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Silicon Valley is not alone anymore: The phenomenon of technological startups in Chile

Silicon Valley is not alone anymore: The phenomenon of technological startups in Chile

Posted by Clarisa Herrera on February 24, 2014

Silicon Valley is without a doubt the gravitational centre of technological entrepreneurship. However the mecca of startups has seen alternative entrepreneurial ecosystems rise and consolidate. Such is the case of Chile.

While there is many entrepreneurial centres in latin america, there is one that over shines above all the others: Chile. About four years ago, the chilean government transformed Chile into a magnet for technological entrepreneurs around the world, with the purpose of creating a cultural change that supported entrepreneurial activity.

The core of this plan, was the launching of Start-Up Chile (Which will start receiving 2014 applications on March 4th 2014), an initiative that has earned world wide recognition and that has exceeded expectations: said Horacio Melo, Executive Director of the program. So far, more than ten thousand projects coming from more than 100 countries have applied, and 750 of these projects have already been funded. Even more importantly, almost 17% of this projects have already earned more than 150 million USD in total private funds after being in the program. 

How would you describe the program in a few words?

We attract entrepreneurs form all around the world to invest in Chile. We give them 40 thousand dollars, give them a work visa for a year and other things that make it easier for them to develop their projects, from an office to social networking with other companies and investors in the US and Europe, but we do this without taking part in the company itself.

How does the Chilean government benefit itself from giving all these opportunities to foreigners?

Our goal with the project is to create a cultural change in Chile that allows us to have more chilean entrepreneurs and a healthier environment; this means more investors, more universities focusing on entrepreneurship, etc. We do this by giving each company not only the money and the social networks they need, but also 4000 virtual points that they have to use in Chile by doing any type of activity that promotes entrepreneurship. These activities can be mentoring local startups, organizing hackathons, or basically any other pro entrepreneurship activity.

Which indicators serve to evaluate the program’s performance in this four years?

The program has received more than 10 thousand projects from 100 different countries, a very positive outcome considering that our goal was to be very global but without spending a cent on Marketing. This has happened thanks to the visibility this program has around the world. We have funded more than 750 projects in more than 65 countries and we have also organized more than 3 thousand activities that have had more than 150 thousand people between participants and spectators. So far, almost 17% of the projects in the program have received more than 150 million US dollars in private funds after being part of Start-Up Chile. This is a great sign because it shows the program helps projects grow and that after being part of the program, the probability of success for each project increases.

Besides, the project has given Chile an image of an entrepreneurship mecca; Washington Post and  The Economist and other media have mentioned us, positioning Santiago de Chile as one of the top project booster cities on earth. We evaluate success with the following criteria: cultural change, success of the projects and the image of Chile as a pro entrepreneurship country.

From which countries outside latin america do you receive entrepreneurs?

US and Canada (as an example please refer to the Canadian startups on 2011). There is also a considerable amount of startups in Germany, Spain, England, and even China, Singapore and Zimbabwe, just to name a few.

It is said that in this industry, visas and bureaucracy stop many entrepreneurs from going to Silicon Valley. Has Chile managed to make this processes easier?

In general, entrepreneurs think that governments shouldn't promote entrepreneurship because they do it in the wrong way. “The wrong way” meaning that they are bureaucratic and slow. Bureaucracy it self has to do with both the size of the nation, and with the biggest companies. The beauty of Start-Up Chile is its flexibility; It has managed to reduce bureaucracy considerably and to relate with the entrepreneurs in the way they need it the most.

What is the vision you have about latin america? In which countries do you see entrepreneurial ecosystems getting stronger?

The general picture is good. It has caught my attention the high quality of argentinian entrepreneurs despite the lack of support they’re getting these days. We get a lot of them and they are good. Now, Brazil is a huge market and it will always be very attractive for that reason; what you do there is always global. Colombia is also doing interesting things related to entrepreneurship and the increase of internet insight. Peru is making an interesting effort to impulse entrepreneurship and position itself that way. Mexico is in a very similar situation as Brazil’s. If we look at it as a whole, the situation on each country complements the others. Chile is a good business platform, Argentina, as I said before, has very good entrepreneurs. It wouldn’t be surprising to see successful argentinian entrepreneurs operating in Chile or chilean entrepreneurs operating in Brazil because of the size of the market there. I think the future of the region is very bright.

I have read that in Chile, universities are still not very involved with entrepreneurship, is that true?

Universities are more committed with entrepreneurship every time, and there’s many with interesting programs going on, they are on a good path. Once one starts, the rest follow. Companies and universities have started to become close to startups.

In your opinion, what things should the program work on, or what is there to improve?

Our model is based on how startups work, something that has changed in the past few years. Today, challenges go from how to improve the quality of the projects, in terms of how to support them more and in a better way, by adjusting the selection model, to how to keep improving the acceleration model. By this I mean increasing the chances of these projects of being successful. In that sense, we want to give privileges to those projects among the chosen ones, that are more advanced in terms of traction for example.

Start-Up Chile boosts the projects, and in general, money for the first faces of each project of the startups is not what is scarce, but rather for the growth after. What do you think about this?

There’s enough money, but there’s just not enough being invested on angel investments or venture capital. About five years ago, investors in Chile said that they would invest if there was enough deal flow (amount of potential investments that an investor revises during a determined period of time) in the country they are looking to invest in. Today, there is deal flow and the change is noticeable. In the past two years more than 10 new funds have started to actively invest in startups. Nowadays the market is led by Kaszek Ventures (founders of the argentinian company  MercadoLibre)  but there is a movement of latin american investors that are looking forward to get into the industry. As projects improve their quality, funding increases. What we see is that if there is a project that wont get funding in latin america, investment can be obtained from the US.

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