Mexican VC: Market Sentiment Q2 2016

June 23, 2016

In June 2016, ALLVP Research conducted a follow-up Q2 survey to its first Mexican Venture Capital Investor Sentiment survey for the first quarter Q1 of 2016. The survey was conducted across the whole family spectrum of Venture Capital in Mexico, including Discovery/Seed Fund, Early Stage and Growth VCs, Angel investors, Family Offices and Private Equity funds; 60 funds were surveyed.

 

If the Q1 survey captured a cautious optimism future for market trends in Mexico, with 25% indicating valuations will go up, a whopping 42% of investors expect valuations to go up in Q2. Meanwhile, investor sentiment on companies’ burn rates is increasing by 10 percentage points, from 22% to 32%. Burn rates are associated with growth when the money is spent on productive assets that will help companies scale faster; of note, Mexican burn rates are in start contrast with the US sentiment[1] of February 2016, where 62% of investors expect the market to tighten – the opposite of increasing burn rates; a stark contract with the Mexican sentiment of giving free rein to scaling up over a desire to cut costs.

 

Meanwhile, the percentage of those expecting the market to tighten decreased from over a third in Q1 to 25% in Q2, a marginal adjustment and yet a positive sign for the market.

 

 

[1] What Do Industry Insiders Think Will Happen in VC in 2016? By Mark Suster, February 2016, https://bothsidesofthetable.com/what-do-industry-insiders-think-will-happen-in-vc-in-2016-f0fdfdf59f51#.14xythrrc

 

 

The findings also indicate a significant reduction in those who expect the investment process to take longer, from 36% to 17%. Compare this with a staggering 77% in the United States who expects the investment process to take longer in 2016 and we have yet another remarkable positive difference in the Mexican landscape with respect to its more mature neighbor. As 2016 unfolds, one thing is certain: the sun is shining in Mexico while the United States… remains overcast; or so the investors believe.

 

 

 

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