Tarun George
By Josette Rigsby
Entrepreneurship is experiencing a surge of support in Chile. Traditionally, the environment has been very risk averse, and not conducive to the volatility of entrepreneurship. My, how times have changed. Chile has dedicated itself to becoming the innovation and entrepreneurial hub of Latin America, and based on all of the activity since 2010, they just might pull it off.
The Chilean Government’s Ministry of Economy created Start-Up Chile to attract foreign entrepreneurs to the country and spur on the domestic entrepreneurial spirit. The program offers the fledgling foreign companies a $40 million grant to participate for six-months, a one-year Visa and access to mentorship and resources to aid in developing their concept.
Nearshore Americas spoke with Brenna Loury of Start-Up Chile to understand the program and to answer the burning question, “Why import external resources instead of incubating domestic entrepreneurs?” According to Loury, the program started exclusively with foreign entrepreneurs to encourage interaction between foreign and local resources with the goal of helping local entrepreneurs step “outside of their box.” And despite my initial skepticism of the concept, it seems to be working.
In the first year of the program, 2010, the pilot phase, 23 entrepreneurial teams from 14 countries participated. The organizers have a goal of 300 participants and eventually 1,000 by 2014. Start-Up Chile tracks various metrics on the participating entrepreneurs like participation in local events, presenting workshops on their particular expertise, raising local or international capital, and contracting talent to ensure they are becoming integrated into the fiber of the country. “It’s been an absolutely incredible learning process,” Loury said. “It went from just an idea to a world-recognized program. People and other countries have been very receptive to the concept. We learned you can’t just throw money at people. You have to create an environment for entrepreneurship.”
The success and popularity of Chile’s model has spurred the launch of similar programs globally. Start-Up America launched in January. Britain launched its startup endeavor in March. This month Greece has jumped onboard the government sponsored startup program.
Start-Up Chile will be announcing the next 100 participants on the program blog on Tuesday 04/26/2011.
Other Programs Encouraging Chilean Entrepreneurs
Start-Up Chile isn’t the only egg in the Chilean government basket. Last month, the Chilean Economic Development Agency announced the initial phase of the Global Connection program. Unlike Start-Up Chile, which imports talent, Global Connection is exporting 20 Chilean tech entrepreneurs to Silicon Valley to incubate in the Plug & Play Tech Center.
The Chilean Economic Development Agency provides participants:
- Plug & Play’s incorporation fee
- Three months in the incubator, which has a value of US$12,000
- Financial support for flights, housing, and insurance up to US$4,000
That is a fairly impressive package of winnings for any new company. The goal of Global Connection is to send 120 Chilean startups to Silicon Valley through the program before 2014.
The Implications
What are the implications for Chile of this focus on entrepreneurship? It could potentially increase the matriculation of young knowledge workers out of the developing country and make Chile much more capable of competing on a global scale. We can’t be sure that these programs will achieve their very aggressive goals, but we’ll definitely be watching.
It's too early to conclude that Start-Up Chile is a success, and it is arguably a failure. Organizations that are managed well try to solve problems by identifying a specific point of intervention and applying their efforts against a theory of change. Unfortunately, Start-Up Chile refuses to identify a specific point of intervention.
The government of Chile should justify intervention into a healthy free market by identifying the supposed “market failure”; in other words, telling a story that describes a process in which the intervention will be phased out and the free market revives. It should be a credible story where everybody prospers, including taxpayers, investors, and companies in Chile. If entrepreneurs sense that something is hidden in the “fine print” or that taxpayers are being fleeced for the benefit of the infotech industry, then it will hinder efforts to attract the goal of 300 entrepreneurs during the next 12 months.
There is no statement of a problem that Start-Up Chile is trying to solve that justifies a government intervention, nor is there a proposed theory of change to solve the supposed problem.
Steve Blank identifies another reason Start-Up Chile will fail:
"Perhaps it was just who I was meeting, but for a country so focused on innovation and startups the lack of venture capitalists was noticeable. Given the interesting things going on in the engineering labs I visited and the startups I met, one would have thought the place would have been crawling with VC’s fighting over deals. Instead it felt like the government – through CORFO – was doing most of the risk capital investing. Given that great VC’s are much, much more than just a bag of money, this means that startups lack experienced board members with practical experience."
I wrote a longer explanation: http://brophyworld.com/startup-companies-in-chile…