Mexico City-based Jüsto, a 100% digital supermarket, raised US$10 million, in a round led by Mountain Nazca.

On October 22, 2019, Justo, Inc. (“Jüsto”), a 100% digital supermarket based in Mexico City, raised US$10 million in funding from various investors in a round led by Mountain Nazca, a Venture Capital firm that backs bold entrepreneurs who seek to build tomorrow's breakout and transforming technology-enabled businesses.

Additional investments from FEMSA Ventures, Foundation Capital, Quiet Capital, among others, were received and will be used to support the company’s continued growth.

The BlackBox team acted as legal advisor to Jüsto in the transaction.

How to incorporate in Mexico?

We usually are asked this question, so we have tried to explain it as simply as possible by preparing a set of two infographics. 

What is Bitcoin according to Mexico’s legal system? Here is the anwer.

In a former post I gave a slight characterization of Mexico’s commercial laws, as old-world laws; however, it would be important for you to know a couple of additional things about Mexico’s legal system. 

We are not a common law system, like the US or UK (and commonwealth countries), so our law is not made by judicial decisions (although we care about Mexico’s Supreme Court’s interpretation of our statutes and rules); instead, we are a civil law system (like France, J'aime la vie!), so we submit to the rule of statutes enacted by Mexico’s House of Representatives (or state legislatures) and to the regulations issued by the executive branch, always that such regulations are in accordance with the statutes (yeah man, when such regulations are against or not foreseen by statutes we do not need to comply with them!  And our courts will acknowledge that).

Notwithstanding we live under a civil law system, we have freedom of contract in its purest form that enables us (and foreigners in Mexico) to do whatever we want, unless a statute enacted by Mexico’s House of Representatives “expressly” prohibits such activity or transaction.  So if it is not expressly prohibited we can do it, and if it is prohibited no matter if such prohibition is against common sense, free-market or the benefit of the parties, any agreement to the contrary will be considered null and void by a Mexican court.

The actual practice of our Mexican civil law legal system, gives a great value to legal-formalism or formality in transactions and civil-procedures; so if the legal requirements are not met, the transaction is invalid and the civil-procedure is lost even if there is a honest underlying will or intention.  A very powerful Mexican (which was CEO of Pemex, our state owned petroleum company) used to say that “formalism is substance”; for example if you lend me money and ask me to write you a promissory-note, and I issue the promissory-note in your favor, but I fail to write the word “promissory-note” in it, then the document is worthless and is not legally considered a negotiable instrument or even a proof of debt.

Bro thanks for the information, how kind, but I started reading because you were going to tell me what is Bitcoin according to Mexico’s legal system!

I used to go on Mondays to the Bitcoin Center NYC and afterwards to the Belfry to have some drinks (and afterwards to the Beauty Bar, and then to Artichoke Pizza, but you do not need to care about this) with the Discuss bitcoin over drinks' guys to talk about rising criptocurrencies and Bitcoin, and at that moment I did not even started to understand what Bitcoins are, and sometimes they asked me about how are they considered in Mexico; months of close study to Bitcoins and Mexican laws, have given me the opportunity to come with this straight single answer, Bitcoins are this:

Oops! I got lost, I think you lost your train of thought!  For your information I didn’t, because Bitcoins are “nothing” in Mexico’s legal system, the actually do not exist.

And are you saying this on your own, or is there any one to support you?  Yes, precisely  Mexico’s Central Bank feels pretty up the same about this, such authority released a press communication on March 10, 2014, saying that Bitcoin or any cryptocurrency:

- Is not legal tender in Mexico.

- Is not issued or backed by Mexico’s Central Bank (hey thanks for telling us!).

- Does not have any capacity to cancel payment obligations (as money does, in accordance with Mexican laws).

- Is not regulated nor supervised by Mexico’s Central Bank (as securities and derivatives are, take note of this for blockchain based autonomous "contracts").

- May not be used by Mexican banks, nor they are authorized to engage in transactions with them.

Bitcoins are not recognized or acknowledge by any statute, they do not have any similarity to anything else, nor they represent any kind of juridical-right; so I was telling you before about the importance of legal-formalism and being “expressly” mentioned in a statute, so if this does not happens, then to the eyes of Mexico’s legal system you do not exist.  Maybe that is the reason why Mexico’s Central Bank issued a press release and not some rules, regulations or binding recommendations (as it is constitutionally entitled to do, in order to regulate currency-exchanges, brokerage and financial services)?

At Bolido App (the company I mentioned you in another post, which I’ve cofounded) we have been working with Mexico’s House of Representatives for the last 2+ years, doing the digital communication to all the new acts and bills that are passed, and I can tell you (this is no private information either) that there is no reform in the loop to start acknowledging Bitcoin.  I personally don’t think there would be one for the next 2-3 years, since they are more preoccupied by economic-energy reforms, like breaking a 75-year state monopoly on oil drilling in order to attract companies such as Exxon Mobile Corp. to invest in Mexico.

So where does this leaves us?  It leaves us with a blank paper in front of us in which we can write whatever we want; the only limit is our vision.  You could open in Mexico an online Bitcoin casino, that would only take Bitcoins (yeah, no money) and you would have no problems from a legal perspective; also, you could do any Bitcoin-regulated activity in any other part of the world, and in Mexico you wouldn’t have any problem (hey, this is no Lettre de Marque! So surely the other country would try to prosecute you or your company). 

As finale, I think that Mexico might become a type of Bahamas, an offshore financial centre, for Bitcoin.  

Author: Victor Aguirre

When did I find out about the 500+% gap of the average salaries of software engineers in US versus Mexico?

At that moment I was living a “comfort life”, working as a senior associate at a Mexican boutique firm (Bufete Carillo Gamboa, S.C.), we were helping Kirkland & Ellis LLP get their clients close some M&A deals in Mexico, I was having the opportunity to once again work with one of the best lawyers and human beings I have ever met, Sergio A. Urias (partner at K&E).

When working with Sergio at Creel, García-Cuéllar, Aiza y Enríquez, S.C. and living in a IPO, structured finance, M&A deals-world, he mentioned to me about Venture Capital and gave me a paper about Silicon Valley (this is back in 2005) which would be the spark for my entrepreneurial flame, and shed me some light about how much money was needed to be raised when launching a startup and how much was usually allocated to employees’ salaries.

I got out of this “safe” environment and cofounded Bolido App, an innovation-digital agency focused in building smartphone apps; at the beginning we had only one employee and I was worried of money for salaries, nevertheless we started growing our team every time we closed a deal and, hence, got hired for more work (the company currently has 25+ employees).

Thanks for the background information, but what does this relates to the 500+% gap!

For our type of business at Bolido App, where we weren’t developing a product for its future sale (rather developing for already closed sales), we didn’t had to get investors of any kind we just grew organically; because, in Mexico the labor is cheap and people are usually hired on a month-to-month basis (as Mexican founders, you usually do not need to give stock to employees or even get many cofounders that will work for free).

An average salary of a software engineer in Silicon Valley is of $90,000 versus a $72,000 average salary in any other place of the US (according to Business Insider); the foregoing, versus a $17,500 average salary of a software engineer in Mexico City and a $13,000 salary in Guadalajara.  The salary gap of a Silicon Valley person versus a Mexico City one is of 500%, and against a person of Guadalajara 675%; obviously, this gap becomes bigger when you consider there is an upper crust in Silicon Valley where software engineers go from $125,000 (Twitter) up to $180,000 (Google).

When going to unqualified labor, the gap broadens much more; the minimum wage of San Francisco is of $10.74/hour versus an $8.00/hour of New York, both versus a minimum wage of $0.93/hour of Mexico City and Guadalajara (both cities share the same minimum wage).  This means that a minimum wage San Francisco employee is 1,150% above a guy in Mexico City or Guadalajara, and a New York one 860% above.

There is a great opportunity for new startups in Mexico to prosper and with smaller amounts of investment (even more when aiming the international market, since selling prices are standard), considering there is a fair size of qualified labor graduating each year as Nathaniel Parish of Forbes mentions “With more than 600,000 people already working in IT and another 65,000 new professionals graduating each year from the country’s technical and engineering schools the U.S.’s southern neighbor is already home to more than 2,000 IT companies.” 

Author: Victor Aguirre

Carlos Slim is richer than Bill Gates, why should a VC care about this when investing in a Mexican startup?

Mexican law is essentially different from US law, nevertheless at some points very similar and at others almost totally incompatible.  In Mexico our commercial laws have roots in European monarchic/aristocratic values, which do not care about startups or innovation, but that love big old-fashioned businesses, like mining, real estate development, public works, factories, banks, and container shipping.

Our current commercial laws were made (in 1889 AD) favoring businesses that require enormous amounts of investment; which, at such moment were sourcing from monarchical endowments or antique warfare spoils.  Such age-old laws were made not considering people that could bring innovative ideas to the world, and disrupt existing markets; otherwise, they were made to protect the status quo, where few people had access to money and glory (whether earned or inherited). 

You might laugh at this but if a Mexican corporate lawyer slept in 1889 for 125 years and woke up today, a lot of the provisions he studied would be exactly the same and others would have minor changes; so she would be able to start advising again almost immediately (actually, things that were nationalized in the 20th century, are now on this 21st century privatized and open to international investment as they once were, so this person would see no change from that part).  (I would love to think that a physician or a physicist could do the same, could live in the same world as they once lived so many years ago.)

As mentioned, these commercial laws are somewhat favorable to good old-fashion investments and businesses in Mexico, so many alike investments American corporations do, tend to flourish and generate great revenue; and you can see these type of investments since the late 19th century.

When you look at Forbes World’s Billionaires list and find out that a Mexican is number one, it makes you think, that its like having two neighbor households, one is a MTV-crib where things are totally cool, flowing with technology and luxury, and the other one is a trailer home, aged and stingy, nevertheless a member of the family of the trailer ends up summing more money than the richest family members of the crib. 

Today new technologies are bringing light to unknown horizons and nontraditional markets, to which Mexican laws will need to take a big jump in order to catch up.  One big benefit is that we have a Mexican principle of law that states that “whichever activity is not regulated, it may be freely engaged by particulars” (no matter if it goes against common sense).

Ok, so get to the point, why when a Venture Capital firm (VC) invests in a Mexican startup, it should care that Carlos Slim is richer than Bill Gates?

Because we gather two things in one same place, old-world laws and large spaces of no-regulation, that allow a VC to have the protections of a 19th century investor in a new-world market where startups can grow fast (Mexico is number 14 in the GDP rank and 11 in the world's population list).  When a VC invests in a Mexican startup, it can be sure that Mexican commercial laws (which by the way are all Federal, no such thing as state commercial laws) are favorable to investors, and that in most cases the high-tech or innovative service/product offered by the startup will not be regulated (so there would be a very low regulatory expense/risk), and therefore freely exploited. 

The VC should only be worried of not pushing so much the lawyer drafting the investment documents that they are done not in full accordance with the Mexican commercial laws (because such lawyer is trying to satisfy the VC's requests).  Nevertheless, there is a great margin to adapt Mexican deals to standard VC terms.

I am positive that Mexico is a great place to invest, to do business and to prosper startups, notwithstanding the laws are slightly old; just remember that investing in "traditional" businesses (that have a lower growth rate than startups) a man became the richest person in the world. 

I would like to finish by saying, that I really look forward for the investments that MITA, Alta Ventures, IGNIA, and others will start and continue to do in Mexico.

Author: Victor Aguirre