There’s a new wave of startups setting up offices in Latin America for their internal back office and customer service requirements as they attack the US and other English-speaking markets.
This trend is growing fastest in Chile, particularly with certain small-time companies that have secured funding from Startup Chile – a government-backed accelerator – in recent years.
“There are benefits to handling these things from Chile, because we can offer lower salaries in exchange for a high quality of life,” said Sean Park, Co-founder of GroupRaise, a US startup that has developed an app to attract fundraising events to restaurants in the States.
However, GroupRaise is not yet utilizing Chile’s local talent for customer service, instead finding expats in the local area, or intentionally flying in agents from the US to work in the country – and it’s not the only startup doing so.
Last year, we reported that Chile was seeing a large upsurge in the English capabilities of its population, and there is great talent in the country excelling in a variety of other roles, particularly programming, marketing, design, and operations.
The question is, why are foreign startups not leveraging local talent in their internal customer service roles?
Importance of Language and Culture
Alongside its headquarters in the States, GroupRaise is attracting large investments from both Latin America and the US.
The company has around 5,500 participating US restaurants so far, also reporting a 50% month-by-month growth in last year. Their goal is to be working with more than 10,000 restaurants by the end of 2017.
GroupRaise’s Chilean setup is focused on customer service and marketing, and serves anything between 500 and 1,000 US-based customers per day, utilizing Zendesk for omnichannel support.
“Fluent English is the number one criteria for customer support,” said Park. “We can’t risk unnatural communication for our customers and we have to stay local, so we focus on hiring expats for that. We have interviewed some Chileans, but we were always able to find expats who understand the culture and the language better. Given that our clients are schools and non-profits, culture plays a huge role.”
For Customer Service, its Expats Only
Another company, The Intern Group, has 12 offices around the world, including one in both Colombia and Chile, where a lot of its management team is based.
The company’s local office in Medellin is used to run their emerging markets internship program, while in Santiago they focus on operations and day-to-day processes, such as admissions, finance, marketing, and customer service for general requests.
In this case, most of the company’s employees in Santiago are expats, but there are no Chileans on the customer service team.
“Our customer-facing team is made up of native English speakers,” said Lexie Kadlec, Director of Enrollments at The Intern Group. “We employ native speakers in Chile for two main reasons: firstly, we practice what we preach; all members of our admissions team are living abroad, which allows them to relate more to the students who apply to our programs. Secondly, having our operations team in Santiago allows us to lower the cost of our internship programs for students. Our mission is to create more accessibility to international education and keeping a team based in a lower-cost city helps with this.”
Like GroupRaise, The Intern Group initially won a grant from Startup Chile, funding its first couple of years. “It’s very convenient to start a business in Chile for foreigners as there aren’t many loopholes to go through. Santiago is a modern city, so expats find it easy to fit in and work there.”
External Recruiting Across the Board
Nathan Lustig, Managing Partner at Magma Partners, seed-stage VC firm in Latin America, has seen expats join these startups across all levels and responsibilities. “One company recruited a high-level executive from the US who has now been with them for three years,” he said. “We also see fresh-out-of-school programmers, content writers, and marketing and sales people coming down to live in Latin America. They might also have large amounts of student debt, so come to live really well for less money. If they can make good money with a tech company that does business in the States, they can get out of debt much faster and have a higher quality of life than back home.”
The companies with offices in both the US and Latin America are seeing the benefit in recruiting people in the States and moving them south for their back office roles, as those people are willing to take a pay cut in exchange for the experience, according to Lustig.
“Someone who makes $100 per hour in the US might only make $60 in Chile, but the opportunity is seen as a huge perk,” he explained. “If you’re working for a Latin American tech company, you’re for sure going to make less than you would in the Valley, but if you find one that’s selling to the States or Europe, you can likely make around 70% of a US salary. However, the cost of living is so much lower, so it balances out.”
Since 2010, this trend has been steadily growing in Chile, particularly when any country in the region experiences any economic or political problems.
For example, there was an influx of US Study Abroad participants that left Argentina between 2010 and 2012 to move to Santiago. Also, after the US election last year, Lustig found that inbound requests to work for startups in Chile spiked, and he expects it to continue growing.
As this influx of US workers coming to Chile increases each year, the country will need to step up its game considerably to ensure that foreign businesses look harder at hiring local talent, rather than relying on a constant stream of expats.