Cárdenas (Conekta): “You set up a startup because you want to create value and offer it to the customer”

Can you tell us about your entrepreneurship project? What service does it provide, and which sector is it in?

Conekta is a solution that helps companies process money online, and we support them so their transactions on the Internet are successful. We support companies so they can successfully collect money from their customers and manage the money they make from all their online sales. We help our customers so they can integrate, have systems and good websites and successfully process their money in e- commerce. Conekta operates in the financial and payments sector.

When did you start collaborating with Mexican entrepreneurship?

I studied Mechatronics Engineering at the University of Waterloo, in Canada, where I lived for nearly seven years. I was very much involved in entrepreneurship. It is highly developed in that country, as in the United States, and it has much communication and knowledge from Silicon Valley. In 2011 I returned to Mexico and I became involved with entrepreneurship here. You could say that I'm a member of the first Mexican generation of startups.

What was the main motivation for your project?

I think that the issue of startups is not firmly established right now in Mexico, there seems to be many people setting them up and the final outcome is unknown. Above all because there hasn't been a success story. Thanks to my experience in Canada I already knew everything about startups and this is how Conekta started. We thought we could go to Silicon Valley, but we think it's saturated already, there are many companies, and the basic needs were already addressed with more superficial propositions, in my opinion.

We then saw that in Mexico and Latin America there were no startups founded by engineers which had a highly technical essence and were making robust products. We saw that there were more people from business than engineers in entrepreneurship projects, and that's why we decided to enter Mexico and create Conekta, not only to set up a startup, but also to become a major player in a few years.

What are the challenges or obstacles for entrepreneurs in Mexico?

I think that any startup anywhere in the world faces challenges. We know that it's very risky and a significant percentage fail, but one thing I see in Mexico es that no one has done it. A startup is a business proposition where investments are made in technology to make it grow exponentially and in a few years turn it into a success story. There have already been talent-based acquisitions, for example, cases of foreign companies that buy Mexican startups, but they pay very little money for them.

In my opinion, that's the challenge, that those companies have not existed as such in Mexico and no one can tell you what to do. I know of no Mexicans who have accomplished a success story in this area and can tell me “look, this is how it's done in Mexico”. As a member of the first generation of startups in the country, our challenge is to pave that way for others following us.

A second challenge is the inefficiency of all the companies we rely on –especially in the fintech sector–, banks and the government. If in the United States something takes you one day to complete, in Mexico it will take you a year. In fact, at a talk I attended I heard that if Mark Zuckerberg had created Facebook in Mexico, he would have spent a month setting up his company, going to the notary, etc. And in the United States we founded our company and the process was literally to sign a document and mail it to a firm in that country, and the company was created the next day. There are many obstacles due to the inefficiencies of the government and the corporations and financial institutions we rely on.

Another challenge is the regulations and structures, which in my opinion are more geared toward the fintech sector . For example, in the United States I can choose a payments company and log into an acquirer bank, and that's it. But in Mexico there is fraud. It's not fraud when someone buys on line and there is fraud, there's nothing we can do when a business is fraudulent. All that regulatory infrastructure does not yet exist in Latin American markets. I know several people in syntech and we are the ones who are becoming our own “policemen”, we're making the law and justice.

I hear many entrepreneurs say that the issue of investment is an obstacle, but that hasn't been our case. I think that if you're good and you know how to do it, you can get funding. There is money, and we already have seed funds in Mexico. But I think that the challenge would be the institutional rounds, B and C, for the same reason I mentioned that because no one has done it and all startup generations hardly resort to them, there have been something like three or four A series of startups. There is no capital in Mexico, there is money but not the sophistication, that's where I see an obstacle, but not as something that prevents entrepreneurship.

How would you define the DNA of the Mexican entrepreneur/innovator?

Being an entrepreneur can be anything from setting up a restaurant or a retail outlet to creating a startup. I can tell you from this last one, which is my context. The reason why you set up a startup is because you want to create value, that's the most important thing, you want to offer value to your customer. So the DNA is that you need the technical knowledge to be able to do so. For example, let’s look at BBVA, which is a company I admire very much and is very big, but apart from the fact that I know that next to them we're nothing, I have the assurance that in Conekta we are technologists. The company was set up by engineers and we're seeing how the value goes to the end customer, that's the essence. This is the DNA or where the entrepreneurship of a startup comes from compared with a bank that has thousands of people, where the people making the decisions are businesspeople.

And part of the DNA of a startup is also innovating, it's not so much about money. That's one thing that changed my perception in Canada, when I was studying there. It's a country where people create value and set up technology companies, and in addition they make more money than other companies. And part of that startup DNA is to create a product with a lower transaction cost. I think that's one of its features.

In your opinion, what is the role of official and non- official bodies in entrepreneurship?

Something very interesting is happening: the entire economic ecosystem in Mexico is not yet used to startups. What I find is that there is a context of very large companies that think they can do anything. If a payments system is needed they say “I'm a very big company and I have all the resources, so I'll make the payments, I'll grant loans, and I'll do everything”. Instead of the mechanisms you find in developed countries, where each one does it's thing and there's collaboration. That's why I think that the private sector has to adapt economically to the market for this to happen.

In the case of Conekta we've already been through this, for example, with the banks. In one specific case, when we started our relationship with a bank three years ago, it regarded us as competitors. They wanted to do what we do, but also be a bank, so at some point they realized that we were ahead in terms of technology, but we can’t beat them at being a bank. That's when they say: “Although I'm a bank and I lack the knowledge of a technology company, let's support each other”. That's why you can already see alliances between startups and corporations. The private sector needs to invest a lot of money in technology.

And as regards the government, what's happening now is that it is doing things, but it doesn't know what it's doing. In Mexico and Latin America, startups are fashionable but no one knows what that is, there has been no experience. One example I find very interesting is Startup Weekend, where you have to set up a startup over the weekend. What happened? They did it in the United States because successful entrepreneurs with extensive experience said they wanted to teach the new generations about this area, but in a serious manner, that there will be one or two who will leave and set up a startup. Mexico saw that and started to import the idea, but it's people who haven't set up startups and have no idea about what they are. So they distort the goal with which this event was created, which were real entrepreneurs that help other people become entrepreneurs. The same thing happened with the government. It heard that it has to support entrepreneurs and startups, but they don't know what they're doing.

For example, we didn't even consider the Inadem because we didn't want to waste our time. I think that the government should focus on what I mentioned about regulation. In our case, as regards online processing, Mexico still says that debits don't exist in e-commerce; if you make a debit online, the banks regard it as if you make a debit in a retailer using a card. So when a chargeback arrives, which is when the customer complains about an unknown debit, the bank says to the retailer “listen, you have a chargeback, please give us the terminal's voucher”. And the retailer says “no, it was done online”, and the bank says that if there is a debit there must be a voucher. In Mexico, to earn a chargeback, as a retailer you need a signed voucher, something that will take me about half an hour to explain to an American investor.

How would you define the existing financial opportunities for entrepreneurship in Mexico?

Financial opportunities in Mexico are good and bad at the same time. To me it's all business, a transaction. If I accept that taking money from someone is valid, then if someone offers me a valid investment proposal it's also valid because we're in a marketplace. But from what I've seen on the funding side, Mexican investors are not yet sophisticated. I've had proposals from the richest families in Mexico where they tell me "listen, I want to invest but I want 60% of your company", and that's not the way it works. Either your invest or you buy my company.

I think we need a startup that becomes something like Google in Mexico, and we also need a fund that has been successful investing in a Mexican startup so people say "oh, I understand how I have to invest". I understand that the rationale for investing in a startup is to get it into rounds where the investor can continue to have control, but the idea for investing is to go public or become a considerable success story, and as an investor I would have the return on investment on the company's value, on the initial investment I made. So that's what has somehow stood in the way of the investment scenario in Mexico.

What advice would you give someone who wants to become an entrepreneur in Mexico?

First, to know what is and what isn't a startup. To know what the purpose of a startup is. Second, to be committed. For example I started when I was 24 years old and I know that I'll have to be fully focused on a startup. Knowing that it will be hard is difficult at the beginning and when many realize it they stop doing it.

Knowing that it won't be easy. When I returned to Mexico I lived in an apartment with a mattress on the floor and a desk where the three founders worked. It's like being sure that you really want to do it, because if people like us were willing to sleep on a mattress on the floor and work on a desk to set up a company, you're obviously more likely to succeed than someone who is not willing to make that kind of sacrifices. Third, to find a base and very difficult problem. And lastly, to have a team so the company can solve that problem.

This entrepreneur claims that he admires the work done by banks very much, but he calls on them to join forces with startups and strengthen the alliances so both can grow the sector. He adds that in Mexico there is money for entrepreneurship, but no investor sophistication in this area.