recent years, you’ve also seen companies like Tata and Huawei setup shop in Guadalajara. This brought thousands more technology jobs into the area, but like the chip design and hardware assembly jobs that HP and IBM created, the professional services and business processes jobs that Tata and Huawei brought aren’t exactly the types of jobs that we think about when we think about a flourishing software and IP-driven job market. What’s really driven Guadalajara into an interesting place to hire has been the arrival of Oracle, and the emergence of a strong startup community.Oracle’s second largest development center is in Guadalajara.  In addition to increasing the pool of software engineers, these companies are cultivating the Silicon Valley culture of risk taking, meritocracy, flat organizations, and aspirational pursuits.

3. Culture: Start-ups are the new black.

What we’ve learned: When we first started Ooyala, it was difficult to hire engineers because the majority of University graduates only wanted to work at large and established multi-nationals. The big company brands mattered. In some ways, providing food, having open floor plans, flat organizations was not perceived as a benefit – this just made the companies seem juvenile and at a higher risk of failing. Not sure why, but the idea of working at a startup has now become an attractive proposition. When we recruited for Wizeline, we had several 100 qualified people submit their resumes and in a matter of weeks, we were able to interview, extend offers, and have five talented engineers on the Wizeline payroll.

3. Government Grants: There is much ado about the monies that are available for companies that are setting up in Mexico. Nafin, the fund established in 1934 by the Mexican Government as a development banking institution, boasts hundreds of millions of dollars in financing for technology companies every year. There are a number of other state and local government programs.

What we’ve learned: A. Though we never look a gift horse in the mouth, actually snagging a grant is a lengthy and time-intensive process.  The grants seem to favor companies making CAPEX investments.  We applied for over $1M in grants and received …maybe $20k – not enough to cover the investment of time.  If you decide to apply for grants, it may make sense to bring on a third party firm that does this professionally.

4. Salary Discrepancies: Salaries and total compensation for talent is ⅓ of what it is in the US.

What we’ve learned: We actually found that you can be at the 80th percentile in terms of compensation, and you will still fall under a third of what is required to hire an employee of equivalent talent in the US.  One of the nice benefits of hiring in Mexico is that people stay at a job much longer than in the Silicon Valley, which obviously increases/improves the cost-savings.

5. Proximity: Depending on whether you fly from Oakland, San Jose or San Francisco, Guadalajara Mexico is only 3.5 to 4 hours away — and there is only a 2-hour time-zone difference for most of the year.

What we’ve learned: Hard to argue with physics… But yes, it’s incredibly convenient to get, there.  You can usually find a couple of direct flights from one of the Silicon Valley airports. Although, Guadalajara is 2 hours ahead of the Silicon Valley, most employees get in to work by 10am, and then take lunch at 2pm and leave between 7 and 8pm.  So there should never be a problem finding your team members in the office.

Now, the elephant in the room is safety.  And although Guadalajara has been considered a safe zone for years – free of much of cartel violence that makes the news in other parts of Mexico — it wasn’t completely immune to the violence.  There have been minor spikes in violence, but it has died down in recent years and  Guadalajara’s violent crimes rate is now lower than Chicago, Houston, Philadelphia, Jacksonville, Milwaukee… and let’s not even talk about New Orleans or Washington DC. But as is true for any city, it’s important to be vigilant and careful.

When we opened the Ooyala office in Guadalajara, it was really an experiment.  The experiment evolved into a strategic asset for Wizeline.  In the coming weeks, we will be running a few posts on how to recruit, incorporate, communicate, compensate… in Guadalajara.

 

Lepe, Bismarck. (2014, January 8). “Why Guadalajara” [Web log post].

http://startupgdl.com/2014/01/08/why-gdl/