Startups or stagnation. The future of our cities is at stake

Cities in Mexico and the United States are entering a decade in which competitiveness will depend less on megaprojects and more on their ability to incubate and scale startups that solve urban challenges: electric mobility, water, housing, security, and digital services. Data from 2024 confirms this shift: investment in Latin American startups grew 26% year over year, with Mexico leading the regional recovery through significant rounds in fintech—a clear indicator of appetite for innovation applied to urban life.

In the United States, venture capital restructured and raised the technological bar: AI accounted for 46.4% of the total invested value in 2024; the fourth quarter alone reached $74.6 billion, dominated by mega-deals in AI. Meanwhile, funding for climate tech fell for the third consecutive year, closing 2024 at $12.9 billion—a signal that the urban energy transition is not advancing at the pace required by climate goals unless paired with public demand and pro-innovation regulation. Fundraising for new U.S. funds reached $76.1 billion in 2024 (508 funds), just above pre-pandemic levels: there is capital, but it is more selective. Cities that integrate startups into public procurement and regulatory pilots will attract a greater share.

Industrial and innovation policy also reshaped the map. In 2024, Washington put money behind its rhetoric: the Tech Hubs program allocated $504 million to 12 regional hubs to spread critical technologies—ranging from semiconductors to biofabrication—beyond traditional poles, while the NSF launched the Regional Innovation Engines: 10 consortia with $15 million in seed money each and potential of up to $160 million over ten years. For cities, this means stable resources for test infrastructure, technology transfer, and linkages with local SMEs.

On the Mexican side, 2024 marked a turning point. Endeavor and Glisco recorded a rebound of capital toward later stages, with Mexico leading the region; fintech captured 37% of investment in the first half of the year, supporting municipal digital banking and payments. This momentum aligns with the binational semiconductor agenda—announced by the U.S. and Mexico in March 2024—and the creation of the Kutsari national design center, with accelerated talent-training programs. The urban reading is clear: more high-tech supply chains in Guadalajara, Tijuana, and Ciudad Juárez mean local startups solving for water, energy, logistics, and housing to support expanding nearshoring ecosystems.

Yet traction is not guaranteed. Mexico is advancing in assembly, testing, and packaging of chips, with Guadalajara as a hub, but faces a talent gap that limits execution speed. Without resolving that bottleneck—through scholarships, bootcamps, and binational university-industry exchanges—cities will see anchor projects without the “capillaries” of local startups addressing challenges such as smart water monitoring or peak demand management in electricity.

If 2024 taught anything, it is a double lesson for local governments. First, public demand can revive strategic verticals: proptech with AI captured a record $3.2 billion despite the broader slowdown, as cities and developers sought energy efficiency, leak reduction, and faster permitting. Second, when municipalities open the door to pilots—from water sensors to traffic analytics—they create evidence that de-risks startup procurement, multiplying the impact of private capital.

Looking ahead to 2025, my position is clear: Mexico and the United States must turn their cities into scaling platforms. That requires five concrete moves. One, startup-friendly procurement with performance-based contracts and catalogs of validated solutions; without demand, capital will continue skewing toward “horizontal” AI rather than urban solutions. Two, city-VC co-investment funds anchored in Tech Hubs/NSF in the U.S. and state/banobras funds in Mexico, with measurable urban impact metrics. Three, fast-track talent accreditation: binational bootcamps in semiconductors, data, and cybersecurity—the 2024 evidence shows the talent bottleneck is now the critical factor. Four, adaptive regulation: Mexico must update its fintech law to integrate digital identity and municipal open finance; without that, urban financial inclusion will stall. Five, reliable urban data: without interoperability standards and ethical governance, mayors cannot buy or evaluate urban AI with transparency, and the capital pendulum will keep drifting away from climate tech despite urgent local needs.

In sum: 2024 brought strong signals—26% more investment regionally, AI as a value driver in the U.S., and industrial policies that decentralize innovation—but 2025 will decide whether cities capitalize on this wave or watch it pass. The difference between an urban hub that attracts well-paid jobs and one that loses competitiveness will depend on how quickly they transform their entrepreneurial base into essential providers of public services, affordable housing, clean mobility, and water resilience. This is not rhetoric: it is municipal economic policy applied with metrics, contracts, and talent.

Written by: Editorial

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