Start-Up Chile’s Global Footprint
Jonathan Ortmans, President, Public Forum Institute
As part of our ongoing discussion about the globalization of the startup movement, we look today at one nation’s strategy that appears to be very effective. Present at the recently concluded Global Entrepreneurship Congress in Liverpool were the leaders of Start-Up Chile, an almost two-year old initiative that has rapidly gained traction around the world. However, while it carries a similar name to other national initiatives around the globe, it has a very different approach.
Unlike the Startup America or StartUp Britain movement, Start-Up Chile works more like a focused incubation program than a platform for initiatives or public relations. Startups from any part of the world can apply for the program and those selected receive a US$40,000 government grant as seed capital, a one-year work visa, office space and unlimited access to its extensive network of local and global contacts. The selected businesses must come to Chile for a minimum of six months, after which they are free to take whatever steps necessary to grow.
As Vivek Wadhwa, an advisor to the program’s creators, pointed out in some of his many articles on Chile´s approach to innovation, the Chilean government is capitalizing on a turning point in the American tech sector as U.S. visa difficulties combined with a slow recovery are pushing talent toward other economies. It was a risky political move, but its impact on the economy soon became evident.
The success of Start-Up Chile has expanded beyond attracting talent. It is creating an increasingly fertile entrepreneurship ecosystem by fulfilling the mission spelled out in one of the program´s promotional videos: "They arrive. They work. They connect. They leave—and Chile stays connected." The program now has an annual budget of about $15 million per year and a pile of more than 1,600 applications from 70 countries, nearly 500 participants, and now 220 foreign startups in Chile that employ 180 locals and 143 abroad. In fact, Horacio Melo, executive director of Start-Up Chile, recently told The Santiago Times that he had been visiting Silicon Valley to advise others on the Start-Up Chile model.
That Chile is breathing life to innovations is great news in itself. Granted, the Chilean economy has been recognized as the most competitive of Latin America—it was the first South America country invited to become a member of the OECD. However, until recently Chile was not yet a startup culture and innovation still played a minor role in the creation of new enterprises, according to the infoDev Incubator Support Center service from the World Bank.
Beyond the powerful network of mentors, entrepreneurs and local talent it has created, the program is putting Chile on the maps of investors. This is an important step for Chile, which is still lacking investors in startups. According to Melo, of the 84 teams that were in Start-up Chile´s first generation of companies, only about 15 to 20 percent stayed—the rest couldn’t find investors there. Now starting with its third generation of companies, the program's leaders report much growth in terms of local and foreign investment. For example, the Harvard Business School graduates behind SaferTaxi, which was part of the second round of selected companies, received US$1 million from a U.S. investor, and have since extended their company´s operations from Chile to Brazil, Argentina and the U.K. The first batches of foreign startups have raised so far a total $8 million in venture capital financing from firms in Argentina, Brazil, France, the U.S. and Uruguay. Results like these remind the program's architects, as Vivek Wadhwa recently put it in a piece in BusinessWeek, Want More Startups? Learn From Chile, that the argument against the program that you can’t build a Silicon Valley without venture capital, is moot.
The mere exposure to working in a startup can become an important outcome of this program for Chile, especially if it encourages more locals to do the same. Endeavor Chile found that the profile of the successful innovative entrepreneur in Chile includes previous experience in one or more ventures prior to founding a successful enterprise. This impact will complement efforts at universities like the Universidad Técnica Federico Santa María and its International Institute for Innovation and Entrepreneurship (3IE) which is helping convert knowledge and ideas into prototypes, products, and new companies. My bet is we will see more Chilean startups on the global entrepreneurship scene, like BioFiltro, the Chilean company that is commercializing a waste-water treatment system first developed at the University of Chile and that became last year´s Cleantech Open Global Ideas Competition winner.
Chile`s leadership is likely to continue to translate its faith in the private sector as an engine for growth into concrete policies that reduce the barriers to starting and growing businesses. If it works towards this goal beyond immigration to education, access to finance, regulation and other areas intersecting entrepreneurship, Chile is sure to be a top startup nation and fierce competitor in the race to build the most attractive startup ecosystem.
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