“Inadem is the flagship of the ecosystem, but it’s everyone’s responsibility,” says Enrique Jacob
Enrique Jacob Rocha has worked in the public sector for more than 23 years. He’s served as a lawmaker, mayor of Mexico City suburb Naucalpan and vice-coordinator of entrepreneurial relations during the presidential campaign of Enrique Peña Nieto. Now, as president of the National Entrepreneur’s Institute (Inadem), he’s designing the future of Mexico’s entrepreneurial ecosystem.
Rocha says he’s satisfied by the results of Entrepreneur’s Week: About 1,300 entrepreneurs showed up with at least one business idea and many people tuned into the conferences streamed over the internet, which were three times greater than his expectations.
In an interview at his penthouse office in a 13-story building in southern Mexico City, Rocha gave an overview of the ecosystem, and said his main concern is that Mexico’s entrepreneurial environment matures and consolidates, so that at some point it can function without Inadem.
“Our main role is to ensure that the ecosystem works,” he said. That’s why he’s making changes to activities as essential as the way incubators obtain federal subsidies (before, they were distributed after the projects were registered with tax authorities and the number of jobs created were declared; soon, they will do so after demonstrating that the company has operated for several months).
More changes are yet to come. Inadem is in full negotiations with the National Banking and Securities Commission (CNBV) on new regulations for raising capital and financing entrepreneurial projects through crowdfunding. It’s also seeking legal reforms that make the bankruptcy process of entrepreneurs more efficient.
Jacob Rocha defines Inadem as the “flagship” of the fleet of the groups of entrepreneurs it aims to help. When asked about the influence it has on the government and functioning of the ecosystem, he said: “That also responds to questions of the circumstances (…). I know that we’re playing a role where we have to be very careful not to take on responsibilities that don’t correspond to us.”
He downplayed rumors that he’ll be replacing current economy minister Idelfonso Guajardo after the ruling PRI party names him candidate for governor of Nuevo León state. “I’m concentrated and I’m not going to get distracted,” he says.
This is part of the conversation we had with Jacob Rocha on August 21.
Considering that Mexico ranks No. 57 out of 120 entrepreneurial countries, according to the Global Entrepreneurship Development Index (GEDI)… Where do you want to take Mexico’s entrepreneurial ecosystem?
Our mission is to consolidate the ecosystem. We want all this support for entrepreneurs to work properly. If someone needs an incubation program or a high-impact incubation, those methods should be able to be transferred. If an entrepreneur needs acceleration or a space for networking, he or she should be able to move forward. Whoever needs financing or angel capital in very early stages — they should be able to find those resources to promote their entrepreneurship.
Our main role is to ensure that the ecosystem works. There’s always a risk when using fiscal resources. It would be bad on our part if we directed resources in the wrong way and at a given time we give that money to an entrepreneur to maintain himself or herself, but when you take away the oxygen it’s just a lost resource. We have to make sure allies of that ecosystem are able to give support to entrepreneurs.
And the risk is that bubbles are created or that the ecosystem depends on the oxygen that the government gives it…
Yes. Incubation is a very sought-after method that leads to highly professional entrepreneurship and an established method, trying to reduce the uncertainty that entrepreneurs experience in that stage.
With the existing incubator policies that were created some years ago and which helped create that offering, it worked in such a way that anyone could ask the Institute for resources. Basically, the deliverables were the tax registry number (RFC), proof that the company was operating and that it had hired at least four people. But during review processes by the Federal Auditing Authority, or other supervisory entities, they were full of RFCs and papers but nothing could tell you that there were active entrepreneurs behind all that.
We implemented verification processes to reduce the number of incubators that could work in partnership with the Institute. We use those methods to work with nearly 200 incubators. Now, entrepreneurs are the ones who receive the resources and decide with whom to work. Before, it was the contrary. Now an incubator accompanies entrepreneurs in their process, and that creates a success bonus which this year can be used six months afterwards, and beginning in 2015, one year later. The intention is that one year afterwards the Entrepreneurial Fund generates 25,000 pesos per active entrepreneur.
We’ve defined three dimensions of entrepreneurship, and with each one you have different tools: pyramid-based incubation, where we have this e-learning platform and which can be taken individually by the entrepreneur or they can choose one to receive support. The second is the traditional incubation process, where we support each other with the allies that assist entrepreneurs and which at the end award active entrepreneurs. The third segment is high-impact incubation which seeks scalable and innovative projects which improve the way products are offered.
With the latter, the level of uncertainty is very high. That’s why we offer incentives for creating capital funds in early stages, where we contribute with mechanisms of co-investments. We give them up to 49% of the fund or a maximum of 50mn pesos. We can offer our opinions but not vote on the decision of individuals. This type of funds uses the smart money concept. There is a high level of involvement in the fund.
What KPI do you use to know if you’re doing things well?
I’ve mapped my ecosystem: What interests me is that the essential components of the ecosystem have the right processes of consolidation or maturation. They exist and that’s what interest us, is that they are finally consolidated and work. There’s always a highly transparent mechanism for resource allocation because of the responsibility that one has in mistakenly channelizing fiscal resources to where they could work at the start and not afterwards. That’s my main concern, that the ecosystem matures and consolidates.
Finally, if an entrepreneur has an idea that could have a result, where the market is the one to decide if it is or isn’t a good business and isn’t going to get stuck because it doesn’t have a method that could help it or because it didn’t have access to some type of capital fund or financing that helped an interesting idea move forward.
What could serve as evidence that an ecosystem is maturing? What are the signals that will tell us that “we’re doing well?”
For example, the role that incubators play is very important. I was surprised by the interest that they were participating in this process of recognition, the information they were sharing.
We concluded our recognition processes a month ago. Now during Entrepreneur Week, with the presence of minister Guajardo, symbolic recognitions were given to 30 or 40 high-impact incubators, basic ones, etc. There are about 200 in our total universe.
On the contrary. Taking a look at the part we tried to fight, before there was a large amount of resources used for incubators, in what I’d say didn’t have very concrete results. This whole change of incentives, of modifying the point of contact with the incubators themselves, created resistance, but now I see there is a large degree of awareness among those who are an active and responsible part of being able to support entrepreneurs who are doing their jobs well.
The same is true with capital funds. When we launched the invitation, we were surprised by the number of projects that participated and that were seeking resources for these investment funds. During the first stage, last year, the Institute committed resources to the tune of 750mn pesos with the creation of 19 investment funds. These 750mn pesos of ours also include a private investment fund of about 850mn pesos, and that gives you a pool of resources of about 1.6bn, and with six more investment funds in invitations this year, the resources the Institute commits will approach 1bn pesos. The private counterpart totals 1.2bn or 1.3bn more. There is now a mass of resources that entrepreneurs can use during these stages, and which we expect will produce results.
Is there any agenda that’s structurally similar to the recent economic reforms — that’s great they happened — do they consider any good legal changes that could support the ecosystem and create a better environment, especially in the fiscal aspect?
We see three environments surrounding the entrepreneur and where it’s very important to act. The first involves the effects of the structural reforms, which are going to create competition among entrepreneurs in Mexico that’s similar to competition in other parts of the world. The fact that at some given moment they have access to competitive costs in terms of telecommunications, the internet, energy or financing costs is going to create a level playing field.
A second dimension involves all the administrative processes of opening a company and managing a series of licenses that normally play a factor in a company’s life. That’s where you’d see the federal government’s efforts for regulatory improvement, the National Commission for Regulatory Improvement. And we have the Entrepreneurship Fund, which has resources that are met by efforts in municipalities, in states or in courts, precisely to improve their management processes.
The third dimension refers to certain regulatory aspects which at a given time limit certain aspects that are relevant for small companies. For example, one of the goals the government has is to help the demand of the public sector also benefit SMEs. In other words, government purchases from SMEs.
This is what happened already, but is there any reform coming up?
Government procurement prompted a series of actions which we’re working on to open the market more to SMEs.
Secondly, e-commerce is an important platform for SMEs to be able to release their products, materialize procurement processes and to be able to distribute them using logistics. When one looks at data, the truth is that Mexico has a lot of work to do when compared to the rest of the Latin American market. So that’s where the institute also carried out a study. It identified a series of actions to undertake. We created a taskforce that that leads the Digital Strategy Coordinating Office, where Alejandra Lagunes is in charge, and we have regular meetings. In fact, we see that we have an upcoming meeting with the National Banking and Securities Commission, with González Aguadé, because there are a few actions that correspond to the Commission.
We’re working with the undersecretary of competition at the economy ministry on a process so that the entrepreneurship launch or bankruptcy procedures are much easier for entrepreneurs.
Our goal is to help understand the environment that entrepreneurs are in to facilitate processes in which ‑ through minor tweaking or which can reach topics of legislation ‑ you help or improve the environment where e-commerce, government procurement and bankruptcy procedures take place.
We are also very involved in the crowdfunding association that was created recently. That’s another one of the topics with the CNBV, because it’s a major platform for financing…
…but with a large amount of risks.
Yes. The CNBV recognizes that it can be a very solid mechanism of financing and also recognizes that it has to make some circulars and adjustments. We’re working on that.
What I’m getting at is that we’re conscious of what our responsibilities are, so that the Institute also helps the entrepreneur or small companies in those environments where they can take better advantage of them through regulatory improvements.
How do you think Inadem is conceived by the ecosystem?
I think the Entrepreneur’s Institute has gained traction within this ecosystem. It’s a little like the flagship. In other words, you form part of the fleet, you make progress trying to set your course, but at the end the responsibility is everyone’s and we play an important role in trying to encourage them with a vision. I think the Institute has earned recognition with the ecosystem.
Have you seen the diagram that Endeavor made of the Argentine ecosystem? It contrasts with the Mexican one, which shows that the government aspect is more centralized.
That’s due to the current circumstances. I’ve seen the study. It mentions that the role that some entrepreneurs play were determining factors for consolidation of the ecosystem. Some other authors also say that a successful ecosystem is one that is driven and moved by the entrepreneurs themselves, not by the government. That’s why I know we’re playing a role in which we have to be very careful not to assume responsibilities that aren’t ours.
And we assume working enough so that Inadem no longer has a reason to exist.
Of course. That would be ideal.
A column that was published said you would become the economy minister if the current minister runs as the PRI candidate for the Nuevo León governorship. Is this true?
They’re speculations. The truth is that I’ve got a responsibility at the Institute and I’m concentrated and I’m not going to get distracted.
You wouldn’t turn down the ministry position?
They’re part of the speculations. The first fact is that they’re mentioning minister Idelfonso Guajardo. He’s doing an excellent job here in the ministry, and he’s totally meant for this position.
From personal experience the best thing you can do is concentrate on your work, do things and move forward, because if you start getting distracted things don’t work out.
Estudió en la Escuela Carlos Septién García y se inició en el periodismo en 2011. Ha trabajado en medios como Emeequis, Aristegui Noticias, Milenio y Canal 22. Escribe en pixeles pero le gusta leer en papel.