500 Startups doubles down on Mexico via local accelerator

Dave McClure’s accelerator 500 Startups plans to make a sizable bet on investing in startups in Mexico and has now swallowed a local startup accelerator called Mexican VC. 500 Startups has been working with Mexican VC for awhile — during the Geeks on a Plane trip to Latin America we all met the team — but now Mexican VC’s founding partners have become 500 Startups partners and they will help lead investments in Latin America.

Mexican VC co-founder César Salazar tells me in a phone interview that you can think of the deal like an acquisition of his firm, but he also didn’t disclose any financial details of the deal. The press release announcing the move jokingly calls it a “hostile takeover.” The partnership will be 500 Startup’s first international accelerator.

The model of partnering with a local team in a developing market makes sense for 500 Startups. The team — which is looking to invest small amounts into literally 500 startups all over the world — can’t fly everywhere all the time or know all the little details of every market.

Mexican VC is a small accelerator, which was founded last year, and Salazar had been working on raising a $5 million fund. The firm has invested in startups that 500 Startups has later worked with, like virtual phone system called Fontacto (like a Google Talk for Latin America), and educational game maker Yogome. Mexican VC has also backed NuFlick, a Netflix for Mexico, and Conekta, a Shopify for Mexico.

The two groups seem to share a similar culture: Entrepreneur-focused, a little counter culture, and an emphasis on enthusiasm. “We [both] believe in starting small, proving that your product doesn’t suck through quantitative data and making sure that you know that everyday you can fail but you can keep going and prove to the world that you’re solving a big problem,” says Salazar.

The investing model will continue in Mexico, too. McClure’s investment thesis is to do a Moneyball type of strategy, playing the odds, and backing a lot of companies in under served verticals, and by under represented entrepreneurs, like women.

McClure seemed particularly interested in the Mexico startup market during the Geeks on a Plane trip. The country has a lot of the Internet and mobile growth potentials as other hot markets in Latin America, but it doesn’t have the investing bubble of a country like Brazil.

At least that’s the pitch — it’s still very much a developing market. More than anyone, a Mexican venture firm called Alta Ventures, led by Paul Ahlstrom, has worked tirelessly to develop a venture community in the country.

Expect 500 Startups to back more startups outta Mexico, and greater Latin America. In the release on Tuesday, 500 Startups says it will announce another ten investments in Mexico next week.

Read my (longish) profile of Dave McClure and 500 Startups here.