ENDEAVOR REVIEW ENTREPRENEURIAL ECOSYSTEM RESHUFFLE - Challenges & Opportunities in the Post-COVID-19 World
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ENDEAVOR
REVIEW
ENTREPRENEURIAL
ECOSYSTEM RESHUFFLE
Challenges & Opportunities
in the Post-COVID-19 World
2020
An interactive dashboard with the complete survey
results can be found at: https://bit.ly/DaaS_Economic_Impact
2 1INTRODUCTION Since its unexpected and unprecedented outbreak, the COVID-19 pandemic has sent profound shockwaves around the world, causing one of the greatest global economic downturns in history. With a projected decline of 10.5% in real GDP in 2020, Mexico is facing one of the sharpest declines in Latin America, only second to Venezuela. The country also has the 4th-highest death toll in the world with over 70,000 lives lost, which is bound to cause serious economic upheavals.1 Every crisis, however, is also an opportunity. The COVID-19 pandemic has been a game-changer for businesses—a quasi- game-over for some and a level-up for others, depending on their readiness to adapt and evolve. Social distancing protocols have changed consumer behaviors as people realize the possibility of taking their daily activities online, including work, studies, and groceries. New market trends such as the rise of tele-industries (tele-health & tele-education), greater digitization efforts, and automation of processes (including the use of AI and robots) to minimize physical contacts. 1 Mexico’s total COVID-19 death toll stands at 74,348 as of September 23, 2020. COVID-19 Dashboard by the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University. 2
Given these radical changes, special participation of Endeavor Entrepre-
this Review seeks to expand neurs, whose first-hand insights and honest
upon how the pandemic will perspectives help readers understand compa-
transform Mexico’s social and nies’ resilient responses in times of crisis.
economic fabric. In particular,
what obstacles and oppor- While the development of the pandemic is highly
tunities does this crisis hold unpredictable, clearly mapping out industry
for entrepreneurs? And what trends and outlook through quantitative and
lessons can they take away qualitative analysis will allow entrepreneurs
to better position themselves to identify upcoming challenges and opportu-
in the post-COVID world? To nities to stay proactive. In these dark times,
do so, this Review will first Endeavor hopes to shed light on the best
provide an overall context practices that entrepreneurs and other
by examining the nature of stakeholders in the ecosystem can adopt to
COVID-19, the macroeconom- support each other and move forward.
ic landscape in Mexico, and
the changes in consumption
patterns in the aftermath.
Next, we will zoom in on the
sectors most affected, both
negatively and positively, by
this disruptive crisis, including
tourism, retail, entertainment,
healthcare, and more.
Drawing on public sources
and Endeavor’s proprietary
customer relationship man-
agement (CRM) of Mexico’s
entrepreneurship ecosystem,
we performed an in-depth data
analysis on key information
such as sales, employment,
and capital raised to holisti-
cally evaluate the economic
impact of COVID-19. Further-
more, this Review involves the
3CONTEXT entered into the pandemic with a faltering economy hindered
by endogenous factors, and COVID-19 only further exposed
the deficiencies of the country’s quality healthcare and engines
for inclusive growth, casting doubt on its potential recovery to
Macroeconomic Landscape a “new normal”.
in Mexico Before & After COVID-19
As the 2nd largest economy in Latin
America and the 10th-most populous
country in the world with 128 million
inhabitants, Mexico is an economic
powerhouse. Its rise and fall have
significant repercussions on the region
and the world. It’s worth noting that
even before the pandemic, the country
had already entered a recession with a
negative growth of 0.1% in 2019, marking
its first contraction in a decade. Mexico
Quarterly GDP Growth YoY
10
3.3 3.2 4.1 2.7 2.7 1.7 3.1 3 3
2 1.6 1.8 2.6 2.2 2.8 1.2
0.1 0
0
-0.5 -0.8
-2.2
-10
-20
-18.9
-30
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
2015 2016 2017 2018 2019 2020
GDP YoY Primary Activities Secondary Activities Tertiary Activities
Source: Endeavor Intelligence, 2020.
*The information corresponds to data collected by INEGI. Accessed: July 2020.
4As the country entered a nationwide Mexico’s real GDP is expected to contract by 10.5% in 2020,
lockdown, the severe impact caused by the worst decline in Latin America only second to Venezuela. A
this near-total activity freeze is evident— gradual recovery will follow with a projected growth of 3.1% in
in Mexico’s GDP for the second trimester 2021.3 According to the National Council for the Evaluation of
there was an 18.9% contraction compared Social Development Policy, by the hour, 13,700 Mexicans lose
to last year, the steepest decline on their jobs, seven companies shut down permanently, 1,366
record.2 And the contraction is particularly people enter poverty, 256 people get infected with COVID-19,
pronounced for secondary (-26%) and 25 Mexicans will die of it.4
and tertiary (-15.6%) activities such as
manufacturing, construction, and retail.
According to the projections by the IMF,
GDP Forecast in Millions of Pesos
18, 465, 007 18, 483, 472
17, 285, 979 GDP 2019
Outlook
Early 2020
Median
of contraction
Maximum
of contraction
16, 526, 181 Outlook 2021
2019 2020 2021
Source: Endeavor Intelligence, 2020.
*The information corresponds to data collected by IMF, Citibanamex and INEGI. Accessed: 18/06/2020.
**The forecast for 2021 is calculated based on the 9.6 % contraction projected for 2020.
3
“World Economic Outlook Update, June 2020”. International Monetary Fund. Accessed
July 9th, 2020.
2
“Estimación Oportuna del PIB trimestral”. National Ins-
titute of Statistics and Geography (INEGI). Accessed Au- 4
Joan Borbolla. “Cada hora en México se contagian 256 personas de COVID-19 y más de
gust 30, 2020. 13 mil pierden su empleo”. Vanguardia. July 31, 2020.
5The pandemic constitutes a perfect Looking at the Mexican labor market, 7,580 establishments
storm for Mexico as it takes specific aim were closed from March to May 2020 alone, resulting in
at its economic pillars: trade, remittance, around 1M jobs lost, according to the Mexican Social Security
tourism, and oil. In 2019, 80% of the Institute (IMSS). But signs of recovery are showing as 2,823
country’s $461 billion USD in exports establishments opened up again in June. By INEGI’s estimates,
went to the United States, mainly in the the economically active population was 45.5 million in May
form of automobiles, auto parts, and while the economically inactive population was 19.4 million, of
computers. Similarly, Mexico is the top which 9.5 million stopped working as a result of the temporary
recipient of U.S. remittances with $38.5 suspension of their employment without receiving salaries.8
billion USD processed in 2019.5 Mexico’s Keep in mind that these figures only account for the formal
heavy reliance on the U.S. is beginning employment sector, and over half of the labor force (51.8%, up
to have serious consequences as the 4.1% since April) pertains to the informal sector, whose data is
U.S. struggles to rein in the pandemic, not readily available. This demographic group is the most vul-
registering over 6 million cases so far nerable to the impacts of the crisis due to their lesser capacity
and forecasting a massive 8% decline to work from home and the lack of a safety net such as health
in 2020’s real GDP. Mexico has already insurance and social security.
seen a sharp YoY drop of 11% in exports
to the U.S. from January to April of 2020.
In addition, as one of the world’s most
visited countries, Mexico attributes
8.7% of its GDP to tourism, a sector
which is seeing significant losses due
to COVID-19. Mexico’s INEGI reports
78.5% fewer international tourists in
April 2020 than in the same month last
year, which translates to a 93.7% loss of
its foreign exchange earnings.6 Lastly,
with a third of its fiscal revenues coming
from petroleum-related taxes, Mexico
is susceptible to the weak demand for
fuel consumption globally. The state
oil company Pemex reported a $23.6
billion USD loss in the first quarter, one
of the worst in history, although the loss
was narrowed to $1.9 billion USD in the
second quarter as oil prices recovered.7
5
Remittances. Migration Data Portal. June 10, 2020.
6
“International Tourism In Mexico Fell 78.5% In April;
Tourism Will Not Recover Until 2023” June 10, 2020.”
Puerto Vallarta Daily News.
7
Shannon K. O’Neil. Council on Foreign Relations. “Mexi-
co’s Oil and Taxes”. May 28, 2014. David Alire Garcia,
Adriana Barrera. Reuters. “Mexico’s Pemex narrows losses
in second quarter, but debt rises”. July 28, 2020. 8
“Encuesta Telefónica de Ocupación y Empleo” INEGI. June 2020.
6Formal Employment Monthly Growth
200, 000 5, 000
4, 452
2, 823
2, 404
123, 139
68, 955
0 0
-83, 311
-130, 593
-200, 000 -3, 295 -5, 000
-6, 689 -344, 526
-400, 000 -10, 000
-555, 247
-600, 000
January February March April May June
2020
Formal Employment Employer Registration Monthly Growth
Source: Endeavor Intelligence, 2020.
*The information corresponds to data collected by the IMSS. Accessed: July 2020.
In response to the unparalleled challenges (13%), Professional, Scientific, and Technical Services (13%),
presented by the pandemic, countries Construction (12%), and Manufacturing (11%)9.
across the globe have witnessed
governments responding with various In contrast, the Mexican government so far has done little in
degrees of vigor to reactivate the terms of economic relief plans to offset the adverse impacts of
economy. Notably, the U.S. enacted the the pandemic. Primarily, assistance is provided in the form of
Coronavirus Aid, Relief, and Economic payroll subsidies, debt moratorium, and direct loan to micro,
Security Act (CARES) that authorized a small, and medium-sized enterprises—a rather limited tool
$2.3 trillion USD (around 11% of GDP) kit compared to the wide-ranging support packages available
economic stimulus package to provide in other major economies. The government assistance
direct economic assistance to American programs, representing only 1.41% of its GDP (around
workers, families, and small businesses. $14B USD), place Mexico as the second-lowest in terms of
Within the package, over $510 billion USD government spending on economic support among the G20
was allocated to the Paycheck Protection countries, whose average spending is 9.7% of their GDP.10
Program to provide forgivable loans to
small businesses affected by COVID-19, to
keep their employees on the payroll. The
9
“Paycheck Protection Program (PPP) Report” SBA. May 2020.
industries that received the most loans
were Health Care and Social Assistance 10
“Policy responses to COVID-19” International Monetary Fund. July 2020.
7CONSUMER BEHAVIORAL CHANGE ventures. On the savings side, despite minimum investment
in marketing, there is an exponential growth in new savings
& INDUSTRY TRENDS accounts as consumers now seek a safe place to keep their
money amidst economic uncertainty.
In addition to financial impacts, consumer preferences are
On a personal level, the far-reaching also heavily influenced by other elements such as social
economic shockwaves are certainly felt distancing measures and sanitary considerations. Some of the
in the pockets of Mexican households. shifts in consumer behavior may even be permanent given the
According to McKinsey’s survey on widespread, prolonged nature of COVID-19. According to the
Mexican consumer sentiment, 70% Imperial College COVID-19 Response Team, in the absence of
reported having felt the impact of interventions, this pandemic would have claimed 40 million
COVID-19 on their job or income, which lives globally. As such, mitigation strategies will need to be
has caused many to delay purchases. The maintained in some manner until vaccines become available,
reduction in income, spending, and savings which could be well into mid-2021 by most experts’ estimates.12
is coupled with the overall pessimism that And even beyond COVID-19, the aforementioned survey by
the impact on their routine finances will McKinsey indicates that consumers expect to reduce in-person
last well beyond two months, as reflected activities such as traveling (-37% and -25% respectively for
by more than 90% of the respondents. international and domestic travel, in net intent), attending
Not surprisingly, consumers reported a events (-29%), and going to the mall (-23%).
decrease in expected spending across all
categories, particularly the discretionary Dubbed by many as “the worst crisis in a century”, the
ones such as accessories, travel, pandemic has touched a nerve across industries, provoking ups
and entertainment.11 and downs that closely mirror the shift in customer behavior.
Analyzing the net utility of publicly traded companies in Mexico
Kubo Financiero, a digital financing plat- in the first half of 2020 and their changes relative to 2019, we
form that specializes in savings, personal found that the sectors most negatively affected are: Airlines
loans and term deposits, and is launching (-2845%), Department Stores (-178%), Logistics (-137%)
a wallet app and debit card, however, has and Industrial (-114%); whereas two sectors have come out
seen two interesting trends according to stronger: Pharmaceutical and hygiene products (+20%)
its Chief Savings and Deposits Officer and Energy (+13%).
Alicia Ortiz. On the credit side, there’s
an uptick in loan requests for home im-
provements as people spend more time
at home, as well as for businesses, as
people prepare themselves to launch new
11
“Survey: Mexican consumer sentiment during the coro-
navirus crisis”. Data collected from May 22-31, 2020. Mc- 12
“The Global Impact of COVID-19 and Strategies for Mitigation and Suppression”. Impe-
Kinsey & Company. June 25, 2020 rial College COVID-19 Response Team. March 26, 2020
8Net Income Growth of Mexico’s IPC Companies (Q1 & Q2, 2020 vs 2019)
Pharmaceutical/Hygiene 34 %
20 %
Food/Restaurant 53 %
-25 %
Financial Services 1%
-11 %
Energy -54 %
13 %
Sel-service stores 17 %
-71 %
Industrial 51 %
-114 %
Logistics 29 %
-137 %
Construction -169 %
-33 %
Department stores -83 %
-178 %
Telecommunication -287%
-13 %
Airlines -432 %
-2845 %
-3000% -2800% -2600% -2400% -2200% -2000% -1800% -1600% -1400% -1200% -1000% -800% -600% -400% -200% -0% -200%
Q1 2020 Q2 2020
N= 44 companies.
Source: Endeavor Intelligence, 2020.
*The information corresponds to the financial reports of companies quoted in the IPC. Accessed: July 2020.
The silver lining is that this extraordinary alternatives that avoid physical contact: tele-work, tele-health,
time has catalyzed a new wave of inno- tele-exercise, distance learning, online shopping, and other
vation among businesses and propelled activities free from distance concerns. The positive side-effects
greater adoption of digital solutions of this pandemic should not be overlooked. Hot Sale, an online
among consumers. Clip, for instance, is shopping holiday promoted by the Mexican Association of
a Mexican startup known for its porta- Online Sales (AMVO), managed to pull off the highest sales
ble POS terminals that help business- yet totaling $1.05 billion USD, which represents an 81.9%
es accept card payments. To help push growth compared to 2019. The 159 participating companies in
through COVID-19, the fintech company Hot Sale registered a total of 525.1 million visits in the span of a
launched a new feature “Pagos a Distan- week (May 22 to June 1), doubling the previous year’s amount,
cia Clip” to make remote, contactless with the most popular categories being Fashion, Electronics,
payments possible. Through the Clip’s Appliances, Beauty and Personal Care products.13
app, SMEs can simply send buyers a link
(via text, WhatsApp, email, etc.) that Conekta, a Mexican fintech that powers online payments
takes them to a secure portal, where for businesses, has noticed an uptick in the number of SMBs
they can complete the transaction with- adopting digital payments to adapt to the new reality. More
out having to download an app—a rather and more people are willing to give digital banking a chance,
user-friendly solution. and it is estimated that the adoption of digital financial services
Social distancing measures are forcing
and encouraging people to turn to 13
“Reporte de Resultados de Hot Sale 2020”. Mexican Association of Online Sales.
9in Mexico has gone up by 70% since the While the retail industry had been struggling to keep up with
pandemic started.14 This trend of digitali- the rise of e-commerce before the pandemic, this crisis has
zation can become a powerful engine for simply made things worse. Over 11,000 stores have closed in
Mexico’s long-term growth in both public 2020 so far, which is starkly higher than 9,879 and 5,700 stores
and private sectors. By McKinsey’s esti- in the U.S. that were closed in 2019 and 2018 respectively.16
mate, GDP can potentially be boosted by
up to 15%, thanks to greater productivity, Unsurprisingly, for retail businesses that rely on a brick-and-
the emergence of new businesses, and mortar model, the impact has been particularly severe. On April
the growth in the information and com- 1, Mexican authorities ordered a shutdown of non-essential
munication technology (ICT) sector.15 business activities, which affected most shops not related to
food or health. Consequently, shopping malls and other retailers
One thing is for sure, COVID-19 has had to close their physical locations. While most retail stores,
completely reshuffled and restructured especially for non-essential goods whose sale is facilitated by
the world economy and few companies in-store visits, such as apparel and jewelry, have suffered across
will come out unchanged, that’s if they the board, other interesting trends are also noted. Grocery
manage to remain afloat at all. Meanwhile, stores stand as major beneficiaries as people reduce dining-
companies that can adapt to the “New out expenses and turn to homemade meals. Furthermore,
Normal” have the potential to ride the uncertainty drove consumers to stock up on food and cleaning
winds of change and soar higher than ever. supplies, which registered an increase of 22.3% and 16%
Next up, this Review will examine some of respectively in Mexico in March. This panic-buying pattern
the most affected sectors to present the has gradually subsided, as supply chains remain robust so far.17
challenges and opportunities ahead.
Chilim Balam, a popular Mexican candy store chain (and
franchise), is one example of a retail business that has felt the
Retail shock of COVID-19. Its founder and director Enrique Osoviecki
shared with us that due to the pandemic, the company had
The COVID-19 pandemic has deeply to close down 85% of its stores, and sales had a 95% drop in
roiled the retail sector, affecting big April, right after the lockdown took effect. Osoviecki expects
and small companies alike. No one a long and gradual recovery, which can take more than 18
is immune from this earthshaker, not months to return to the 2019 level. In the meantime, the
even the seemingly untouchable giants. company has made detailed contingency plans anticipating
JCPenney, Neiman Marcus, J. Crew, and different recovery scenarios and is re-strategizing to account
GNC are a few of many who have filed for the reduced size. Through the buildup of omnichannel
for bankruptcy. Other household names sales—especially its strengthened delivery services, both
such as Chanel, Hermes, and Rolex have in-house and in collaboration with other platforms such as
discontinued production. Rappi, Uber Eats, and Amazon—and intensified digitization
efforts, Chilim Balam is redefining its image as a traditional
retailer to come back as a “modern, tasteful, and tasty brand”.
14
Alejandro Chavez. Banca digital: Tres tendencias que van
a cambiar para siempre el futuro de esta industria. Mer-
ca2.0. July 1st, 2020. Walter Loeb. “More Than 11,000 Stores Are Closing In 2020 So Far—A Number That
16
Will Surely Rise”. Forbes. Updated July 23, 2020.
15
Mauricio Hernández Armenta. “Digitalizar a México
empujaría al PIB hasta en 15%: McKinsey”. Forbes. Jan 23, Ana M. López. “Mexico: wholesale grocery sales growth due to COVID-19 by product
17
2020. 2020”. Statista. May 12, 2020.
10Notwithstanding the grave challenge Association of Online Sales (AMVO) estimates that 6 out of 10
ahead, the fast-changing retail landscape SMEs sell their products via the internet, representing a 94.6%
is also presenting an opportunity for the growth compared to 2019. In fact, 2 out of 10 SMEs joined online
industry to reimagine and reinvent itself. sales as a result of this pandemic20.
Among the many adaptation strategies,
stores are compelled to digitize their Prior to COVID-19, Luuna, a Mexico City-based company
sales and marketing channels, pay specializing in bedding products, had centered its growth in the
extra attention to craft a personalized opening of physical stores—closing 2019 with 10 stores, and 9
experience, cultivate customer loyalty new ones in Q1 of 2020 alone. When the pandemic hit, Luuna
beyond a transactional relationship, pivoted promptly to strengthen its online presence, working
and rethink the role of their physical with Amazon and Mercado Libre in addition to its own B2C
stores. For instance, brands may start channel to have mattresses and pillows delivered to customers’
considering the idea of developing AR/ doorsteps. The quarantine has also driven up the sale of home
VR technology to deliver the full shopping products as people are confined to their residence, which
experience to customers’ homes. As further boosted Luuna’s growth.
Daniel Espinosa, the founder of the
eponymous jewelry store, commented, Looking at the mid and long term, COVID-19 may also leave a
“In the current climate, companies’ positive legacy for certain business categories as consumers
efforts should be directed at improving contemplate different factors in their purchase. SoftBank-
the process of brand building, which backed Kavak, an online marketplace for second-hand vehicles,
comes from the product, the design, and had to initially slow down its operations when the emergency
customer experience.”18 first hit. The company was able to regain sales, however, as
consumers are now prioritizing social distancing and choosing
private vehicles over public transportation. The preference for
E-commerce used vehicles is also more pronounced under harsh economic
conditions.21 In short, while Kavak’s sales fell 28% in April from
Notably, the retail sector has turned into the prior year, they recovered to pre-pandemic levels in June
a two-tiered economy where businesses and began to pull even higher in August. The company is even
with robust online channels are holding up preparing its expansion into Argentina in a recent merger with
much better or even reaching a new height, another second-hand auto firm called Checkars.22 Offering a
riding the strong winds of digitization. contactless experience backed by superb customer service,
Understandably, with physical stores off- Kavak is positioned to capture the growth from a narrowing
limits, online shopping is having its golden digital gap.
era. In Mexico, retail e-commerce sales
are expected to grow 20.9% by year- Even some more traditional sectors such as groceries have
end, up from the previous estimate of seen an impressive transformation. Although supermarkets
18.0%.19 Companies, big and small alike, remain open, consumers are opting to shop online as a safer
are accelerating their digitization efforts
to adapt to the new reality. The Mexican 20
“Estudio sobre Venta Online en PyMEs 2020”. Mexican Association of Online Sales.
July, 2020.
18
“Casa de plata: entre moda, lujo y resiliencia.” Endeavor 21
Alejandro Enríquez. “KAVAK, Transforming the Used-Vehicle Market for Good”. Mexico
Media Lab. Business. June 17, 2020.
Matteeo Ceurvels. “Hot Sale 2020 Helps Revitalize
19 22
Daina Beth Solomon. “Mexican Used Car Startup Kavak Announces Argentina Expan-
Mexico’s Battered Economy”. eMarketer. Jun 22, 2020. sion.” The New York Times. August 26, 2020.
11and more convenient option. In the span Mobility & Logistics
of just two weeks—comparing the week
of March 9-15 to the week of 16-22— Simply put, the tremendous outbreak of COVID-19 has
the average number of unique visitors paralyzed the world, freezing nearly all movement in just a few
to online grocery stores in Mexico rose weeks’ time. In Mexico, according to the Community Mobility
by approximately 15%, to 1.5 million.23 Report made available by Google, there was a nosedive in
This habitual shift is likely to stay. A traffic to just about every destination after the lockdown order
recent Nielsen study found that 11% of took place: retail & recreation (-56%), grocery & pharmacy
respondents had purchased fresh food (-22%), parks (-50%), transit stations (-62%), and workplaces
online for the first time in 2020, with (-50%). The only exception was residential areas that saw a
70% of those surveyed saying they 23% increase as people became homebound.25
would do it again within the year.24
Companies that provide mobility as a service (MaaS) are
Jüsto, Mexico’s first online supermarket, now facing a drastically different reality, one where people
has seized the opportunity and recently are reducing their commute and rethinking their options, with
raised a $12 million USD bridge round, sanitary considerations being a top priority. Uber has cut 6,700
hitting over $20 million USD in funding employees—roughly 25% of its staff—since the pandemic
in less than a year. Ricardo Weder, Jüsto’s started. The multinational ride-hailing company reported an
founder and CEO, noted in an interview 80% drop in ride requests worldwide in April and may close
that the competitive intensity is stronger up to 45 offices should the lockdown persist.26 Conversely,
than ever as everyone tries to capitalize home delivery apps such as Uber Eats, Rappi, and Didi Food
on the new digitization trend. Based in have grown significantly in Mexico, each seeing their orders
Mexico City, Jüsto has a collaborative increase by 24.06%, 44.34%, and 15.12% respectively in
vision and is working with Uber Eats, Didi April.27 In fact, according to Uber’s second-quarter report, its
Food, and Rappi to accelerate its growth. delivery business is now larger than its original ride-hailing
It is poised to expand into other Mexican division, based on adjusted net revenue.28
cities and eventually other parts of Latin
America. “As entrepreneurs, we have the As a key player, Uber has adopted several important changes
opportunity to transform our companies to stay resilient and support the ecosystem. For instance, the
with new added value and look for new tips option is now made more prominent to support delivery
forms of collaboration, while maintaining personnel, and an option to donate directly to restaurants
the status quo can be fatal,” Weder was added, which generated more than $500,000 USD in
shared his thoughts in regards to the donations in Mexico by July.29 Uber Eats is also seeing a
pandemic’s impact, “Every crisis carries
an opportunity, and now is the best time COVID-19 Community Mobility Report - Mexico. Google. Data from March 26 to May
25
7, 2020.
for entrepreneurs to activate ourselves.”
26
“Uber despedirá a 3,000 trabajadores, su segundo recorte laboral del mes”. Forbes Mé-
xico. May 18, 2020.
Andrea Villar. “Mexicans Increase Spending on Rappi and Uber Eats By 40 Percent”.
27
23
José Gabriel Navarro. “Average number of unique vi- Mexico Business. June 03, 2020.
sitors of online grocery stores during the COVID-19 out-
break in Mexico in March 2020” Statista. May 26, 2020. 28
Kirsten Korosec, Alex Wilhelm. “Uber’s delivery business is now larger than ride-hai-
ling”. TechCrunch. August 6, 2020.
24
Jonathan Shieber. “Mexico City’s Jüsto raises a $12 mi-
llion bridge round for its delivery-only grocery stores”. Te- Sheila Sánchez. “25 apps mexicanas preparan su ‘debut’ para competir con Didi Food,
29
chcrunch. July 1, 2020. Uber Eats y Rappi”. Forbes. July 20, 2020.
12growing enrollment of new restaurants, highest sanitary standard: vehicle cleaning after every trip, zero
who in many cases have to adapt their contact between the driver and passengers, antibacterial gel,
operations and menus to be more temperature check before boarding, dividers between seats.
delivery-friendly. With the ride-hailing According to Matos Albino, implementing these measures
services, Uber Eats, and its recent deal and making them visible to passengers is the key to regain
with Cornershop to expand grocery consumer confidence in the MaaS sector. As a result of this
deliveries, Uber is now building a strategy, Urbvan started working with over 30 multinational
strategic narrative of becoming an companies and SMEs to ensure operational personnel can still
“Operating System for Everyday Life” for commute to and from work safely.
people who move around or want things
moved around for them. COVID-19 Lastly, Cabify, a Spanish ride-hailing company with operations
undoubtedly served as an accelerator for across Latin America, is supporting the entrepreneurship
Uber and other mobility companies to ecosystem in its own way. Agustín Jiménez, the Country
diversify their offerings. Manager of Mexico at Cabify, suggested that the company’s
operations in Europe, where the outbreak started several
In Mexico, we have witnessed a similar weeks earlier, had prepared Cabify Mexico for the contingency.
strategic resilience manifested by In addition to providing drivers a COVID-19 kit with sanitary
companies who continue to evolve and supplies to address safety concerns, joining other MaaS
stay innovative. In the words of Alejandro companies in launching a package delivery service Cabify
Morales, co-founder of Econduce, “We Envíos to diversify its revenue source, Cabify is working with
are in times of great uncertainty, but we fintech Lana to provide soft loans to its drivers facing financial
must prepare ourselves for the worst hardships. Jiménez noted an increasing preference for cash
while hoping for the best.” A startup instead of credit card payments when drivers charge their
of shared electric scooters, Econduce passengers, a reflection of people’s need for immediate
recently launched Econduce Go as a liquidity amidst all the uncertainty.
new business line focused on delivery
to adapt to the new consumption trend.
With Econduce Go, users can now rent Tourism & Hospitality
electric scooters weekly at an affordable
price to perform delivery services.30 Of all the sectors, the tourism and hospitality industry likely took
the worst hit from the sudden halt of movements domestically
Similarly, Urbvan, a Mexican daily and internationally. As a result of COVID-19, the World Travel
commute transportation system startup, and Tourism Council projects a global loss of 75 million jobs
faced adversity when ridership suddenly and $2.1 trillion USD in revenue.31 Brian Chesky, the CEO of
plummeted, especially given that many of Airbnb, summarized the wrecking ball effect of the pandemic:
its passengers were commuters traveling “It took us 12 years to build Airbnb, and we lost almost
to their workplace. The company’s co- everything in four to six weeks.”32 The company, the world’s
founder Joao Matos Albino shared with largest in community-driven hospitality, saw its bookings fall
us some important adjustments that by 90% and was on the verge to be wiped out by the pandemic.
help Urbvan continue adding value to its
customers. Urbvan is holding itself to the 31
Elizabeth Becker. National Geographic. “How hard will the coronavirus hit the travel in-
dustry?” April 2, 2020.
30
Endeavor Media Lab. “Emprendedores, las manos detrás 32
“Airbnb CEO: It Took Us 12 Years to Build, and We Lost Almost Everything in 6 Weeks”.
de la reinvención de la movilidad.” Entrepreneur. June 25.
13But signs of recovery are showing gave the grim estimate that it could be as late as 2023 before
starting from June, as Airbnb welcomed the sector fully recovers.37
an uptick in travelers, road-tripping, and
remote workers that seek getaways at Still, the rebound is happening as the country gradually reopens
mountain towns, beach houses, and following the COVID-19 Traffic Light Monitoring System.
lakeside camps. Despite a $400 million Key tourist spots such as Los Cabos and Cancun began their
USD adjusted loss in the second quarter, phased opening in June, although occupancy rate remains low
Airbnb is preparing to go public and for hotels and resorts compared to the pre-COVID-19 level.
make one of the largest market debuts According to the tourism minister of Quintana Roo, arrival
this year—a telling representation of the numbers have been increasing, and the numbers are expected
tourism industry’s roller coaster ride in to climb to around 60% capacity at hotels by December.38
the COVID-19 period. 33
According to a Consumer Sentiment Survey by BCG, consumers
As the most visited country in Latin consistently rank leisure travel as the activity they miss the
America and 7th in the world, Mexico most while waiting out the pandemic, with over 60% agreeing
has a vital tourism sector that brought that they “can’t wait to start traveling again.” In particular,
in 45.2 million foreign visitors and young people and frequent travelers are expected to hit the
generated $24.6 billion USD in revenue road again first, with a strong preference for domestic over
in 2019.34 Yet, the hard landing of international destinations. Price remains a key factor that
COVID-19 has been so destructive that favors budget travel, seeing that people’s pockets are badly
the sector is losing over $180 million hurt. Flexibility for cancelation or changes makes another huge
USD per day according to estimates by appeal to travelers amidst all the uncertainty surrounding
researchers at Anahuac University.35 the pandemic. 39
Tourists arriving by air decreased by
98.1% in April, dropping from over 1.6 In a webinar hosted by Endeavor, top executives from Grupo
million to fewer than 31,100 travelers.36 Presidente, Reservamos, and VivaAerobus shared their
Mexico’s largest airline Aeromexico insights on the industry’s outlook. The panelists highlighted the
has filed for Chapter 11 bankruptcy in importance of human resources, maintaining communication
the U.S., joining an increasingly larger and motivation among the team to foster unity especially in
club of airlines in restructuring amid times of adversity. Additionally, they called on the government
the unprecedented crisis for the global to step up to assist, including financial and regulatory support
aviation industry. Miguel Torruco, the such as a friendlier visa process for foreign visitors. Mexico’s
head of Mexico’s Ministry of Tourism, Ministry of Tourism recently announced a $500 million USD
loan program aimed at rescuing hotels, travel agencies, and
other tourist service providers during COVID-19 contingencies,
Olivia Carville. “Here’s Why Airbnb Is Going Public in the
33 but the extent to which the sector finds relief remains to be seen.
Middle of the Pandemic”. Bloomberg. August 26, 2020.
34
“International Tourism Highlights 2019 Edition”. World
Tourism Organization (UNWTO). 37
“Turismo se podría recuperar hasta 2023, estima Torruco”. Milenio. August 5, 2020.
35
Jonathan Kracer. “Refocused outlook for the Mexican
tourism industry”. Hotel News Now. July 14, 2020. 38
Donald Wood. “Mexican Tourism Hotspots Slowly Recovering From Coronavirus Im-
pact”. Travel Pulse. July 28, 2020.
36
“International Tourism In Mexico Fell 78.5% In April;
Tourism Will Not Recover Until 2023” June 10, 2020.” 39
Lara Koslow, Jean Lee, Jason Guggenheim, and Pranay Jhunjhunwala. “COVID-19 Con-
Puerto Vallarta Daily News. sumer Sentiment Snapshot #10: The Trip Back”. BCG. May 18, 2020.
14Just as people’s desires to explore new health resources, daring entrepreneurs have stepped up to do
places will never stop, we have witnessed their part in tackling the challenge.
the determination of entrepreneurs and
service providers to remain resilient and Just like other sectors, healthcare products and services are
rise from the ashes. To address the press- trending towards tech-driven solutions. For instance, Mexican
ing issue of liquidity, an initiative called healthtech Prescrypto is building a platform that offers an all-
CuandoVolvamos sprang up organically around approach for creating, storing, accessing, and managing
to allow SMEs to pre-sell their products medical prescriptions for the ease of doctors and patients—a
and services. A customer, for instance, helpful tool with enormous potential given that only 36% of
can support local restaurants by pre-pur- public hospitals in Mexico have an electronic health records
chasing meals at a discounted price to be system. Additionally, Prescrypto’s founder and CEO Everardo
used once the restaurant reopens. Busi- Barojas spoke to us about the need to build an interconnected
ness owners can then use this money to healthcare ecosystem with greater interoperability across
pay for expenses and avoid a permanent different platforms.
closure. Within the hospitality sector,
there are also talks of a potential “immu- Sofía Salud, a health and technology company aiming to
nity passport” that facilitates travel and become a health insurer, is optimizing the tech space much
investment in more automation technolo- like Prescrypto. They currently provide telehealth services to
gies—perhaps the age of Robot Hotels, as patients through virtual consultation and started providing
already seen in Japan and the U.S., is not services free of cost during the COVID-19 period. The
far for Mexico. company’s co-founder Manuel Andere noted a soaring interest
in video consultations since the pandemic started and believes
that this adoption trend is likely to stick around in the future. He
Healthcare acknowledged that telehealth has its limitations and is mainly
suited for simple consultations that do not require in-depth
As COVID-19 upended everyone’s physical inspection. Still, most patients are happy with the
everyday life, the sector of healthcare service for having saved time and minimized risks of infection.
now finds itself in the spotlight under Despite the benefits of a virtual world, Andere also commented
intense scrutiny. The current crisis on the regulatory obstacle when it comes to obtaining a license
has exposed the fragility of existing for the insurance business. The pandemic has slowed down
public health infrastructure in Mexico the paperwork processing speed of the Ministry of Health
and highlighted the urgent need for and health insurance companies, which could impede the
innovation. By and large, Mexico still development of telehealth services.
lags behind other developed countries
in terms of public health. Only 5.5% of
Mexico’s GDP is spent on health, and Entertainment
only 2.4 doctors are available per every
1,000 habitants, much lower than the Movie theatres, concerts, and sporting events businesses are
OECD averages of 8.8% and 3.4. The experiencing a freeze as most are not allowed to operate at all.
unparalleled challenge brought by And with social distancing measures in place, it’s expected that
COVID-19 requires concerted efforts by even when operations resume, the capacity limit will inevitably
both the public and private sectors. As prevent these physical-venue-based activities from maximizing
the pandemic severely strains public their profit. Event organizers will have to be creative to turn the
15tide around. For instance, the NBA is now director-general indicated that 95% of the moviegoers felt safe
hosting its games in Disney World in an about their experience. Miguel from Cinépolis concurs that risks
isolated environment, and numerous associated with cinemas can be mitigated by maintaining social
events have gone online, including the distancing, disinfecting the room after every show, and training
One World: Together At Home concert employees to practice strict hygiene protocols. The key lies in re-
that convened dozens of celebrities who storing consumer confidence and convincing both government
performed from home, and UK’s first authorities and the public through actions with high visibility.
socially distanced concert where groups
of up to five are placed at platformed On the digital side of the Entertainment industry, a very different
private viewing areas.40 story is unfolding. Since the pandemic took place, streaming
services have boomed as people stuck at home are consuming
“Imagine your company was having more media content. Netflix added 15.8 million new subscribers
around 30 million visitors, building 400 in the first trimester of 2020; Disney Plus’ users jumped from
screens a year, and all of a sudden your 23 million at the beginning of 2020 to over 50 million by the
income practically dropped to 0 as end of May; Apple and Amazon are also aggressively vying for
people stopped visiting movie theatres.” viewership, with the former gifting a free one-year Apple TV+
That’s the reality faced by the in-person subscription along with the purchase of its devices, and the
section of the Entertainment industry, latter making the rental of recently-screened movies available
as summarized by Miguel Mier, COO even to non-Amazon Prime members.41
of Cinépolis. Cinépolis is the largest
cinema chain in Latin America with over In the context of a growing demand for media consumption,
700 theatres and nearly 6,000 screens the popular saying “content is king” has even more relevance
in 17 countries. A whopping 98% of the during the pandemic when people have extra time at
chain’s operations paused due to the home to choose a streaming platform, TV series, or movie.
pandemic. The urgency to adapt and For Lemon Studios, a leading production company in the
transform is very present, as Miguel Spanish-speaking world, the only way forward is constant
commented, “This brutal hit is pushing and forward-thinking innovation. “As a content producer, we
us to innovate and generate projects are accustomed to improvising with creativity, especially now
that allow us to position ourselves in a in crisis mode, ” the company’s co-founders Billy Rovzar and
changed world”. Fernando Rovzar commented. Social distancing measures
have been an obstacle to the filming process that requires
According to the newly released statis- the participation of an entire crew. For example, for the final
tics by Mexico’s National Chamber of scene of Monarca season 2, the Rovzar brothers shared that
the Film Industry (CANACINE), 106,000 a wedding scene that originally involved three hundred
viewers showed up in the first five days people had to be rewritten to protect the crew’s safety.
of movie theatres’ reopening (August 12
to 16) in Mexico City, which represents a To mitigate risks while ensuring the continuity of filming
97.5% drop compared to the 3.7 million projects, the studio engaged in negotiations to acquire their
tickets sold during the same period last own production facilities with onsite living spaces, allowing for
year. On the bright side, CANACINE’s a safe and controlled setting for the team to carry on its work.
This is something that would have taken 6 years to complete,
40
Amy Woodyatt. “UK’s first socially distanced concert
shows what the future of live music might look like”. CNN. 41
Víctor Millán. “Las ‘Streaming Wars’ en tiempos de pandemia: qué plataforma está sa-
August 13, 2020. liendo más reforzada”. Hipertextual. May 10, 2020.
16but was achieved in just 6 months with
the COVID-19-induced acceleration,
according to Billy. While it was originally
named Lemon Films because of its
specific focus on films, Lemon Studios is
now working on its transition to becoming
a more versatile studio. It has taken
on a wide range of projects, including
animation and digital podcasts, whose
production is more easily accomplished
remotely. This diversification further
empowers the company to weather the
impact of COVID-19 and remain resilient.
Looking ahead, virtual 3D locations and
green screen technology are areas of
innovation that will help overcome the
limitations of physical barriers.
17IMPACTS ON ENTREPRENEURIAL The survey addressed various aspects of entrepreneurs’ busi-
nesses, including revenue, employment, access to finance,
ECOSYSTEM COVID-19-related obstacles and opportunities, and contingen-
cy responses. Specifically, the survey defines three important
periods: “During Lockdown,” the period of confinement; “After
Lockdown,” the transition period from the end of confinement
Endeavor conducted a comprehensive to December 2020; and “New Normal,” the period when the
survey to study the impact of COVID-19 market is expected to regain stability, from January 2021 on-
in Mexico’s entrepreneurship ecosystem. ward. An important caveat is that the exact duration of these
In total, 60 responses were collected periods could well vary depending on a host of factors, includ-
from entrepreneurs across different ing government responsiveness, the threat of a second or third
sectors.42 These startups reported a total wave, and the progress on vaccine creation. Of all the business
revenue of $400 million USD, employing aspects affected by COVID-19, respondents rated Product/
more than 11k people. Taking the median Service Demand as the major obstacle (level of disruption: 10),
values, a “typical” company in the sample followed by Funding (8) and Sales (7).
generated $4 million USD, employed 97
workers in 2019, and was founded in 2012.
COVID-19 Related Obstacles
Company Profile
Product/Service Demand 10
entrepreneurs 60
Funding 8
median of 97
employee number
Sales 7
median of revenue 4M
(usd) in 2019
Suppliers 5
median of 2012
foundation year
Salaries 3
Technological limitations 2
0 2 4 6 8 10
42
An interactive dashboard with the complete survey N= 60 companies
results can be found at https://bit.ly/DaaS_Economic_ Source: Endeavor Intelligence, 2020.
Impact
18Looking at the impact on revenue in
different time periods, while most sectors
reported a decline during lockdown,
Marketing, Media & Entertainment
(-60%), Commerce & Retail (-60%), and
Energy, Infrastructure & Utilities (-50%
appear to be the sectors most negatively
affected by COVID-19. All three reported
a greater than 50% decline as a result of
the lockdown and an expected negative
impact that lasted through the “After
Lockdown” period.
Impact on Revenue
Agriculture, Food & Beverage 10 20 20
Education 5 50 35
Financial Services 30 30
Enterprise, Software & Services -30 30
Health -40 5 35
Mobility & Supply Chain -15 -40 30
Energy, Infrastructure & utilities -30 -50
Commerce: Retail & Consumer Tech -15 -60
Marketing, Media & Entertainment -25 -25 -60
-150% -100 % -50 % 0% 50 % 100 %
During Lockdown After Lockdown New Normal
N= 60 companies
Source: Endeavor Intelligence, 2020.
19The survey results conform to the above- expected growth in the “New Normal” period, an indicator of
mentioned industry-specific analysis. businesses’ optimism in the transformative benefits brought
In particular, the Marketing, Media & by the accelerated wave of digitization.
Entertainment sector can suffer great-
ly as social distancing measures will In terms of employment, while some sectors such as Marketing,
limit venue capacity for all the physical Media & Entertainment (-25%), Energy, Infrastructure &
events, thereby reducing their efficiency Utilities (-25%), and Enterprise Software & Services (-15%)
and profitability. Similarly, traditional re- reported a reduction during lockdown, many respondents were
tail brands are facing an uphill battle as determined to keep their workforce. Several entrepreneurs
people frequent brick-and-mortar stores highlighted the human element in the interviews, that it’s
less and less, especially with the looming even more crucial to treat employees with kindness and
sanitary shadow cast by COVID-19. On understanding in such a high-stress environment due to
the bright side, most sectors reported an COVID-19.
Impact on Employment
Education 5 5
Mobility & Supply Chain 10
Commerce: Retail & Consumer Tech 10
Financial Services 10
Health 10
Enterprise, Software & Services -15 15 25
Marketing, Media & Entertainment -10 -10 -25
Energy, Infrastructure & utilities -25 20 30
-50 % -25 % 0% 25 % 50 %
During Lockdown After Lockdown New Normal
N= 60 companies
Source: Endeavor Intelligence, 2020.
20In the case of Luuna, for example, co- to ensure the safety of the personnel. When someone on the
founder and CMO Guillermo Villegas operational side falls under the at-risk population category or
commented that the company had displays symptoms, he or she must take a leave of 15 days,
decided to cut no personnel, even though which forces the company to look for costly substitutes.
the shutdown of stores would imply the
idle state of some workers. Instead, Luuna The lockdown has compelled companies to create new ways
decided to reduce costs by reevaluating of teamwork. In our survey, 52% of respondents said their
existing supplier contracts and to train company has shifted to 100% home office during lockdown,
the in-store workers for its fast-growing and another 30% reported “mostly home office, and some
digital channel. But this has not been a in-person”. This shift is especially prominent in Enterprise
seamless transition—Villegas suggested Software & Services, Education, and Financial Services, sectors
that one of the most expensive HR- that are less constrained by in-person activities.
related costs has been the adjustments
Home Office vs. In-Person Work
100 % home office 52 % 23 % 5%
Mainly home office, but some in person 30 % 40 % 23 %
Hybrid scheme:
50 % home office, 50 % in person 10 % 22 % 35 %
Mainly in person,
but some home office 8% 13 % 28 %
100 % in person 2% 8 %
0% 25 % 50 % 75 % 100 %
During Lockdown After Lockdown New Normal
N= 60 companies
Source: Endeavor Intelligence, 2020.
21And when asked about productivity in average of 66% extra travel time stuck in traffic any time of
the remote work setting, 41% said their the day, and up to 101% during peak hours.43 The outstanding
team was just equally productive, with performance and the time-saving flexibility can partly justify
another 37% believing they were more how this new work style could continue well beyond COVID-19.
or much more productive. In addition, Even for the “New Normal” period, 63% of respondents said
home office saves many workers the they would adopt a hybrid model with 50% or more of the
dreadful daily commute—Mexico City team doing home office. Several major tech companies, includ-
was ranked the most congested city in ing Facebook, Twitter, and Slack, have said they will allow em-
2017 according to TomTom Traffic Index, ployees to work from home indefinitely. The age of telework is
with a chilango expecting to spend an here to stay.
Remote Work Productivity
Percentage of respondents
50 %
40 %
30 %
20 % 41 %
10 % 22 % 20 %
15 %
2%
0%
Much more More productive Equally Less productive Much less
productive productive productive
N= 60 companies
Source: Endeavor Intelligence, 2020.
43
“TomTom Traffic Index 2017: Mexico City Retains Crown of ‘Most Traffic Congested
City’in World”. TomTom. February 21, 2017
22Still, remote work is not without its chal- Some entrepreneurs also believe in the importance of having
lenges as employees can struggle with physical contact and do not think office workspace will be
work-life balance (distraction from fami- obsolete anytime soon. Ricardo Weder, co-founder and CEO
ly members and housemates), hardware of Jüsto, said “100% Home Office doesn’t make sense to us.
and internet limitations, and mental While work should be flexible, at the end of the day people
health issues. To compensate for the lack need to be able to co-live and build rapport through face-to-
of personal contact and continue enrich- face interactions.”
ing company culture, entrepreneurs in our
survey and interviews have mentioned As enterprises prepare for their return to the office, they
various team-building initiatives, includ- are being abundantly cautious to ensure the safety of their
ing routine all-hands meetings, constant workforce. Among the preventative measures cited by our
monitoring of employees’ conditions respondents, “provide masks and antibacterial gel to staff”
through surveys and virtual sessions, (60%), “mix remote work and office hours” (57%), and “have
and other recreational activities such as controlled access with temperature check” (52%) are the
yoga and meditation. According to Lemon most popular options. For instance, the fintech Clip has made
Studios’ co-founders Billy and Fernando a detailed return plan outlining all the phases of reactivation
Rovzar, it is crucial to upkeep a sense of with corresponding safety measures. One such strategy is
belonging, camaraderie, and fighting spir- alternating workdays by groups of team members following
it among team members. “Job insecurity the 10-4 office plan (10 days quarantine + 4 days office work)
can provoke stress, which is a deadweight to minimize the risk of infection. Clip also plans to rearrange
for productivity and creativity,” they said, its workspace and modify lunch hours to allow extra distance
“In times of adversity like this, vision and between members, and Clippers will be given flexible working
leadership are even more vital for us not options should they choose to continue working from home
to lose sight of our work.” after the office reopens.
Back to the Office Safety Measures
Provide masks and antibacterial gel to staff 60 %
Mix home office and office hours 57 %
Have controlled access with a digital thermometer 52 %
Do recurring sanitizations 45 %
Reduce venue capacity 45 %
Testing employees for COVID-19 22 %
Make structural changes in workspace to reduce 20 %
high contact areas (door handles, coffee makers, etc)
Reduce office hours 20 %
0% 20 % 40 % 60 %
Percentage of respondents
N= 60 companies
Source: Endeavor Intelligence, 2020.
23When asked about the disruption of supply chain)—are seen more severely impacted than others.
operations caused by COVID-19, 42% Additional costs also arise as a result of social distancing,
answered “Disruptive”, and another increased sanitation, and personnel rotation, as previously
28% answered “Highly Disruptive” illustrated in Luuna’s case. Although only 15% of all survey
during lockdown. Companies whose respondents reported a “Positive” a “Very Positive” impact on
operations rely on physical space—retail their operations during lockdown, this percentage went up to
stores, storage, distribution centers (not 40% for the “New Normal” period. Some companies noted the
to mention the disruption in the global decision to go virtual has allowed them to see new possibilities.
Impact on Operations
Highly Disruptive 28 % 12 % 5%
Disruptive 42 % 30 % 25 %
Normal 15 % 30 % 30 %
Positive 10 % 23 % 27 %
Very Positive 5 % 5 % 13 %
0% 25 % 50 % 75 % 100 %
During Lockdown After Lockdown New Normal
N= 60 companies
Source: Endeavor Intelligence, 2020.
24In the case of Uber Eats, to simplify the that did not take the proactive steps to upgrade themselves
onboarding process and solve logistics are now taking a particularly heavy hit. “Go digital or die” is
issues, Uber has gotten rid of the tablet the cruel reality faced by many educators—Trainor shared that
requirement and now allows restaurant 20% of private schools had to close because of a lack of an
partners to simply download an app on online alternative. The impact was even greater among public
their devices (bring-your-own-device) to schools that lack the necessary infrastructure, not to mention
start accepting orders. underprivileged students who don’t have the means (devices
and/or internet connection) to go online. COVID-19 served
Similarly, for Knotion, a Mexican as an important wake-up call to the education sector, where
education enterprise that offers an the incorporation of technology is an unstoppable train and
interdisciplinary learning ecosystem for distance learning will continue gaining relevance.
K-9 students, COVID-19 has prevented
in-person visits previously required for The pandemic has been particularly tough on companies that
demos, installations, and follow-ups. have to suspend or significantly scale down their operations.
Instead, the company has taken its A study on Latin American startups by the Inter-American
operation fully online, which enabled Development Bank provided some bleak statistics: due to
it to scale more efficiently, especially COVID-19 half of the aspiring entrepreneurs on route to starting
in response to the growing demand for their business ceased the process, 53% of the operational ones
tele-education. According to Knotion’s stopped generating revenue, and only half of the startups could
CEO & Co-founder Noel Trainor, the last two months without closing down the company. 44 In our
pandemic has exposed the technology survey, we found slightly better financial health among the
gap in the education system, one of respondents, with 27% reporting a cash runway of fewer than
the few sectors that have significantly 3 months and another 30% between 4 and 6 months.
lagged in the digitization wave. Schools
Cash Runway
Less than 3 months 27 %
Between 4 and 6 months 30 %
Between 7 and 12 months 13 %
More than 1 year 30 %
0% 10 % 20 % 30 %
Percentage of respondents
N= 60 companies
Source: Endeavor Intelligence, 2020.
44
Hugo Kantis, Pablo Angelelli, Juan Federico, Cristina Fernández. “Startups y empresas
jóvenes ante el COVID-19: impactos y respuestas desde el ecosistema”. Inter-American
Development Bank. May 14, 2020.
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