July 2020 The Baja California and Nuevo León Industry, Innovation, and Talent Clusters

Growing the California-Mexico Binational Economy Acknowledgments The Bay Area Council Economic Institute wishes to thank Blas Rob Ryan, Co-Founder, GrowthHax L. Pérez Henríquez and the Stanford–USAID Mexico Clean Alana Sanchez, International Relations Adviser to California Economy 2050 Global Development Alliance for their support, Energy Commission Chairman David Hochschild which made this research possible. We also wish to thank the Susanne Stirling, Vice President, International, California Economic Institute’s partners in Mexico, Endeavor Insight and Chamber of Commerce Fundación IDEA, for their valuable introductions and analytical Gary Swedback, CEO, NAI Mexico support, El Florido for its broad support and insights provided Carlos Valderrama, California Trade & Investment into Tijuana’s industrial parks, the Consul General of Mexico Representative–Americas, Governor’s Office of Business and in San Francisco, Remedios Gómez Arnau, and the following Economic Development, State of California individuals who contributed their time and ideas through Ivan Villanueva, former Senior Business Development Officer, research and informational interviews. Ministry of Economic Development, State of Baja California Baja California Monterrey Laura E. Araujo, Director of Binational Affairs, Carolina Agurto, Partner, Fundación IDEA Tijuana Innovadora Tuto Assad, Co-Founder & CEO, Vitau Jose Arreguin, Nearshore Software Development Consultant, Nicholas Bambos, Chair, Department of Management Science ArkusNexus & Engineering, Stanford University Marco Barraza, VP Enterprise Operations, Arkus, Inc. Carlos Guillermo Elizondo, CEO & Founder, Territorium Life Mónica Lacavex Berumen, Vice Rector–Ensenada Campus, Martha Leal González, Director of Planning, Postgraduate, Autonomous University of Baja California Outreach and International Cooperation and Networks, Instituto de Innovación y Transferencia de Tecnología (I2T2) Bruce Cain, Director, Bill Lane Center for the American West, Stanford University David Güemes-Castorena, Professor of Technology and Innovation Management, Tecnológico de Monterrey Andres Campos, Executive Director, Ensenada Economic Development Corporation Luis Garza, Founder & CEO, Kinedu Blas L. Pérez Henríquez, Director, Mexico Clean Economy 2050, José López Castellanos, former Undersecretary for Investment Precourt Institute for Energy, Stanford University Promotion, Ministry of Economic Development, State of Baja California David Ortega, Director, CIDESI Nuevo León Nikia Clarke, Executive Director, World Trade Center San Diego Mark Rinder, Fulbright Grantee & Intelligence Analyst, Endeavor Mexico Melissa Floca, Chief Strategy Officer, Center for U.S.-Mexican Studies, University of California, San Diego Enrico Robles, CFO & Intelligence Director, Endeavor Mexico Bryan Early, Adviser to Commissioner Andrew McAllister, Raul Rodriguez, Vice President International Relations, California Energy Commission Tecnológico de Monterrey Jesse Gipe, Director, World Trade Center San Diego Iliana Ramirez, Director of Human Capital, Csoftmty Iván Rivas Rodríguez, Director General, Coparmex Nuevo León Blas Pérez Henríquez, Director, Mexico Clean Economy 2050, Precourt Institute for Energy, Stanford University Darío Treviño, Vice President International Relations, Coparmex Nuevo León Greg Horwitt, Director of Innovation Design, UC San Diego Daniel Undurraga, Co-Founder & CTO, Cornershop Cecilia Romero Larroque, Asset Manager, Grupo El Florido Sergio Ortiz Valdés, California Office Director, Tecnológico de Helen Lopez, Assistant Director, International Affairs Office, Monterrey California Governor’s Office of Emergency Services Cristina Villa Pulido, Energy Promotion Coordinator, Office of Hector Mayami-Sugranes, Director General, INCIDES the Secretary of Economy and Labor, State of Nuevo León Guillermo Mejía, VP Program Development, Framework Science Angeles Vela del Río, Director General, Csoftmty and Startup Advocate, Frontera Founders Jorge Gorozpe Velazquez, Director of Energy Development, Office Claudia B. Hernández Merlo, Director of Technology, Office of of the Secretary of Economy and Labor, State of Nuevo León Innovation and Development, CONACYT Nadia Nieblas, Research and Studies Coordinator, INCIDES Flavio Olivieri, Institutional Developer, Tijuana Innavadora This report is made possible by the support of the American Max Oltersdorf, Deputy Director for International Affairs People through the United States Agency for International and Trade, Governor’s Office of Business and Economic Development (USAID). The contents of this report are the sole Development, State of California responsibility of the Bay Area Council Economic Institute, as David Peguero, Co-Founder, GrowthHax a research project commissioned by the Stanford University’s Gabriel Reyes, CEO, iDigital Groups California–Global Energy, Water, and Infrastructure Innovation Mark Rinder, Fulbright Grantee & Intelligence Analyst, Initiative co-sponsored by the Bill Lane Center for the American Endeavor Mexico West and the Precourt Institute for Energy as part of Mexico Enrico Robles, CFO & Intelligence Director, Endeavor Mexico Clean Economy 2050, and do not necessarily reflect the views Georgina Serrano Romero, President, Raserver Inc. of USAID or the United States Government. Mexico Clean Economy 2050 (MCE2050) was founded as a Global Development Alliance (GDA) led by Stanford University with the support of the United States Agency for International Development (USAID) and contributions from private sector partners, universities, and research institutes, as well as non-governmental and civil society organizations. Originally spanning the period 2017–2020, MCE2050 was developed to inform the national policy design and implementation process in Mexico in order to promote clean innovation and low-carbon development in the United States-Mexico binational economy. From the start, MCE2050 focused on fostering increased connectivity and collaboration between California and two emerging innovation hubs in Mexico: (1) our neighbors, the state of Baja California and the cities of Tijuana, Mexicali, and Ensenada on the Mexican side of the binational region known as Cali-Baja, and (2) the state of Nuevo León’s capital city, Monterrey, a major regional industrial manufacturing center. Stanford continues to develop and expand this program with the support of the Precourt Institute for Energy, the Bill Lane Center for the American West, and other research centers and initiatives within the university. In the future, MCE2050 will continue to bring this knowledge base, research capacity, and the insights of the broader Silicon Valley innovation ecosystem to Mexico, while serving as a neutral convener to advance innovative technological, business, policy, and social solutions to regional and binational energy and environmental problems. This report on the innovation environments in Baja California and Monterrey, prepared by the Bay Area Council Economic Institute, contributes to that process.

Blas L. Pérez Henríquez Director Like other countries, Mexico’s states and cities define its economic landscape. Of those, several regions cluster industry and talent in ways that particularly connect the Bay Area and California. This report examines two: Monterrey in the state of Nuevo León and the Tijuana- Mexicali-Ensenada complex in the state of Baja California Norte. Each presents a unique environment and distinctive assets that are attracting—or could attract—California and Bay Area investment and research partnerships.

Tijuana Mexicali Ensenada BAJA CALIFORNIA

SONORA

BAJA CALIFORNIA SUR CHIHUAHUA

COAHUILA

Monterrey SINALOA NUEVO DURANGO LEÓN

ZACATECAS TAMAULIPAS

NAYARIT SAN LUIS

AGUASCALIENTES POTOSI

YUCATÁN

GUANAJUATO HIDALGO JALISCO QUERÉTARO QUINTANA ROO TLAXCALA CIUDAD COLIMA MICHOACÁN DE MÉXICO VERACRUZ MÉXICO MORELOS CAMPECHE PUEBLA TABASCO GUERRERO

OAXACA CHIAPAS 1

Baja California Business and Industry Bordering California’s San Diego and Imperial counties, San Diego area port of entry) and 647,000 for the northern Baja California is usually thought of as a tourist Calexico East crossing from Mexicali.3 destination and a site for the cross-border manufacturing facilities known as maquiladoras. Like those of a number With a population of more that 2 million and one of 4 of other Mexican states, however, Baja California’s the fastest growth rates in the country, Tijuana is the environment is changing based on a new commitment to largest city in the state of Baja California and the fifth research, higher education, and entrepreneurship. As the largest in Mexico, and it concentrates the region’s state’s economy is still heavily based on manufacturing, research and production activity. Other key cities include that transformation is still a work in progress. What the state capital Mexicali (with a population of more makes Baja California Norte unique is the investment than 1 million) and the port city of Ensenada (with a 5 focused on the cities of Tijuana, Ensenada, and Mexicali, population of 335 thousand). that is capitalizing on the region’s proximity to San Diego The region is an important production base for and California. This is contributing to the development industries including aerospace, medical devices, of a dynamic cross-border economy in what is becoming biotechnology, automobiles, and electronic equipment. known as the Cali-Baja region. Other key sectors include agro-industry, particularly The San Ysidro Land Port of Entry is the busiest land wine. Most companies concentrate in 101 industrial 6 7 border crossing in the Western Hemisphere,1 with parks close to the border, including 65 in Tijuana 8 an average of more than 100,000 bus passengers, and more than 25 in Mexicali, where activity is led pedestrians, and personal vehicle passengers making by manufacturing. the northbound crossing of the Tijuana-San Diego ■■ The medical devices sector benefits from proximity border there each day. In 2019, there were more than to industry clusters in Southern California. More than 36.6 million northbound crossings of vehicle passengers 70 medical technology companies are engaged in and pedestrians at San Ysidro (which doesn’t allow design, assembly, manufacture, sterilization, and freight crossings) plus 1.7 million northbound truck and other processes, with a workforce of 61,000. full truck container crossings 6 miles away at the Otay Mesa port of entry2 (reflecting the region’s cross-border ■■ Aerospace activity focuses on components, with production). In addition, both types of 2019 northbound more than 94 companies supporting over 35,000 truck crossings at the two other California-Mexico employees, comprising the largest concentration of freight crossings totaled 105,000 for Tecate (the third aerospace companies in Mexico (at 21%) and more

3 The Baja California and Nuevo León Industry, Innovation, and Talent Clusters

than half of Mexico’s aerospace workforce. Over imported components, raw materials, and manufacturing half of the aerospace companies in Tijuana have equipment, and to pay lower taxes on finished products more than 500 employees, in fields ranging from exported to the US. According to CANACINTRA commercial aviation to defense, space (satellites), (Cámara Nacional de la Industria de Transformación or and drones. Beyond assembly and subsystems National Council for Industry Transformation), 98% of manufacturing, processes include design, R&D, inputs for Tijuana’s maquiladoras are imported.13 One and the development of advanced materials, with of CANACINTRA’s goals is to increase purchasing by production for companies such as Boeing and Airbus. maquiladoras from local suppliers, to support small businesses and entrepreneurs. To further that objective, ■ ■ Biotech activity is concentrated in Ensenada and in in 2018 the state government passed the Ley de 37 research laboratories across the state. Fomento a la Proveduría Local (Law for the Promotion ■■ The automotive sector is anchored by two assembly of Local Suppliers), which provides fiscal incentives to plants operated by Kenworth (PACCAR Group), maquiladoras to increase their purchasing from local which produces heavy trucks for a worldwide market, suppliers and creates a fund to support local SMEs 14 and Toyota, which assembles the Tacoma truck. through trade fairs, trainings, and certifications. Altogether, 80 automotive companies operate in the Some of the earliest international companies came to region, including a wide range of parts suppliers. Tijuana and Mexicali from Japan, with most clustered in the electronics sector. In the early 2000s, Tijuana ■■ The electronics sector, long the region’s anchor, was the world’s top site for the production of television comprises more than 200 companies producing sets, led by companies such as Sony. As the industry products including circuit boards, flat screen televisions, and technology changed, Japan’s presence receded cellular phones, home appliances, computers, and and South Korea’s grew, joined later by companies from semiconductors, with a workforce of 92,000.9 Canada, China, and Europe. Outside of manufacturing, medical tourism—offering While still anchored in assembly, production has been advanced procedures in fields such as cancer treatment, moving to higher levels of value-added content and dentistry, and ophthalmology—is growing rapidly. more complex products. In recent years, that shift has Feature film production is another sector with a well- included a focus on integrated solutions that include established base and significant potential for growth. software and R&D. Wine production, centered in the Guadalupe Valley, aggregates more than 100 wineries10 and related In the automotive sector, prior to the 2010 closing of restaurants, inns, and event spaces in Mexico’s equivalent Toyota’s joint venture in Fremont with General Motors— to Napa Valley. The state of Baja California ranks third in New United Motor Manufacturing Inc. (NUMMI)—there Mexico in the value of total international exports (US$36 had been close collaboration with Toyota’s facility in billion in 2017), accounting for 10.4% of national exports. Tijuana. With NUMMI’s demise, parts of Toyota’s Fremont Forty percent comes from manufacturing.11 The region’s activity moved south. Training today is continuous, with production is overwhelmingly destined for US markets, Mexican engineers regularly traveling to Japan and followed by markets in Canada. The US is the source Japanese engineers traveling to Tijuana. Work performed of 80.7% of foreign direct investment (FDI) in the state, there includes the development of automated equipment followed by South Korea (3%), Japan (1.9%), Canada and applications software, both for global markets. (1.9%), Spain (1.4%), and China (1.3%), with others accounting for 9.8%.12 Though still small, service trade is also growing based on computer systems design, scientific R&D, software The region’s development as a global business center is publishing, data processing, and other professional, rooted in the maquiladora program (formally known as scientific, and technical services.15 For example, Programa de la Industria Manufacturera, Maquiladora y US-based global biotechnology company Thermo de Servicios de Exportación or IMMEX), which enables Fisher Scientific has more than 200 software developers contract manufacturers in Mexico to defer taxes on working at its IT Center of Excellence in Tijuana.16

4 SPOTLIGHT Honeywell Honeywell International, a Fortune 500 company Embraer. According to Luis Sanchez, the president producing commercial and consumer products, of Honeywell Mexico, “Mexicali offers a wide range engineering services solutions, and aerospace of advantages for a company like ours, including systems, has had a manufacturing presence in Baja access to a motivated and able labor force and strong California since 1979, and today employs more than educational infrastructure that includes many highly- 2,000 people at its Mexicali sites. Since 2007, it qualified universities.”* has supported a center for engineering and design that employs 350 Mexican engineers. In 2017, the * Content supplied by Mark Rinder, Fulbright Grantee & Intelligence company added a wind tunnel, an investment of Analyst, Endeavor Mexico; https://mexico-now.com/honeywell- aerospace-to-invest-us-15-million-in-mexicali/; https://manufactura. 300 million pesos, to permit the testing of aircraft mx/industria/2018/02/02/honeywell-presume-su-planta-de- turbines for companies including Boeing, Airbus, and aeronautica-en-mexicali.

SPOTLIGHT Film and Animation In the last two decades, Baja California has developed augmented reality. iDigital founder Gabriel Reyes, a substantial base for film production centered on Baja a systems engineer, wants to improve the efficiency Studios, a facility located on the coast south of Tijuana of filmmaking by applying industrial engineering and Rosarito Beach. Originally built by Twentieth Century methods. As he explains, “There’s nothing in film Fox for the filming ofTitanic in 1997, the campus houses production like ISO 9000, Six Sigma, or other the world’s largest water tanks and stages designed certifications that ensure efficiency and quality in the for filming. Subsequent productions have included production process. The industry should be more MGM’s Tomorrow Never Dies, Warner Brothers’ Deep efficient in how it works, which the engineering Blue Sea, Disney’s Pearl Harbor, and Fox’s Master and discipline can address.” The company is currently Commander: The Far Side of the World. More recent working with partners at Stanford and World Building, production has focused on television series such as a Cali-Baja innovation collective organized by Pigeon Fear the Walking Dead and streaming films for Amazon, Hole Productions from San Diego, to establish XR HBO, and Netflix. Those high-end productions have Cinema Lab, a software-based “extended reality” enabled an accumulation of localized experience and center that builds on the experience of digital expertise. Lower costs, more flexible unions, proximity to designers in world building for films and will be housed Hollywood, and access to a complete pipeline of services at Baja Studios, to test out new ideas applicable to from pre- to post-production are also enabling growth in social and economic issues as well as entertainment. the sector. Fear the Walking Dead, for example, required Other Baja California companies in the industry advanced visual effects. Where visual effects artists were include Boxel Studio, a ten-year-old visual content once brought in from Santa Monica and Canada, today studio employing 40 artists and technicians. Focusing most work in the field is local. on visual effects (VFX) and animation, Boxel works Feature film production has generated a supporting with US companies such as the History Channel, ecosystem of digital content studios such as iDigital Nickelodeon, Hulu, and Netflix Medal( of Honor Groups, which has both advertising and film divisions. docudrama). The pipeline of designers and technicians Starting with production services, the company is supported by degree programs in animation and is now generating its own IP, with a new film in filmmaking at local universities.* post-production, and supports a post-production * http://www.bajafilmstudios.com/; Interview with Gabriel Reyes, and animation unit focusing on virtual reality and April 2020; http://boxelstudio.com/.

5 The Baja California and Nuevo León Industry, Innovation, and Talent Clusters

Postgraduate Building, CETYS Tijuana campus

University and Research Environment Much of this activity builds on a growing base of trained Autonomous University of Mexico) is a public research engineers that supports an active developer community; university.19 Headquartered in Mexico City, UNAM has of the more than 2,500 students graduating each year satellite campuses in almost every Mexican state as from Tijuana’s more than 35 universities, about 27% well as in the US, Canada, and Spain.20 UNAM’s Baja are engineers.17 In addition to hardware and software California campus in Ensenada is home to the Centro engineering, other fields of study include computer de Nanociencias y Nanotechnologia (see below). systems, multimedia design, digital graphic design, and ■ UABC animation and visual effects. Tijuana is also home to 186 ■ (Universidad Autónoma de Baja California or technical and high schools that offer accredited programs Autonomous University of Baja California), the fifth in engineering, sciences, IT, business, and many other largest public university in Mexico, had over 68,000 areas.18 Regional universities are working to develop new undergraduate and 3,500 graduate students in 2019 degrees and programs to provide the technical skills that spread across its three main campuses: Mexicali, companies require. Tijuana, and Ensenada. Priorities address key sectors of the state’s economy including agriculture, fisheries, Key universities and research institutes include the following: tourism, commerce, and industry, and support active partnerships with the business community.21 Included ■■ Established in 1551, today UNAM (Universidad in the university’s 134 undergraduate and 64 graduate Nacional Autónoma de México or National programs are 15 in engineering (including computer

6 Baja California

systems, bioengineering, aerospace, civil engineering, and technicians, working on almost 400 research electronics, renewable energy, robotics, mechanical projects across Mexico. Its center in Ensenada engineering, nanotechnology, and chemistry). supports 113 laboratories in four academic divisions: During 2019, there were 8 research institutes and experimental and applied biology, earth sciences, 670 funded research and technology development applied physics, and oceanography. Leading fields projects.22 International agreements are in place with include marine ecology, environmental geosciences, 140 universities,23 and joint degrees are also offered marine biotechnology, computer science, optics, with universities in Spain, Chile, and Colombia, as geothermal energy, seismic engineering, and well as two universities in California (UCSD and aquaculture. A number of research projects are being UCLA).24 Other joint research, teaching and exchange developed jointly with business and government programs are in place with San Diego State University, counterparts; corporate partners from the United UC Irvine, and Scripps Institution of Oceanography, States include Chevron, Plantronics, Intel, and IBM. as well as MIT and in projects funded by NASA, the Products and applications from this research range National Science Foundation (NSF), and UNESCO. from fish farming to antibodies derived from sharks, diagnostics for trichinosis, oil spill remediation, and One distinctive UABC program is its School of nanosatellites developed for the Mexican army. Enology and Gastronomy, which supports Baja’s growing food and wine sector. Research on the While for most of its 40 years CICESE has focused on properties of Baja California wines, consumer academic research (and generated few patents), more preferences, and soil and water technical analysis recently it has shifted to more applied research— supports regional viticulture companies, while working to identify projects with commercial collaborations with wineries and restaurants deliver potential that can be pushed to market and in the a professional practicum for students. In addition to process support students and post-graduates who collaboration agreements with the Universidad de la could be entrepreneurs. Seven years ago, an Office Rioja (University of Rioja) in Spain, the school recently of Technology Transfer was created, and research signed a letter of intent to collaborate on enology collaboration with industry expanded. Under an research with California State University, Fresno.25 agreement with the National Science Foundation in the United States, the center uses the I-Corps ■■ CETYS Universidad (Centro de Enseñanza Técnica entrepreneurial support method adopted by Bay Area y Superior or Center for Technical and Higher universities such as Stanford and Berkeley to orient Education), a private university with 500 academic scientific researchers to entrepreneurial opportunities. staff and approximately 7,700 students, has three University research partners in California include the campuses—in Tijuana, Mexicali, and Ensenada.26 Scripps Institution of Oceanography (San Diego), UC While its laboratory space is limited and most of its San Diego, UC Riverside, UC Irvine, and UC Davis.28 entrepreneurs are young, the school has a significant focus on innovation-based entrepreneurship, ■■ CNyN (Centro de Nanociencias y Nanotecnología or 27 including a nationally accredited business incubator. Center for Nanosciences and Nanotechnology) got its Research institutes are particularly growing in Ensenada, start in 1983 as UNAM’s Ensenada physics laboratory a city that until recently was better known for its port (LEIF or Laboratorio de Ensenada del Instituto de 29 and tourism. Física). Today, its specialists in nanomaterials, bionanotechnology, nanocatalysis, nanostructures, ■■ CICESE (Centro de Investigación Científica y microelectronics, and nanofabrication focus on de Educación Superior de Ensenada or Center transforming technology in the areas of medicine, for Scientific Research and Higher Education in energy and the environment, and human activities.30 Ensenada) is the largest institution of the 27 that Each year, CNyN graduates approximately 10 students make up CONACYT (Consejo Nacional de Ciencia with bachelor’s degrees in nanotechnology, 10 with y Tecnología or National Council for Science and master’s degrees, and 5 with doctorates in materials Technology). Currently it supports 530 research staff engineering and physical sciences. Industry research

7 The Baja California and Nuevo León Industry, Innovation, and Talent Clusters

partners include CIDETEQ (Centro de Investigación (Centro de Análisis para la Investigación en Innovación y Desarrollo Tecnológico en Electroquímica or or Analysis Center for Research in Innovation) show Center for Research and Technological Development Baja California near the top in science (#8 in Public in Electrochemistry), Honeywell, and Pemex. and Private Investment in Science, Technology and Collaborations in bionanotechnology and physics are Innovation; #2 in Higher Education; #6 in Scientific also underway with UC San Diego.31 Output; and #2 in Information Technology), but lagging at the private sector level (#32 in Innovative Companies ■■ The Centro de Estudios Vitivinícolas (Center for and #28 in Entrepreneurship and Business.)35 Startup Wine Studies), a degree-granting program at CETYS, activity in Baja California is still in the early stage, with provides research laboratories and training to support risk capital—angel investment and public or private 32 Baja California’s burgeoning wine industry. The venture capital—very limited. Approximately 90% of center is located close to the Guadalupe Valley, a the startup funding that does exist comes from outside fast-growing viticultural region that is home to more Mexico, and startups that reach the growth stage usually 33 than 100 wineries. raise capital in California.36

Collaborative research between universities and with A range of facilities and initiatives are being developed industry is encouraged by the national innovation to accelerate the state’s innovation ecosystem and research program (Programa de Estímulos a la support entrepreneurial growth: Innovación or PEI) run by CONACYT. Analysis suggests that the program is finding success, most often with ■■ COCITBC (Consejo de Ciencia e Innovación UABC at the center.34 Tecnológica de Baja California or Council of Science and Technological Innovation of Baja California), part of the state government’s secretariat of economic Technology and Innovation development, is seeking to address these shortcomings Environment through strategies designed to build a sustainable innovation system in the region.37 Among other Overall, Baja California presents a mixed picture when initiatives, it has developed a fund to which companies it comes to science and innovation. Rankings in 2018 may apply for scientific research funding. To be eligible, of the 32 Mexican federal entities (31 states plus projects must either be large (to advance growth) or the Ciudad de México federal district) by CAIINNO address a significant problem in the community.

CICESE auditorium (center)

8 Baja California

■■ The BIT Center, also developed with state government companies. One noteworthy entrepreneur is CETYS support and housed in a former supermarket in Universidad graduate Jordi Muñoz who, after moving Tijuana’s city center, is the city’s major incubator to San Diego, co-founded 3D Robotics in 2009.44 Until facility. It provides co-working space, small private it shifted away from manufacturing and consumer offices, and conference and training rooms for use by markets to focus on enterprise software, 3D Robotics entrepreneurs, schools, and universities, and also offers was the largest producer of consumer drones in the free areas for use by freelancers.38 US. The company attracted close to $100 million in ■■ The Consejo de Desarrollo de Tijuana (CDT or venture funding, manufactured in Tijuana, and was led Tijuana Development Board) is a key private initiative from offices in Berkeley and Mexico, with additional 45 supporting entrepreneurship programs.39 presences in San Diego and Austin. ■■ MIND Hub (Mexico Innovation and Development Hub), co-founded in 2011 by Ángel Sánchez and Jorge Arrroyo Opportunities and Issues of Arkus, Inc., is a collaborative tech innovation space in What uniquely distinguishes Baja California from other the heart of Tijuana’s financial district. With a focus on Mexican regions is its physical proximity to California, enabling technology on either side of the US/Mexico which offers advantages in time, access, and border, it houses tech and related services companies. operational efficiency. Beyond manufacturing, the Cali- Current campus occupants include the software Baja border region presents a range of opportunities consultancy Arkus Nexus and several graduates of MIND for both Mexican and California companies. Hub’s incubation program, and the space also hosts local US and Mexico tech communities such as StartupSD. Its One is the opportunity to increase the production incubation/acceleration program is no longer operating, and use of renewable energy (particularly wind and however, and has stopped accepting startups.40 solar), where capacity is underdeveloped but demand ■■ BlueBox, a Latin American accelerator offering training is growing on both sides of the US border. Mexico’s for entrepreneurs, innovation workshops, office space, Secretaría de Energía (Ministry of Energy) predicts that and an incubation program, operates one of its three Baja California will need an additional 67,000 MW Mexican programs in Tijuana.41 of electrical power by 2032.46 Despite the region’s ■■ The accelerator program Endeavor had a presence abundant land and sun (Baja California has some of the in Tijuana from 2008 to 2019, when it consolidated its highest levels of solar radiation in Mexico) however, Mexican operations in Mexico City, with active staff only 21% of total power generation in Baja California is in other domestic markets. While the reorganization currently produced from renewable sources, including 47 allowed Endeavor to focus on regions with higher flows geothermal. IEnova, a subsidiary of San Diego-based of entrepreneurs, it continues to maintain a network of Sempra Energy with a presence in 17 Mexican states, local contacts and mentors and holds local events. A Baja operates the Sierra Juárez wind farm close to Mexicali, California “community leader” is based in Mexico City.42 with 47 turbines and long-term plans for up to seven times more. Since production began in 2015, 100% of its ■■ Positioning CETYS Universidad to better connect production is sent to the United States, helping California with private sector companies doing aerospace R&D meet its renewable energy goals.48 IEnova also operates in Mexicali, CEID (Centro en Innovación y Diseño or the 41 MW Rumorosa solar facility close to Mexicali.49 Center for Innovation and Design) opened in 2018 on Transmission lines in two main border-crossing areas the CETYS campus in Mexicali. CEID aims to sponsor are managed by the Western Electricity Coordinating ten innovation projects each year, taking the space Council (WECC),50 Mexico’s CFE (Comisión Federal de industry in Mexicali to the next level.43 Electricidad or Federal Electricity Commission), and The region’s large industrial base is starting to become a the California Independent Systems Operator (CAISO). significant source of tech company founders—typically These facilities suggest a model for how renewable engineers who at one time worked at large companies energy can grow to support more production inside such as Sony, in some cases went to work at large or Mexico and stronger connections between the California small consulting firms, and eventually started their own and Baja California grids.51

9 SPOTLIGHT El Florido El Florido, a large development in southeast Tijuana, facilities. Cecilia Romero Larroque, Asset Manager is an example of the new business and production with the El Florido Group, believes “their goal is to be model that Tijuana is endeavoring to embrace. Within closer to the US market, not offshore in Asia.” its scope is Los Nogales, a master-planned, mixed- use community that includes future housing and Higher education facilities located in El Florido include commercial, hotel, residential, healthcare, sports, UTT (Universidad Tecnológica de Tijuana or Tijuana cultural, educational, and research facilities, such as ITT Technological University), a public university with (Instituto Tecnológico de Tijuana or Tijuana Institute of 5,000 students that offers technical and engineering Technology), as well as open space. Also present in Los degrees; ITT, a public university currently building Nogales is the Consorcio Tecnológico de CONACYT, a 3,000-student campus that will offer majors in which houses not only SEPROA (the newly created engineering as well as masters and doctorate degrees; Secretaría para el Manejo, Saneamiento y Protección UNEA (Universidad de Estudios Avanzados or al Aqua or Secretariat for the Management, Sanitation University of Advanced Studies), a private university and Protection of Water) but also SEST (the Secretaría with 800 students that offers majors that include de Economía Sustentable y Turismo or Secretariat of systems engineering, industrial engineering, business Sustainable Economy and Tourism), as sustainable administration, and international trade; and CECyTE water, economic, and tourism issues are all seen as Baja California (Colegio de Estudios Científicos y decisive for the future and growth of Baja California. Tecnológicos del Estado de Baja California or College of Scientific and Technological Studies of the State Also within El Florido, the new Los Olivos Logistics of Baja California), a technical college that trains and Industrial Park includes 2,372,000 square feet of approximately 2,300 students. With proximity between production space, joining an existing industrial park, industrial facilities and educational institutions, La Encantada, with a diverse base of tenants. La strengthening the links between research, workforce Encantada Industrial Park, the heart of El Florido, with development, and production is a key focus. 2.3 million square feet of built-out space, is home to 16 companies producing electronic parts, aerospace Sources: Information provided by Cecilia Larroque, Asset Manager, components, and a range of healthcare and industrial El Florido, March 2020; “El Florido – A Master Planned Community,” products. Growing interest is being reported by http://florido.com/; and Dias, Tito, “El agua es determinante para el futuro y crecimiento de Baja California,” Dario Tijuana, May 29, 2020, companies from Korea and elsewhere in Asia, as well https://diariotijuana.info/el-agua-es-determinante-para-el-futuro-y- as US-based companies, in opening new industrial crecimiento-de-baja-california/.

10 Baja California

On the production side, the Bay Area’s Sun Power has (USMCA) also allows Baja California to benefit from manufactured and assembled solar panels in Mexicali repositioning by US companies looking to reduce since 2011, and in 2019 donated 10% of the 3,000 political vulnerability and shorten supply chains by panels going into two new solar arrays being built on returning production to North America. With no time the Mexicali and Tijuana campus of CETYS University. zone difference with California, and Tijuana being At 1.2 MW, the project represents the largest renewable as little as two hours away from the Bay Area (by air energy initiative in Mexico to be built by a university to San Diego and car across the border), proximity and builds on CETYS’s well-established renewable affords Baja California a unique advantage as a site energy engineering track.52 A third promising area for near-shore business location. for cooperation is clean energy research and policy collaboration with the state of California, which leads Underlying its potential for more advanced production the United States in the field of renewal energy research and research, Baja California’s universities are and in policies to enable both energy efficiency and generating a large number of engineers who possess clean energy adoption. The Mexico Clean Economy the skills required by both large and small companies 2050 project, a global development alliance launched and can be hired at a fragment of the cost of by Stanford University’s California Global Energy, Water comparable engineers in Southern California or Silicon and Infrastructure Innovation Initiative with support from Valley. A pool of creative talent with industry experience the US Agency for International Development (USAID), is also supports the film sector. Proximity to the border, a actively exploring opportunities to expand the production low cost of living, and a dynamic food, wine, and craft and use of renewable energy in Baja California and beer scene make Tijuana a potentially attractive site greater energy cooperation in the Cali-Baja region. for Bay Area and other companies that are looking for engineering talent. The State of California will play an expanded role through an MOU currently being negotiated between the For Tijuana, leveraging this talent pool to support California Energy Commission (CEC) and its counterpart home-grown innovation and startup activity still in Baja California to cooperate in a range of fields relating presents challenges. Entrepreneurial activity in the to the shared grid, including building efficiency (shared region remains constrained, and there are no large, codes and standards), industrial efficiency (of value to home-grown, private companies that can spin out new the maquiladoras), and renewable energy production startups—though as mentioned earlier, engineers that can both help California meet its targets for the do leave maquiladoras to start their own companies. production of renewable energy and address reliability MIND Hub shuttered its startup incubation activity issues in Baja California. The MOU and the activity it primarily due a shortage of investment capital. Most generates will be one of a the deliverables of the revived venture funds focus on Mexico City, and companies Commission on the Californias (see below). 53 that successfully raise funds often do so in California, operating as California entities. A related challenge In the innovation space, the presence of industrial is that until now the region has not produced clusters hosting large US and international companies breakthrough companies at scale, a milestone that can presents an opportunity for Mexico’s government and serve to attract venture investors. universities to work more closely with entrepreneurs to produce technologies and services that can This points to the major challenge as Baja California help manufacturers advance to higher value-added attempts to build an innovation economy: the need to production. The region’s established industrial base transition its manufacturing economy toward higher and infrastructure also present both location sites and value-added activity through a deeper connection market opportunities for US technology companies. to R&D. Production processes have been perfected The extension of NAFTA through the recently over the years, making the Tijuana-Mexicali region a approved US-Mexico-Canada Trade Agreement highly efficient place to manufacture. The level of new

11 The Baja California and Nuevo León Industry, Innovation, and Talent Clusters

value creation, however, is low. To date, innovation the Commission for the Californias, a forum for has come primarily through efficiency gains that sharing ideas around common issues and devising have progressively lowered costs, but most true R&D shared solutions.55 Topics that have been identified continues to be done in places like the Bay Area or for shared information and cooperation, and that Boston—or overseas. With so many large US and involve multiple California agencies, include energy global companies established in the region, there management and grid resilience, water resources and is a significant opportunity for industrial innovation. quality, transportation infrastructure, cross-border In aerospace, for example, more products could trade and investment, agriculture, public health (cross- be developed and designed locally, more deeply border disease management, a particularly salient topic integrating local firms into the global aerospace supply in the wake of the COVID-19 crisis), and emergency chain. Solar panels are being manufactured in Tijuana preparedness.56 Moribund for many years, the revived but as a next step could incorporate more local design Commission offers a systemic vehicle to better connect and engineering. the neighboring economies of Mexico and California as a binational economic region. Large international companies are starting to play a greater role in R&D; for example, Samsung does so The economy of northern Baja California has evolved through its Tijuana software development center. Other dramatically from the days when Tijuana was largely companies, such as Honeywell, Plantronics, Thermo a destination for day-tripping tourists from San Fisher, Skyworks, Solar Turbines, and Japan’s SMK, Diego. High-rise towers now dot the landscape, a are starting to produce locally generated IP, with new gastronomic district has developed with craft breweries design centers being established. Across multiple and Mexican-Mediterranean fusion cuisine, the sectors, expansion of the local R&D base will be central region hosts a growing pool of engineers, and R&D is to the Tijuana-Mexicali-Ensenada region’s ability to starting to play a larger role. Tijuana now serves as a achieve higher value-added production and more significant node on a West Coast IT chain of research, innovation-based growth. engineering, and production that extends from Guadalajara to Seattle. Economic synergy, cross-border Baja California’s connection to California to the north also university programs, and transportation links with San has a significant state-to-state dimension. Agency level Diego and Southern California enable complementary relationships are in place between the two governments, activity that can bind the Cali-Baja region more such as the MOU signed in November 2019 with deeply as a binational economy and support deeper California’s Office of Emergency Services (OES) to share ties with Northern California as well. Although the information and cooperate on best practices and training. maquiladora system is well established and ties with That agreement re-confirmed an earlier MOU and a Southern California are strong, Bay Area and Silicon cooperative relationship that was initiated in 2008.54 Valley companies tend to look first to other places in Mexico such as Guadalajara and Mexico City to invest In December 2019, California’s Governor Gavin or to find talent. A more concerted strategy by Baja Newsom and the Governors of Baja California Norte California to grow its innovation infrastructure could and Baja California Sur signed an MOU re-establishing potentially influence that calculation.

12 2

Monterrey Business and Industry The state of Nuevo León enjoys the highest per capita proximity, business culture more closely resembles that GDP in Mexico (US$16,107 in 2018, almost twice of the United States than other states in Mexico. the national level of US$9,341), leads other states by a significant margin in its attraction of foreign Since 2007, the city has supported an initiative, direct investment (drawing 13% of the nation’s total Monterrey: International City of Knowledge, that in 2018), and accounts for more than 9% of Mexico’s works to attract R&D talent to Monterrey as well as manufacturing exports. Reflecting the region’s strong well as investment in infrastructure. This has led to the manufacturing base, the lion’s share of FDI (64%) is drawn establishment under the government’s science and by manufacturing, followed by financial services (11%) and technology agency I2T2 (Instituto de Innovación y commerce (7%), with most FDI coming from the United Transferencia de Tecnolgía or Institute of Innovation and States. Manufacturing worker productivity is the highest in Technology Transfer) of PIIT (Parque de Investigación Mexico. Nuevo León’s 4.2% economic growth in 2018 also y Innovación Tecnológica or Technology Research and substantially exceeds the 2% national average.1 Innovation Park), which has attracted both institutions and private businesses. Universities and national A center of private business and home to a high research organizations have a presence, while companies percentage of Mexico’s largest companies, the with labs or product design activity include CEMEX, Monterrey metropolitan area is headquarters for leading Schneider Electric, and Pepsico. The park also hosts two corporations including CEMEX, Banorte, Banregio, incubators—for nanotechnology and biotechnology. FEMSA, Gamesa and OXXO. Large multinationals such as Boeing, Caterpillar, Dell, GE, Mercedes-Benz, Philips, More recently, Monterrey’s strategic focus on R&D and Siemens also have major presences there.2 and innovation is being built on a government initiative, Nuevo León 4.0, with a major focus on Close to Texas and the US border, commerce builds digital transformation. Launched in 2017, it focuses on transportation infrastructure that includes direct air on new technologies and business processes such as service to twelve US cities (including Los Angeles) and IoT, machine-to-machine communication, AI, digital cargo transport through regional hubs of companies manufacturing, big data, 3D printing, and advanced such as DHL, FedEx, UPS, and Estafeta. The Laredo- design, with the goal of helping Nuevo León’s industrial Colombia Solidarity International Bridge sees sector compete globally through the development of approximately 1,000 northbound truck crossings per smart factories. Developing high value-added labor day between the United States and Mexico.3 With this skills is a related focus. Though led by the government,

13 The Baja California and Nuevo León Industry, Innovation, and Talent Clusters the board is made up of the state’s four leading private Tecnológico de Monterrey, Mexico’s equivalent universities, the state secretaries of education and to MIT. Residents of Nuevo León pursue higher education economy, the head of CONACYT (Consejo Nacional de at a higher rate than elsewhere in Mexico; although Ciencia y Tecnología or National Council for Science Nuevo León is the 8th most populous state in Mexico,5 it and Technology), and the head of CAINTRA (Camara has the 4th highest number of undergraduate university de la Industria de Transformacion de Nuevo León or students and the 5th highest number of graduate Transformation Industry Chamber of Nuevo León), with students.6 In 2019, 193,000 students were enrolled in implementation in the hands of private industry. Its undergraduate and graduate programs, of which 82,000 chair is reserved for the CEO of an industrial firm rather were in science, technology, and engineering fields. than a state official. Task forces help coordinate activity Twenty-six thousand were at the graduate level, of which between manufacturing heavyweights in key sectors nearly 13,000 were in science and engineering programs. such as steel, building materials, automobiles, aircraft, Six thousand were at the post-graduate level, of which electricity, food, and infrastructure.4 2,000 were in science and engineering.7

This educational infrastructure serves as a critical base University and for company formation. Each year on average, Nuevo León’s universities and technical schools graduate Research Environment more than 11,000 technicians and 7,500 engineers, Corporate investment draws on a pipeline of human grant more than 1,000 master’s degrees and PhDs, capital provided by leading universities including UANL and participate in the Nuevo León 4.0 strategy to (Universidad Autónoma de Nuevo León or Autonomous empower the state’s industry 4.0 ecosystem, which is University of Nuevo León), UDEM (Universidad de the first initiative of its kind in Mexico.8 Tecnológico de Monterrey), UMM (Universidad Metropolitana de Monterrey and UANL host particularly strong computer Monterrey or Monterrey Metropolitan University), and the science programs.

UDEM Main Administration Building (Rectoria)

14 Monterrey

Tec de Monterrey Rector’s Office and Advanced Technology Center

Tecnológico de Monterrey rank Tec de Monterrey #8 in the Top Schools for Entrepreneurship Studies 2020 survey, making it the only Tecnológico de Monterrey plays a central role in university outside the United States to be listed. Tec de fostering innovation and entrepreneurial development Monterrey graduates account for 27% of Mexico’s top in the city and the state, as well as nationally. A private 100 CEOs. institution, the university was founded in 1943 by business leaders concerned with the shortage of Through Tec de Monterrey’s Institute for Entrepreneurship engineers and middle managers needed to support Eugenio Garza Lagüera, students are exposed to and Mexico’s incipient industrial expansion. In 1950, trained in entrepreneurial processes. Students from it was the first foreign institution in the world to all disciplines are required to create a company at receive accreditation from a US body. In the 1990s, some point in their academic career, with more than it was the first university in Latin America to connect 10,000 participating in an entrepreneurial challenge to the internet and was also among the first in the in their first semester; not every company is legally hemisphere to create a virtual university. By 2000, Tec incorporated, but everyone participates in a project de Monterrey had grown to 26 campuses in 20 Mexican that generates revenues. states, that today serve more than 93,000 high school, undergraduate, and graduate students. Beyond its academic programs, Tec de Monterrey offers innovation hubs and incubators throughout the country, Approximately 88% of Tec’s Board of Trustees (450 out supporting more than 800 projects each year; in the last of 510) are business leaders, and 41% of its alumni have 14 years, the incubator network has graduated more gone on to start businesses, generating economic value than 4,000 companies. Approximately 20% of alumni equivalent to 19% of Mexico’s annual GDP. Reflecting establish a company or go to work at a new company this, The Princeton Review and Entrepreneur magazine within three months of graduation. An independent

15 The Baja California and Nuevo León Industry, Innovation, and Talent Clusters survey of alumni by university ranking firm QS suggests varying degrees of R&D intensity and are supported by that 41% have started for-profit businesses (compared a structured state system that links government with to 15% for universities as a whole in Mexico and 25% at universities and businesses. Several funds also provide MIT), of which 65% are still in operation. Entrepreneur- targeted support for entrepreneurs and technology related partnerships and alliances are in place with commercialization. The Nuevo León Innovation Fund leading universities in the United States and around the supports science and technology research-based world, including Stanford and UC Berkeley in California.9 projects with funding of up to US$200,000 targeting entrepreneurs and new company formation. The Nuevo A 2018 Endeavor Insight survey of 153 founders of León Joint Fund (supported by the state government entrepreneurial companies in the Monterrey tech sector and CONACYT) also provides capital for emerging found that the primary undergraduate major of those technology businesses but with a critical focus on founders was engineering (46%), followed by business and university partnerships and an active role played by computer science (13% each). The majority had obtained the state’s official technology clusters. A third fund, their undergraduate degrees from local universities, and PROSOFT, also administered jointly by the state and more than half studied at Tecnológico de Monterrey. Less federal governments, was originally established to than half of the interviewed founders obtained graduate support projects that promote competitiveness in the 10 degrees; of those, 55% obtained MBAs. software and IT sector but has recently been opened to 12 Reflecting the strength of Tec de Monterrey’s engineering other fields. and computer science programs, technology companies With its university base, business orientation, and from the United States regularly come to recruit talent major corporate headquarters, Monterrey is home to a through “Microsoft Week,” “Google Week,” and other growing entrepreneurial ecosystem. This builds in part outreach programs. Approximately of 70% of those hired on an IT sector that is one of Mexico’s largest—Nuevo eventually work in the United States—in San Francisco, León accounts for 9.8% of Mexico’s IT companies (with Seattle, and other technology centers. In addition to a Nuevo León, Mexico City, Jalisco, and the state of continuous calendar of entrepreneur-focused programs, Mexico together accounting for more than 55% of the each year since 2013 the university has hosted INCmty. sector nationally). Collectively, the state’s ICT industry Modeled on Austin’s South by Southwest, INCmty is the includes approximately 400 companies, more than largest entrepreneurial festival in Latin America. In 2019, 100 university programs related to the sector, and more than 10,000 participants gathered across more than US$1.9 billion in sales.13 400 events. A 2018 analysis by Endeavor Insight found that Partners, supporters, and sponsors that contribute to Monterrey’s tech sector included between 300 INCmty include Bay Area companies such as Google, and 350 entrepreneur-led ICT companies working Facebook, Silicon Valley Bank, and Draper Venture principally in fields such as software development Network. In 2015, Tec de Monterrey established a Silicon (SaaS), e-commerce, fintech, and mobile apps/mobile Valley International Office at Plug and Play, sending development. Serial entrepreneurship is common, as entrepreneurship students each summer. In 2019, the one in three of these companies has a founder who Silicon Valley Office moved to San Jose State University.11 starts a second company. More than half of SaaS and e-commerce founders have prior experience working Technology and Innovation at large international tech companies such as Microsoft or Yahoo.14 Environment Entrepreneurs are supported by angel investors, a Strategic business clusters in Monterrey include nascent venture capital community, and locally based nanotechnology, biotechnology, aeronautics, family offices. The dollar value of angel and venture medical services, automobiles, home appliances, IT investment is low by US standards but growing; nearly and software, multimedia, transport and logistics, half of angel investment comes from the founders of the agribusiness, energy, and tourism. They build on city’s large tech companies.

16 Monterrey

Exhibit 1 Most tech founders in a recent Monterrey survey had obtained their undergraduate degrees from local universities, particularly Tec de Monterrey. Undergraduate Degrees of 153 Monterrey Tech Founders Surveyed, 2018

58%

11% Mexican Universities in Monterrey

9%

5%

Mexican Universities 8% outside Monterrey

9% Non-Mexican Universities

Full List of Universities Included in Each Category Mexican Universities Mexican Universities Non-Mexican Universities: in Monterey: outside Monterrey: Northwestern University Tecnológico de Monterrey Instituto Politécnico Nacional New York University UDEM Instituto Tecnológico Autónomo Savannah College Art and Design UANL de México Stanford University Cedim Tecnológico Nacional de México Universidad Austral Facultad Libre de Derecho de Universidad Autónoma de Universidad Nacional del Rosario Monterrey Aguascalientes Universidad Politécnica de U-ERRE Universidad Autónoma de Cataluña Universidad del Norte Guadalajara Universidad Pontífica Bolivariana Universidad Metropolitana de Universidad Centroccidental Universitat de les Illes Balears Monterrey Lisandro Alvarado University of Waterloo Universidad Mexicana del University of Southern California Noreste, Universidad University of Texas. Tecmilenio Universidad Valle del Fuerte

Source: Endeavor Insight Visualization: Bay Area Council Economic Institute

17 The Baja California and Nuevo León Industry, Innovation, and Talent Clusters

Exhibit 2 In 2018, Monterrey’s tech sector included between 300 and 350 entrepreneur- led ICT companies working primarily in fields such as software development/ SaaS, e-commerce, fintech, and mobile apps/mobile development. Breakdown of Industries Within the Monterrey Tech Sector, Number of Companies, 2018 E-Commerce/On Demand or Delivery Platform Software Development for Enterprises/SaaS Mobile App/Mobile Development Adtech/Media/Content Delivery/Social Media IT Services Cloud Platforms and Applications Fintech Healthtech Security and/or Logistics Systems Edtech Software/Software Development (for Consumers) Other Data Analytics Agtech/Biotech/Cleantech Search Engines Videogames (Gaming) Machine Learning Virtual Reality

0 20 40 60 Source: Endeavor Insight analysis

Exhibit 3 Investment in Monterrey companies is concentrated at the seed stage. Investments in Monterrey by Type, Percentage of Total Investment Amount, 2018

70%

60%

50%

40%

30%

20%

10%

0 Angel Investment Seed Capital Series A/B Private Capital (US$20K–$120K) (US$20K–US$1.1M) (US$2M–US$6M) (US$2M–US$15M) Source: Confidential data collected by Endeavor México; Endeavor Insight analysis

18 Monterrey

As recently as six years ago, venture investment was ■■ Endeavor is a worldwide NGO founded in 1997 difficult to find, but it has become easier to secure in with a mission focused on stimulating global the last few years. Early investors included Rogelio entrepreneurial activity. After opening offices in Chile, de los Santos, co-founder of Dalus Capital and a first Argentina, Brazil, and Uruguay, Endeavor México mover in the region’s venture capital community. Larger launched in 2002 with a single office in Mexico corporations headquartered in Monterrey, such as City. Since then, Endeavor has opened eight more CEMEX, have established corporate venture funds. regional offices across the country, including one in Other venture firms include Dila Capital, IGNIA, Auria Monterrey. Endeavor connects entrepreneurs with Capital, Grupo Topaz, Stella Maris Partners, Toro mentoring, strategic advice, introductions, and talent Ventures, Startup Studio Monterrey, and Life Is Too development programs, including tailored education Short Capital. Monterrey venture firms primarily invest programs at leading universities and an Endeavor locally but also have national portfolios. Investment MBA fellows program that connects top MBA student levels tend to be small, with a median of US$110,000 in teams with startups and growing companies to help local companies and US$457,500 in national companies, them solve business problems.18 and with the local investment concentrated at the ■ seed stage.15 In 2019, Nuevo León had 33 venture ■ Monterrey Digital Hub is an innovation community transactions with US$40 million invested (an increase campus providing a tech learning ecosystem of 6.5% over 2018)—the third largest number of to help companies bring digital transformation venture transactions in Mexico after Mexico City (640 to their industry sectors. It connects member transactions, US$1,044 million invested) and Jalisco (40 companies through open innovation and corporate transactions, US$70 million invested.16 entrepreneurial networking programs and offers digital training programs for upskilling and reskilling Monterrey’s entrepreneurial support infrastructure their workforces.19 In 2018, global digital consulting also includes a number of networking, guidance, and services company NEORIS chose the Monterrey funding initiatives: Digital Hub as the location for the first in a network of Innovation Labs created to support digital innovation ■ ■ Founded in association with Tecnológico de in the manufacturing, financial services, and Monterrey with the purpose of promoting business telecommunications sectors around the world.20 growth in Mexico by supporting startups, Enlace+ is a network of more than 360 entrepreneurship ■■ Csoftmty, which is Nuevo León’s information and counselors and mentors, which now has 11 branches communication technology cluster, has for the throughout Mexico. Through its Advisory Councils last five years hosted an entrepreneur showcase of leading entrepreneurs, Enlance+ provides and competition covering health, industry 4.0, mentoring, networking connections, and access to lifestyle, fintech, and e-commerce. It also organizes Tec de Monterrey facilities, and it annually awards entrepreneur and innovation tech tours to IT to qualifying companies a 100% scholarship in its companies and innovation spaces (universities, professionalization program.17 accelerators), in Monterrey as well as Silicon Valley, and offers an innovation training program and diploma.21

19 SPOTLIGHT CEMEX CEMEX, a cement and building materials worldwide the Chilean fund Manutara Ventures in 2017.24 Another supplier headquartered in Monterrey and one of example is StructionSite Inc., an Oakland, CA-based Mexico’s largest companies, exemplifies the role that intelligent construction management tracking leading corporations are playing in the entrepreneurial software provider, which received a US$1.5 million system. Launched in 2017, the firm’s corporate venture seed investment round led by CEMEX Ventures in arm, CEMEX Ventures, serves as a strategic investment January 2019.25 vehicle and provides an open collaborative platform for engaging startups, entrepreneurs, universities, CEMEX also fosters sustainability innovation through and other stakeholders in the development of a range of collaborative efforts. In addition to sustainable solutions in the construction sector. CEMEX evaluating its suppliers’ compliance with sustainability Ventures conducts an annual Construction Startup best practices, it created an INTEGRATE Your Ideas Competition aimed at entrepreneurs and startups Innovation Program that encourages suppliers to that seek to innovate in the fields of smart cities and share creative ideas for products, processes, and buildings; project design and engineering; supply services that can improve practices across the CEMEX chain management; project and jobsite management; value chain. One such improvement introduced by innovative building materials and construction Volvo (Sweden) is the use of simulators to develop methods; and investment and financing.22 the competence of machine operators. CEMEX’s R&D group also works cooperatively with customers Winners of the competition are invited to a pitch to co-create building solutions, such as a concrete day and may become part of the CEMEX Ventures facade capable of reducing the temperature portfolio. Startups in the portfolio receive not only of currents traversing it. The firm’s CEMEX-Tec investment capital, but also commercialization and Center for Sustainable Communities was founded expansion assistance through access to industry in 2010 to promote sustainable urban and rural decision makers, feedback from an industry expert communities through applied research, innovation, network, and support from an R&D and marketing and entrepreneurship programs in collaboration with team.23 One example among CEMEX Ventures portfolio academia and the public and private sectors.26 CEMEX companies is Ipsum, a Chilean construction project was also among the companies, industry leaders, and management platform which closed a US$1 million academic institutions that developed the Monterrey seed investment round led by CEMEX Ventures and Digital Hub, which opened in 2018.27

20 Monterrey

Significant IT and digital technology firms in Monterrey Portuguese-speaking world,31 and Terra became the include NEORIS, Infosel, Naranya, and Softtek: largest internet company in Latin America following its IPO on the Nasdaq the following month.32 In ■ ■ Founded in 2000 when a technology solutions January 2010, Terra sold its shares in the company, group was spun off from the CEMEX IT department, which emerged as Infoselective, SA de CV in which NEORIS now operates as a Miami-based global the Infosel operation is now located with a focus on 28 business and IT consulting company with providing IT for the financial information services 29 approximately 4,000 employees, including many in market in Mexico.33 Monterrey. As employees have left the firm over time to start their own companies, NEORIS has become ■■ In 2002, Arturo Galván, together with his brothers one of the largest generators of spin-off startups. (Ernesto and Carlos) and Javier Salinas Maldonado, went on to create Naranya,34 Latin America’s first ■ ■ Infosel, founded (as Información Selectiva, SA digital innovation studio.35 Naranya works with media, de CV) in 1988, is one of Mexico’s pioneer IT telecommunications, retail, and consumer brands to companies. During the 1990s it became the largest leverage the digital economy, employing over 200 internet services company in Mexico. Its co-founder people36 in 17 Latin American markets37 with a focus Arturo Galván is among the most influential on e-commerce, digital marketing, advertising, and entrepreneurs in the Mexican ecosystem and is a content. It also supports Naranya Labs, one of the leading angel investor and mentor. An engineering first corporate accelerators in Mexico working to help graduate of Tecnológico de Monterrey and an startups scale. MBA graduate of Stanford, he co-founded Infosel while working at the local newspaper El Norte, ■■ Softtek, an IT services company, is Monterrey’s where he identified specific challenges faced by largest technology company; with over 12,000 the publishing industry.30 Infosel was launched as a employees worldwide, it accounts for approximately spinoff of the newspaper group and became the first half of Monterrey’s tech sector and is active in 20 online services company in Mexico as well as the countries with operations at 30 sites in Latin America, country’s largest internet service provider (ISP) and the United States, Europe, and Asia.38 It helps anchor internet portal. In October 1999, the company was the city’s entrepreneurial sector through investment acquired by Terra Networks, an internet access and and the large number of employee spinouts and local language content provider for the Spanish and mentors it generates.

Exhibit 4 Monterrey has several smaller but fast-growing companies that have the potential to become the next generation of scaled companies. Monterrey Companies: Significant Recent Funding Rounds

Startup Sector Funding Amount Announced Date Lead Investors

ePesos Fintech US$6 million 2017 Santander InnoVentures

Nowports Shipping & logistics US$5.3 million 2019 Monashees, Base10 Partners

Dynamo, Sierra Ventures, Sinai Skydrop Shipping & logistics US$5 million 2018 Ventures, Soma Capital, VARIV

Kinedu Edtech US$3 million 2018 IGNIA

Source: Endeavor México and Crunchbase

21 The Baja California and Nuevo León Industry, Innovation, and Talent Clusters

Monterrey’s environment for startups is nascent but ■■ Territorium Life, co-founded by Carlos Guillermo promising, with retail and e-commerce, fintech, and Elizondo in 2013, develops software that helps job healthcare the most active verticals. Newer companies seekers identify and develop the skills they need to that are seeing success include Enviaflores, a leader in be hired, by linking job postings with educational flower delivery, and ePesos, which provides financial service providers. Companies also use its services, services for the unbanked and underbanked in Mexico. provided on a SaaS model, to better understand what kind of training they should invest in. In 2019, Several case studies exemplify how the city’s the company, with 65 employees, had 3.9 million entrepreneurial assets are being leveraged and the users in the United States, Mexico, Colombia, and challenges that emerging companies face. the Dominican Republic. Asked to comment on ■■ Kinedu, which focuses on early childhood the environment for entrepreneurs in Monterrey, development, was founded in 2013 by Luis Garza Elizondo observes that “Monterrey is a city built by Sada as a mobile app and web platform to provide entrepreneurs; it’s a city of entrepreneurs, where parents with personalized development roadmaps entrepreneurs are respected. Tecnológico de Monterrey was founded by an entrepreneur and the that encourage early growth and learning. Garza Sada, a graduate of Stanford, was mentored by universities here are oriented in that direction.” The successful entrepreneurs Arturo Galván of Naranya city is dominated by large industrial companies, he and Armando Badillo of Eduexperts, received angel notes, who are looking to invest in new products investment from Softbank, and has subsequently and services. This is pushing a shift of focus from become an angel investor in his own right, leveraging manufacturing toward creative and other services. the Tecnológico de Monterrey ecosystem. Asked Having access to large headquartered companies and about Monterey’s environment for startups, he points their employees helps young companies grow in the out that the main advantage to starting a company region: “In Monterrey it’s easier than in other places in Monterrey is access to the well-trained, English- to get to the president or other top executives of the speaking talent that graduates from local universities. big companies. They go to Tecnológico de Monterrey 41 The main disadvantage he sees is the competing and other startup events.” opportunity for young professionals offered by the city’s abundance of corporate jobs at large national Opportunities and Issues and multinational firms.39 Monterrey stands out in Mexico for its concentration ■■ Vitau, co-founded in 2019 by Tuto Assad, is an of industry and of large domestic companies. It is also online pharmacy that allows patients with chronic the most business-oriented city in Mexico, with the illnesses like diabetes to receive subscriptions for strongest private sector. Large companies, while based medications at their homes without having to visit a in traditional sectors such as glass and cement, are pharmacy. Assad participated in Y Combinator in the accelerating their adoption of technology, creating new summer of 2019, is scaling Vitau in Monterrey, and opportunities for partnerships with overseas companies has launched the private equity fund Toro Ventures as well as home-grown startups. For California and through which he invests internationally in other Bay Area companies, it offers a production base and startups. As he sees it, Monterrey still lacks a strong market, and also investment opportunities with some of culture of collaboration and the robust ecosystem Mexico’s major industrial enterprises. which that culture enables. Large corporations dominate the economy, which can divert attention One sector with particular opportunity for further from entrepreneurship. He also sees an upside to development and binational cooperation is energy—and the large corporate presence, as Monterey is home renewable energy in particular. Nuevo León has 301 to a number of family offices that are gaining new MW of installed generating capacity, of which 18,266 experience working with startups.40 is from renewable sources. State leaders see great

22 Monterrey

potential for the development of increased production companies (which together account for 80% of the from solar, wind, biomass, and geothermal sources.42 sector’s employment) have 100 or more employees. This Stanford University is collaborating with university, NGO, points to the related challenge that as it seeks to grow government, and industry partners to identify and catalyze more and larger technology companies, Monterrey needs these opportunities through its Mexico Clean Economy to hold more entrepreneurs and engineers in the region. 2050 project, launched with the support of the United Founders point to human capital as their most serious States Agency for International Development (USAID). challenge, as they compete for technical talent with both local companies and companies in the US.43 Technology companies specifically look to Monterrey as a source of engineering talent. It also offers One strategy for meeting this challenge is to develop a market and investment platform for emerging a deeper focus on enabling the growth of later-stage Mexican companies. One reason often given by local companies through greater collaboration between entrepreneurs for starting their companies in Monterrey universities, corporations, and venture capitalists, is the city’s market and networks of clients and suppliers, including an upward shift of venture activity toward and the access to customers they provide. Corporate later-stage investment. In that process, Tec de leaders also directly support the entrepreneurial Monterrey, which anchors the region’s technology and community by investing in startups. entrepreneurial communities, is a unique asset.

The city’s technology and startup ecosystem faces Despite its economic importance in Mexico, ongoing challenges. Despite the significant increase in Monterrey has not yet attracted significant attention the number of tech companies, reaching scale is difficult, from Bay Area and California companies or investors, and tech employment concentrates in the city’s three who focus primarily on opportunities in Guadalajara leading tech companies. Fewer than 20 entrepreneur-led and Mexico City.

23 The Baja California and Nuevo León Industry, Innovation, and Talent Clusters Notes Baha California 1 US General Services Administration, “San Ysidro LPOP Project 15 World Trade Center San Diego et al., “Trade and Facts,” July 17, 2019, https://www.gsa.gov/about-us/regions/ Competitiveness in North America: A Focus on the Cali Baja welcome-to-the-pacific-rim-region-9/land-ports-of-entry/ Mega-Region,” June 2018, https://www.sandiegobusiness.org/ san-ysidro-land-port-of-entry/san-ysidro-lpoe-project-facts. sites/default/files/Trade and Competitiveness in North America 2 US Department of Transportation Bureau of Transportation - SEP.compressed.pdf. Statistics, “Border Crossing/Entry Data: FAQ,” February 16 Thermo Fisher Scientific, “Tijuana,” accessed March 3, 2020. 16, 2018, https://www.bts.gov/statistical-products/ https://jobs.thermofisher.com/global/en/tijuana. border-crossing-data/border-crossingentry-data-faq and 17 Tijuana EDC unpublished slide presentation, 2018, Mexico - Annual Data tables, 2019, https://www.bts.gov/content/ Tijuana EDC.pdf. border-crossingentry-data. 18 Tijuana EDC, “Mexico Engineering Graduate Numbers 3 Ibid. Triple,” October 26, 2016, https://tijuanaedc.org/ 4 United Nations, Department of Economic and Social Affairs, mexico-engineering-graduate-numbers-triple/. Population Division (2018), “The World’s Cities in 2018— 19 UNAM_MX, “What is UNAM?” video, n.d., https://www. Data Booklet” (ST/ESA/ SER.A/417), https://www.un.org/en/ youtube.com/watch?v=tt-fKHqkllU. development/desa/population/publications/pdf/urbanization/ the_worlds_cities_in_2018_data_booklet.pdf. 20 “About UNAM,” English Version, UNAM ENALLT, 2010, https://ced.enallt.unam.mx/alex/posgrado/docs/ 5 Statistics sourced by https://worldpopulationreview.com and folletoIngles.pdf. https://www.macrotrends.net. 21 Content provided by Mónica Lacavex Berumen, Vice Rector– 6 United States-Mexico Chamber of Commerce et al., “Baja Ensenada Campus, UABC. Manufacturing Tour,” May 31, 2018, https://2016.export. gov/california/losangelesdowntown/events/baja2018/eg_us_ 22 Content provided by Flavio Olivieri, Institutional Developer, ca_121767.asp. Tijuana Innavadora. 7 Tijuana EDC, “Industrial parks: Mexico has available space 23 Content provided by Mónica Lacavex Berumen, Vice Rector– for companies,” September 2, 2019, https://tijuanaedc.org/ Ensenada Campus, UABC. industrial-parks-mexico-has-available-space-for-companies/. 24 “Informe de Actividades: 2019–2023,” Universidad Autónoma 8 Mexicali EDC, “Mexicali Baja California Mexico,” accessed de Baja California, http://www.uabc.mx/planeacion/informe/ March 2, 2020, http://www.mexicaliindustrial.com/mexicali- informe2019/Informe-de-actividades-2019.pdf. english.php. 25 Content provided by Mónica Lacavex Berumen, Vice Rector– 9 Government of the State of Baja California, “State Model Ensenada Campus, UABC. of Innovation of Baja California”, “Baja California: The Most 26 “CETYS University,” uniRank, March 23, 2020, https:// Diverse and Open Economy in Mexico,” 2018, and “Invest www.4icu.org/reviews/universities-english/3240.html and in Baja” website accessed March 3, 2020, http://investinbaja. “CETYS Universidad,” LinkedIn school page, accessed April gob.mx/. 18, 2020, https://www.linkedin.com/school/cetys-universidad/ 10 San Diego Tourism Authority, “Discover Baja California’s Wine about/. Region,” accessed March 3, 2020, https://www.sandiego.org/ 27 “Incubadora de Negocios,” CETYS Universidad, 2020. https:// articles/baja-california/baja-california-wine-region.aspx www.cetys.mx/incubadora-de-negocios/. 11 Secretería de Economía, Estados Unidos Mexicanos, 28 Interview and content supplied by Claudia B. Hernández Información Económica y Estatal: Baja California, 2019, Merlo, Technology Manager, CICESE. https://www.gob.mx/cms/uploads/attachment/file/438165/ 29 Centro de Nanociencias y Nanotecnología, “Historia,” Baja_California_2019.pdf. accessed March 6, 2020, https://www.cnyn.unam.mx/index. 12 Government of the State of Baja California, Office of the php?option=com_content&view=article&id=79&Itemid=113&l Secretary of Economic Development, “Welcome to Baja ang=en. California: The Most Diverse and Open Economy in Mexico,” 30 Fabiola Méndez and Francisco Medina, “Centro de 2018. Nanociencias y Nanotecnología de la UNAM a la vanguardia 13 Andrade, Daniel, “Maquiladoras de Tijuana importan el en investigación científica,” UNAM Global, May 7, 2018, 98% de sus insumos y solo 2% es de proveeduría local,” El http://www.unamglobal.unam.mx/?p=38846 Imparcial, September 8, 2019, https://www.elimparcial.com/ 31 Content provided by Andres Campos, Executive Director, tijuana/tijuana/Maquiladoras-de-Tijuana-importan-el-98-de- Ensenada Economic Development Corporation. sus-insumos-y-solo-2-es-de-proveeduria-local-20190908-0024. 32 CETYS Universidad, “Nace el nuevo Centro de Estudios html. Vitivinícolas,” December 6, 2018, https://www.cetys.mx/ 14 CANACINTRA Tijuana, “Nueva Ley de Fomento a la noticias/nace-el-nuevo-centro-de-estudios-vitivinicolas/. Proveeduría dejaría un billón de dólares en BC: Canacintra,” 33 San Diego Tourism Authority, “Discover Baja California’s Wine February 2018, http://www.canacintra.net/noticia. Region,” accessed March 3, 2020, https://www.sandiego.org/ php?id=1046. articles/baja-california/baja-california-wine-region.aspx.

24 Notes

34 Patricia Moctezuma, Sergio López and Alejandro Mungaray, 50 Institute of the Americas, “Baja California: Energy Outlook “Innovation and Development: A Program to Stimulate Regional 2020–2025,” February 2020, p. 2, https://www.iamericas.org/ Innovation in Mexico”, Problemas de Desarrollo, Vol. 48 No. documents/energy/reports/Baja_Energy_Outlook_2020_2025. 191, October-December 2017, http://www.scielo.org.mx/scielo. pdf. php?script=sci_arttext&pid=S0301-70362017000400133&lng= 51 Peter Fairly, “Mexico Border Wall Won’t Stop Cross-border es&nrm=iso&tlng=en. Power Push,” IEEE Spectrum, October 26, 2017, https:// 35 CAIINNO, “Índice Nacional de Ciencia, Tecnología e spectrum.ieee.org/energywise/energy/renewables/ Innovación 2018,” https://www.caiinno.org/wp-content/ usmexico-wall-wont-stop-crossborder-power-push. uploads/2018/12/INDICE-2018.pdf. 52 Tina Casey, “For Solar Manufacturer SunPower, Renewables 36 Interview with Guillermo Mejía Declaud, former Managing Are Only a Beginning,” Triple Pundit, June 11, 2019, https:// Director, MIND Hub, 2020. www.triplepundit.com/story/2019/solar-manufacturer- 37 “About,” COCITBC, November 2019, https://www.facebook. sunpower-renewables-are-only-beginning/83851. com/pg/BC.COCIT/about/. 53 Information provided by Bryan Early, Adviser to Commissioner 38 BIT Center Tijuana | LinkedIn, accessed March 4, 2020, https:// Andrew McAllister, California Energy Commission and Alana www.linkedin.com/company/bit-center. Sanchez, International Relations Adviser to California Energy Commission Chairman David Hochschild. 39 “Apoyando el desarrollo Económico en Tijuana, Baja California,” CDT | Consejo de Desarrollo de Tijuana, 2020, 54 Information provided by Helen Lopez, Assistant Director, https://cdt.org.mx/. International Affairs Office, California Governor’s Office of Emergency Services. 40 “About,” MIND Hub, 2020 https://www.arkusnexus.com/mind- hub#ABOUT; MIND Hub on LinkedIn, https://www.linkedin. 55 Office of Governor Gavin Newsom, “Governor Newsom com/company/mexico-innovation-development-hub-mindhub/ and Governors from Baja California States Re-Establish about/; content provided by Marco Barraza, VP Enterprise ‘Commission on the Californias’”, December 4, 2019, Operations, Arkus, Inc. https://www.gov.ca.gov/2019/12/04/governor-newsom-and- governors-from-baja-california-states-re-establish-commission- 41 “¿Todo esto puedo hacer aquí?” BlueBox, accessed of-the-californias/. April 19, 2020, https://www.blueboxmx.com/ todo-eso-puedes-hacer-aqui. 56 Interview with Max Oltersdorf, Deputy Director for International Affairs and Trade, Governor’s Office of Business and Economic 42 Content provided by Mark Rinder and Enrico Robles, Endeavor Development, State of California. México; Endeavor website, https://www.endeavor.org.mx/. 43 The Baja Post, “[:en]CEID building grand opening at CETYS Monterrey University Campus Mexicali[:es]Inauguran edificio CEID en Cetys Campus Mexicali[:],” January 31, 2018, https://www. 1 Government of Nuevo Leon, Ministry of Economy and Labor, thebajapost.com/2018/01/31/ceid-building-grand-opening-at- “Nuevo León Investment Guide: To live, to work and to cetys-university-campus-mexicali/. do business,” 2019, https://www.businessnuevoleon.com/ investment-guide. 44 Thinking Heads, “Jordi Muñoz,” accessed April 29, 2020, https://www.thinkingheads.com/en/speakers/jordi-munoz/. 2 Monterrey Manufacturing Development Information Office, “Monterrey Companies Examples by Sector.” 45 Ryan Mac and Aaron Tilley, “Behind the Crash of 3D Robotics, North America’s Most Promising Drone Company,” 3 Texas Department of Transportation, “Texas-Mexico Forbes, October 5, 2016, https://www.forbes.com/ International Bridges and Border Crossings,” December 2019, sites/ryanmac/2016/10/05/3d-robotics-solo-crash-chris- https://ftp.dot.state.tx.us/pub/txdot/move-texas-freight/ anderson/#777fadf53ff5. The company eventually exited the studies/texas-mexico-bridges-crossings-2019.pdf. market due to strategic issues brought on by competitive 4 Oxford Business Group, “Nuevo Leon Government is Leading pressure from DJI, China’s leading drone producer. the Push for Industry 4.0,” chapter in The Report: Mexico 2018, 46 Good Neighbor Environmental Board, “Energy Production, https://oxfordbusinessgroup.com/analysis/adapting-future- Transportation and Demand in the Transborder Region: state-government-leading-push-industry-40; content provided Opportunities and Impacts, Nineteenth Report of the Good by David Ortega, Director, CIDESI Nuevo León; http://piit.org. Neighbor Environmental Board to the President and Congress mx/piit.php. of the United States, December 2019, p.76, https://www.epa. 5 Briney, Amanda, “Mexico’s 31 States and Single Federal gov/sites/production/files/2020-01/documents/19thgneb_ District,” ThoughtCo., July 25, 2019, https://www.thoughtco. report_published_final_508compliant.pdf. com/states-of-mexico-1435213. 47 Institute of the Americas, “Baja California: Energy Outlook 6 Secretaria de Educación Pública, “Sistema Educativo de los 2020–2025,” February 2020, p. 3, https://www.iamericas.org/ Estados Unidos Mexicanos Principales Cifras 2017–2018,” documents/energy/reports/Baja_Energy_Outlook_2020_2025.pdf. https://www.planeacion.sep.gob.mx/Doc/estadistica_e_ 48 T.R. Goldman, “How Mexican Wind Lights San Diego Homes,” indicadores/principales_cifras/principales_cifras_2017_2018.pdf. Politico Magazine, February 16, 2017, https://www.politico. 7 Information provided by Martha Leal González, Director com/magazine/story/2017/02/mexico-wind-farms-renewable- of Planning, Postgraduate, Outreach and International energy-san-diego-border-214789. Cooperation and Networks, Instituto de Innovación y 49 IEnova, “Nuestros Servicios,” accessed April 29, 2020, https:// Transferencia de Tecnología (I2T2). www.ienova.com.mx/servicios.php?elec.

25 The Baja California and Nuevo León Industry, Innovation, and Talent Clusters

8 Government of Nuevo Leon, Ministry of Economy and 23 “About Us,” CEMEX Ventures, accessed March 13, 2020, Labor, “Doing business in Nuevo Leon,” 2018, http://www. https://www.cemexventures.com/about-us/#our-offer. congresocomce.org.mx/wp-content/uploads/2019/05/BNL- 24 “CEMEX Ventures invests US$1M in Chile’s Ipsum,” 2018.pdf. LAVCA, January 10, 2018, https://lavca.org/2018/01/10/ 9 Content provided by Sergio Ortiz Valdés, California Office cemex-ventures-invests-us1m-chiles-ipsum-en-espanol/. Director, Tecnológico de Monterrey; “Data and Figures,” 25 “StructionSite Raises $1.5M Seed Financing,” FinSMEs, Tecnológico de Monterrey, accessed April 24, 2020, https:// January 7, 2019, http://www.finsmes.com/2019/01/ tec.mx/en/data-and-figures; “Top Schools for Entrepreneurship structionsite-raises-1-5m-seed-financing.html. Studies 2020 Press Release,” The Princeton Review, November 12, 2019, https://www.princetonreview.com/press/top- 26 CEMEX, “Building a Stronger CEMEX: 2018 entrepreneurial-press-release; “Economic and social Impact Integrated Report,” 2019, https://www.cemex.com/ of Tecnológico de Monterrey graduates in the world: 75 documents/20143/47791895/IntegratedReport2018.pdf. years of entrepreneurial legacy,“ Tecnológico de Monterrey, 27 “The First Digital Transformation Ecosystem in Mexico: 2019, http://sar.itesm.mx/ranking_2019/75_years_impact_on_ Monterrey Digital Hub,” Business Wire, July 12, 2018, https:// economy.pdf. www.businesswire.com/news/home/20180712005924/en/ 10 Endeavor Insight, “Evaluation and Network Analysis of the Digital-Transformation-Ecosystem-Mexico-Monterrey-Digital-Hub. Monterrey Tech Sector,” October 2018, https://www.endeavor. 28 “NEORIS Announces Strategic Global Expansion,” org.mx/data_lab.html. 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Cooperation and Networks, Instituto de Innovación y Transferencia de Tecnología (I2T2). 33 “About Us,” Infosel, accessed March 14, 2020, https://www. infosel.com/corporativo/quienes-somos/. 13 Csoftmty, “Cluster TIC de Monterrey,” 2019. 34 Naranya on Facebook, accessed March 14, 2020, https://www. 14 Endeavor Insight, “Evaluation and Network Analysis of the facebook.com/pg/NaranyaGroup/about/. Monterrey Tech Sector,” October 2018, https://www.endeavor. org.mx/data_lab.html. 35 Arturo Galván on LinkedIn, accessed March 14, 2020, https:// www.linkedin.com/in/arturogalvan/?originalSubdomain=mx. 15 Ibid. 36 “Naranya Profile,” Thalamus, accessed March 14, 2020, 16 AMEXCAP, Mexico VC Overview 2019, http://amexcap.com/ https://www.thalamus.co/buyers/naranya. contenido/overview-of-the-venture-capital-industry-in-mexico- october-2019. 37 “Our Story,” Naranya website, accessed March 14, 2020, http://www.naranya.com/our-business/. 17 Enlace+ website, accessed March 12, 2020, http://enlacee.org/. 38 Softtek, “2018 Sustainability Report,” 2019, http://www. 18 Endeavor website, accessed March 12, 2020, https:// softtek.com/images/public/docs/03sepeng-sustainability- endeavor.org/. report-softtek-2018pages.pdf. 19 Monterrey Digital Hub website, accessed March 12, 2020, 39 Interview with Luis Garza Sada, December 10, 2019. https://mtydigitalhub.com/. 40 Interview with Tuto Assad, December 18, 2019. 20 NEORIS press release, “NEORIS Announces Creation of Innovation Labs Worldwide to Create a Smarter 41 Interview with Carlos Guillermo Elizondo, September 2019. Future,” July 16, 2018, https://static1.squarespace.com/ 42 Lourdes Flores, “Nuevo León apuesta por energías static/5b51602f1137a69fe86ba917/t/5b5904718a922d06e011 renovables,” El Economista, October 24, 2018, https://www. 64c9/1532560497989/PR+2018+Jul+Innovation+Lab.pdf. eleconomista.com.mx/estados/Nuevo-Leon-apuesta-por- 21 Csoftmty, “Monterrey: Capital of Digital Transformation.” energias-renovables-20181024-0113.html. 22 “Cemex Ventures launches Construction Startup 43 Endeavor Insight, “Evaluation and Network Analysis of the Competition,” AEC Magazine, February 19, 2019, https:// Monterrey Tech Sector”, October 2018, https://www.endeavor. www.aecmag.com/technology-mainmenu-35/1756-cemex- org.mx/data_lab.html. ventures-launches-construction-startup-competition.

26 Project Sponsor Stanford–USAID Mexico Clean Economy 2050 Global Development Alliance

Project Partners

Image Credits Front Cover Top Left: ITESM Biotechnology Center; photo by Page 8: CICESE auditorium; photo by Agencia Informativa Bas Rouge on Wikimedia Commons Conacyt on Wikimedia Commons Front Cover Top Center: View from the Library at Tec de Monterrey; Page 13:View of Monterrey; photo by Guillermo Otero on Flickr photo © 2020–Idea Cúbica–Fotografía Arquitectónica Y Video Page 14: UDEM Main Administration Building; photo by Drone Monterrey–Jorge Taboada; courtesy of Blas Henríquez purolipan on Flickr Front Cover Top Right: San Ysidro border crossing; photo by Phil Page 15: Tec de Monterrey Rector’s Office and Advanced Konstantin on Flickr Technology Center; photo by Creative Commons Monterrey Page 3: Gateway to Mexico sign, Tijuana; photo by Gautam on Wikimedia Commons Krishnan on Unsplash Back Cover: US and Mexico flags; photo by Omar Barcena on Flickr Page 6: Postgraduate Building, CETYS Tijuana campus; photo by Gabriel on Flickr About the Bay Area Council Economic Institute Since 1990, the Bay Area Council Economic Institute and the state, including infrastructure, globalization, has been the leading think tank focused on the science and technology, and health policy. It is guided economic and policy issues facing the San Francisco by a Board of Advisors drawn from influential leaders in Bay Area-Silicon Valley, one of the most dynamic regions the corporate, academic, non-profit, and government in the United States and the world’s leading center sectors. The Institute is housed at and supported by for technology and innovation. A valued forum for the Bay Area Council, a public policy organization that stakeholder engagement and a respected source of includes hundreds of the region’s largest employers information and fact-based analysis, the Institute is a and is committed to keeping the Bay Area the trusted partner and adviser to both business leaders world’s most competitive economy and best place and government officials. Through its economic and to live. The Institute also supports and manages the policy research and its many partnerships, the Institute Bay Area Science and Innovation Consortium (BASIC), addresses major factors impacting the competitiveness, a partnership of Northern California’s leading scientific economic development and quality of life of the region research laboratories and thinkers.

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