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