Chile: Latin America’s answer to Silicon Valley?
by Dale Quinn The Financialist
On November 20th local and foreign entrepreneurs converged in the Chilean capital of Santiago to pitch their start-up ideas to thousands of potential investors.
The entrepreneurs had been accepted into an intensive six-month incubator program financed by the Chilean government, which is seeking to diversify the country’s resource-driven economy by establishing it as Latin America’s tech hub.
The program, known as Start-Up Chile, was launched in 2010, and entrepreneurs who have been involved say it has already sparked an atmosphere of creative collaboration in the country.
The incentives for start-ups to set up shop thousands of miles from California’s Silicon Valley and other obvious tech hubs are impressive: $40,000 in seed money with no equity requirement and a one-year visa for entrepreneurs to develop their projects.
A start-up is typically rich in ideas and potentially valuable equity, which it often must sell early on to fund its growth. Start-ups are attracted to a program that helps them fund their operations while maintaining full control of the company.
The Chilean government hopes that by drawing global entrepreneurs to the country, it will create an atmosphere that inspires local techies to launch their own potentially game-changing ideas.
Jose Miguel Irarrazaval, Head of Investment Banking in Chile for Credit Suisse, says the program, part of President Sebastián Piñera’s ongoing effort to increase the entrepreneurialism of the population, is good for Chile.
“The program carries economic clout when considering that in Chile roughly 80 percent of jobs are generated by small- and mid-size businesses,” Irarrazaval tells The Financialist.
“We are a commodities-based economy, but we need to diversify, and over the next decades initiatives like Start-Up Chile could help create what could be a viable tech industry,” Irarrazaval continues.
So far, the program has been successful. Over the past two years, Start-Up Chile has received more than 6,500 applications from around the world, and 602 companies have been accepted into the program.
Using cash from mining taxes, the Chilean government aims to invest $40 million in 1,000 start-ups through 2014, Horacio Melo, the program’s executive director, tells The Financialist.
As part of the program, participating companies must send a founder to Chile for six months to collaborate with other entrepreneurs, participate in local events and present workshops in their area of expertise.
“One of the best things about Start-Up Chile was the peer-to-peer mentorship,” says Jonny Miller, a co-founder of Maptia.
Miller’s Seattle-based company is working on building maps that will allow users to discover the personality and culture of places around the world.
While in Chile, Maptia organized the “Travel Tribe,” which brought together other travel ventures involved in Start-Up Chile to brainstorm ideas and discuss challenges, Miller says.
An attractive aspect of the program is that once the six months are up, there is no obligation for the company to remain in Chile.
“We make sure that, when they are here in Chile, they mentor Chileans, talk at universities, hire Chilean talent and expose all these people to what being a global entrepreneur is like,” Melo says.
That philosophy works in the program’s favor, says Krista Canellakis, a co-founder of UrbanKIT.
Canellakis and her partner Marisol García, who is Chilean, are building a crowd funding website where individuals and communities can pitch ideas for neighborhood improvements and solicit funding.
While most of the start-ups are genuinely committed to making a difference locally, they like the idea that they can leave, Canellakis says.
“If they were more clingy to the start-ups, you wouldn’t get as many people down there with such amazing ideas,” Canellakis says.
Start-Up Chile has put the Latin American country on the map for entrepreneurs around the world, as those who participate in the program share their experiences with other like-minded people, Canellakis says.
Mariano Kostelec, the co-founder of UniPlaces, a website that helps international students find housing when they move overseas, says his company is fine-tuning its model in Chile and Portugal, with plans to spread to North America, Europe and beyond.
Kostelec says Chile offers UniPlaces a good test market, but without the seed money Start-Up Chile provides, “we wouldn’t have come to Chile at this stage.”
Still, there are other reasons for entrepreneurs to choose Chile as the launching pad for their companies, says Credit Suisse’s Irarrazaval.
“If we look at the professional standards, our universities are well-placed among peers, our economy is stable and the legal environment is also well recognized,” he says.
“I think the program goes in the right direction to promote innovation and the development of new companies.”
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Photo courtesy of: Start-Up Chile
