How Guadalajara reinvented itself as a technological hub | Innovation

In 2009, as the Silicon Valley economy began to recover from the financial crisis, Bismarck Lepe, a tech entrepreneur with a Stanford pedigree and a few years of work at Google under his belt, began looking for cities. around the world to put his new business. , Ooyala, which provides online video solutions for businesses.

He knew venture capitalists would be ready to turn on the tap again after the economic downturn. He also believed that Ooyala was ripe for a great expansion. But Silicon Valley was just too expensive to try and hire a full staff there.

He was more than a little surprised when the colleague he had asked to assess options in the world returned with the suggestion of Mexico’s second largest city, Guadalajara. “At first I was a little hesitant,” admits Lepe, “since my parents had left Mexico.

In fact, Lepe’s parents had grown up in a small town not far from Guadalajara and had left the country before he was born to try their luck as farm laborers in the United States. Lepe remembered making the round trip to Mexico when he was young, before his parents moved to California permanently, but he had never seen Mexico as a land of opportunity, let alone a place to invest.

Even to most Mexicans, Guadalajara was known as the source of tequila and mariachi groups, not the technology. His image was heavy and traditional, not avant-garde.

His colleague insisted, however, telling him that Guadalajara had a pool of talented young programmers and engineers. Its tech ecosystem was not as mature as those in other cities around the world, including some in India and Vietnam, but it was growing rapidly.

Guadalajara’s technological boom had taken decades to incubate. From the 1960s through the 1980s, a number of foreign companies, including Kodak, Motorola, IBM, Hewlett-Packard and Siemens, located some of their manufacturing operations in Guadalajara. It was about finding cheap labor for manufacturing, and Guadalajara developed a group of tech companies that made semiconductors, printers, and photo equipment, among other basic components of the technology industry. “All the directors of the factories were American,” recalls Jaime Reyes, who joined HP’s operations in Guadalajara in the 1980s.

In the 1990s, says Reyes, the leadership started to change and he himself became HP’s first Mexican manager in 1994. By the end of the decade, most of the managers were Mexican, and there were engineers. , Mexican programmers and designers working in factories, although they were still mainly specialized in the manufacture of basic technologies. During this period, the companies worked closely with local universities to expand their technology-related courses, and the collaboration paid off in generating local talent. It looked like a very successful model through which Guadalajara would eventually be able to move up the ranks of the value chain.

Then it all fell apart.

China’s entry into the World Trade Organization at the end of 2001 devastated Guadalajara’s tech industry. During the 2000s, many factory and engineering jobs shifted to Asia, which suddenly boasted of lower tariffs to go with even lower wages than those in Guadalajara. The tech industry could have disappeared.

But this is not the case. Instead of retreating, Guadalajara has reinvented itself as a major center for research and development, programming, design, and other highly skilled technological professions, building on the foundations laid years earlier. Reyes recalls the time in the 2000s when HP’s Guadalajara operation produced the first fully designed printer in the company’s Guadalajara offices. “We reversed the model to become the designers and Taiwan the manufacturer,” he recalls.

Today, Oracle, Intel, HP and IBM all have extensive R&D and programming facilities in Guadalajara. Amazon has also recently set up its own R&D center there and Continental Tires, a German company, produces around 20 patents per year from its local research center. There is still low-wage component manufacturing and assembly, but the city is now known primarily for its engineering talent and creativity.

Bismarck Lepe eventually came up with the idea that Guadalajara might be the right place to base most of Ooyala’s operations. While moving to Guadalajara, he met Adal Lopez, a young aspiring entrepreneur from the city, and he asked her to come and work for him for a few years to run Ooyala’s Mexican operations. Adal López really wanted to start his own business, but Lepe convinced him that it was worth learning the ropes at a more established startup.

Lepe’s bet on Guadalajara – and López’s direction – has paid off. The company was hugely successful and Lepe eventually sold it in 2014 to Australian telecommunications giant Telstra for $ 410 million. The buyout took place largely due to the strength of Ooyala’s operations in Guadalajara.

At the time of the sale, Adal López had already started his own business with the backing of Lepe and other Silicon Valley investors.

In 2015, Bismarck Lepe was back in Guadalajara with his latest startup, Wizeline, a business solutions company specializing in database integration. Today, Wizeline has 300 employees in Guadalajara and plans to grow to 1,200 by the end of the year. Meanwhile, the San Francisco headquarters remain lean with 25 to 30 employees.

Lepe has become an evangelist of the benefits Guadalajara offers to the American tech industry. “You start to receive the second or third generation of technologists who have experience in construction[ing] scalable products, ”he says. “And it’s not just the talented people who are there, but the ones we can attract to live there.” Wizeline now has employees from Egypt, France, Ecuador, Colombia, China, New Zealand, and of course the United States working out of its Guadalajara offices. It is easy to get them work visas, which is becoming increasingly difficult north of the border. And they love the quality of life in a city that’s a lot cheaper than Silicon Valley, but still has great cultural and recreational options.

Lepe is so convinced by Guadalajara that he launched a non-profit organization, Startup GDL, to promote the city as a technology hub to other startups in Silicon Valley. The GDL startup currently has a long pipeline of US-based small and medium-sized tech companies looking to locate some or all of their operations in Guadalajara.

But Guadalajara’s future may not lie only in attracting Silicon Valley companies, but also in building its own. Adal López, who ran Ooyala’s operations in Guadalajara, now runs Kueski, his own fintech startup that offers small loans online, an alternative to banks and loan sharks. In a country where banks cater primarily to the wealthy and larger corporations, Kueski fills a niche left unoccupied by banks by providing quick loans to small businesses and the growing middle class. He found a formula that could work well in many other emerging economies around the world that have similar financial penetration issues.

Guadalajara is now teeming with small and medium-sized startups trying to emulate what Silicon Valley innovators once did to build an ecosystem of successful businesses and venture capitalists. Among the most consolidated startups, in addition to Kueski de López, are Sunu, which makes bracelets for the visually impaired, allowing them to gauge the distance to nearby objects, and Unima. Funded by both private investment and the Gates Foundation, Unima’s technology, designed to perform medical tests in remote areas lacking doctors, could one day be found not only in parts of Mexico, but also in many parts of Mexico. Central America, Africa and Southeast Asia.

When you visit, Guadalajara always feels like an overgrown provincial town, where you can stroll the cobbled streets past colonial churches on a quiet weekend afternoon. The city, like all of Mexico, remains firmly anchored in its past, at the same time as it begins to build a new vision of its future. At times it seems conservative and traditional, and at other times innovative and entrepreneurial, a quirky combination that highlights the underlying tensions as Mexico moves from an inward-looking country to a global one and turned outwards. And the modern and dynamic economy based on technological innovation still coexists with massive inequalities, widespread corruption and persistent poverty in many parts of the country, as well as in Guadalajara.

But things are changing. Perhaps one of the signs of the times, Guadalajara three years ago elected a former journalist as the city’s first independent mayor, defeating traditional political parties along the way, as well as a 26-year-old independent MP, who mounted his campaign largely via social networks. On July 1 of this year, if the polls are right, the mayor will likely be elected governor of the state and the congressman will become one of its senators, both signs of a willingness to try new paths in Guadalajara and surroundings.

Bismarck Lepe has no illusions that everything is perfect in Guadalajara. He knows that corruption and the lack of upward mobility, some of the issues that caused his family to leave, are still a major problem there and throughout Mexico. But Mexico offers more spaces where creativity and innovation can flourish, and it is willing to bet on those, especially in Guadalajara. “It’s definitely not my parents’ Mexico,” he says.

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