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Friday, October 12, 2012
REMEMBER WHEN BUSINESSES FLOCKED TO THE USA?
Are you old enough to remember when business CAME to the USA?
My, how times have changed.....
Last one out - turn off the lights, please.
The lure of Chilecon Valley
As America shuts out entrepreneurs, Chile welcomes them
Oct 13th 2012 | SANTIAGO | from the print edition
by one they came to the stage and pitched their ideas to the crowd.
There was the founder of Kwelia.com, which makes software that helps
landlords mint more money from their properties. There was the
co-founder of Chef Surfing, an online service for people looking to hire
chefs, and for culinary wizards keen to tout their skills. And the
creator of Kedzoh, which has an app that lets firms send short training
videos to workers via their mobile phones or tablet computers.
and other start-ups, some sporting fashionably weird names such as Chu
Shu, Wallwisher and IguanaBee, won rapturous applause from the
entrepreneurs and venture capitalists in the audience. To your
correspondent, who is based in Silicon Valley, it all felt very
familiar. Yet this scene took place in Chile, a nation better known for
copper-mining and cheap wine than for innovation.
countries have sought to create their own versions of Silicon Valley.
Nearly all have failed. Yet Chile’s attempt is interesting because it
exploits the original Silicon Valley’s weak spot—America’s awful
immigration system. When the home of free enterprise turns away
entrepreneurs, Chile welcomes them.
Chile” is the brainchild of Nicolas Shea, a Chilean businessman who had
a brief stint in government. The programme selects promising young
firms and gives their founders the equivalent of $40,000 and a year’s
visa to come and work on their ideas in Chile. Since 2010, when Start-Up
Chile started, some 500 companies and almost 900 entrepreneurs from a
total of 37 countries have taken part. Start-Up Chile has doled out
money to Chileans, too (see chart).
Shea says he was inspired by his experience in America, where he
studied at Stanford University, a wellspring of high-tech start-ups. “I
saw smart people being kicked out of the United States because they
couldn’t get visas to stay,” he says. “And I thought: why not bring some
of them to Chile?”
several other countries, including Brazil and Mexico, Chile wants to
establish itself as the entrepreneurial hub of Latin America. It has
launched government-funded seed-capital programmes to back local
start-ups and made it easier to set up a new company swiftly. Via
Start-Up Chile it has also been importing foreign entrepreneurs, in the
hope that they will inspire homegrown ones.
Getting handy in the Andes
programme has been a big hit with foreigners, which is hardly
surprising: they get to build their businesses with Chilean taxpayers’
pesos without having to give up any equity. Many rave about their time
in the country, where they can write software code while sipping Pisco
Sours (a favourite local tipple) and swapping tips with their peers.
“The vibe is very Californian here,” says John Njoku, an American who is
the founder of Kwelia.
have used their cash for all manner of purposes. TOHL, a start-up that
produces flexible piping that can be deployed from helicopters to
distribute water in difficult-to-reach areas or disaster zones, says it
has spent the money on things such as testing its new system with a
Chilean mining company and acquiring a patent.
Chile aims to have backed 1,000 fledgling firms by the end of next
year, at a cost of $40m. It has already sired some successes such as
CruiseWise, an online cruise-booking service, that have gone on to raise
capital from other sources. However, it should really be judged by the
two yardsticks Chile’s government set for it. Has it raised Chile’s
profile abroad as a hub for enterprise? And has it inspired Chileans to
start their own businesses?
against the first of these yardsticks, the programme has undoubtedly
been a success. Its current executive director, Horacio Melo, and his
colleagues regularly criss-cross the globe holding meetings to encourage
entrepreneurs to come to “Chilecon Valley”, as the start-up hub has
inevitably been dubbed. Start-ups from some 60 countries applied for the
latest round of grants. Chile’s experiment has spurred interest
elsewhere: Brazil is planning to launch a similar programme to attract
foreign talent to its shores later this year. “The public-relations part
of Start-Up Chile has been much more successful than even we dreamed,”
gushes Juan Andrés Fontaine, a former economy minister who gave a green
light to Mr Shea’s idea.
the programme’s impact on Chile’s entrepreneurial ecosystem is somewhat
trickier, but it appears to have had a positive effect. In return for
the cash they receive, foreigners are expected to share their know-how
by, for instance, coaching local entrepreneurs and speaking at events.
Between 2010 and September 2012, Start-Up Chile participants held almost
380 meetings and took part in more than 1,000 workshops and
Longueira, Chile’s current economy minister, reckons that Start-Up
Chile has helped to drive broader changes, such as a big increase over
the past couple of years in the number of Chilean firms applying to
other seed-capital funds run by the government, as well as a rise in the
number of universities that teach students about enterprise. (The
Catholic University of Chile, for instance, plans to open an innovation
centre to enable academics and entrepreneurs to work side by side.) Mr
Longueira also notes that Start-Up Chile has provided plenty of material
for Chilean newspapers, which now devote far more space than before to
entrepreneurs and their doings.
Mixing Pisco Sours, and ideas
Start-Up Chile opened its coffers to locals, it has inspired plenty of
them to try to turn their wacky ideas into businesses. Almost 40% of the
most recent round of applications were from Chilean firms. Chileans who
have been backed by Start-Up Chile say they have benefited from rubbing
shoulders with foreign peers. “A Brazilian on the programme did all of
our web development,” says Nicolas Martelanz, the boss of Motion
Displays, a Chilean start-up whose software helps retailers boost
revenues by putting more information at salespeople’s fingertips. Other
Chileans who have taken part rave about the contacts they have made
thanks to Start-Up Chile.
everything is cool in Chile, however. Local entrepreneurs—and foreign
ones who might consider staying on after their time on the Start-Up
project—face tough challenges. There are not enough private venture
capitalists to support young firms with money and advice. Nor do Chile’s
universities spawn start-ups nearly as fast as America’s do. Many
ambitious start-ups in Chilecon Valley hope to graduate some day to
barrier to creating a vibrant start-up culture is Chile’s harsh
bankruptcy regime, which makes it hard for those who fail to start
afresh. Also, the economy is dominated by a few vast business empires
and an extremely conservative bureaucracy. Ironically, this is
threatening to stifle a peer-to-peer lending business that Mr Shea,
Start-Up Chile’s founding father, recently launched (see box).
are some signs that things could change for the better. For instance, a
bill that will dramatically improve Chile’s bankruptcy regime is
wending its way through the legislative process. Mr Longueira is
optimistic that it will pass by the end of the year. But Chile will
still find it tough to match Brazil, which boasts a massive domestic
market and a more developed venture-capital industry. Brazil’s
bureaucracy may be worse than Chile’s, but its economy is more
entrepreneurial and ten times bigger.
Cheyre, the boss of CORFO, a government body that oversees Start-Up
Chile and other initiatives to support entrepreneurs, argues that while
Brazil will inevitably be seen as the China of Latin America given its
size, Chile can become the region’s Singapore, which has prospered by
welcoming foreign talent and providing businesses with a stable,
well-regulated base for their operations throughout Asia.
however, has a long track record. Start-Up Chile is only two years old,
and it is closely identified with the current centre-right government,
which may be turfed out at the polls next year. A new government could
party wins, José Miguel Musalem of Aurus, a Chilean venture-capital
firm, says he hopes that Start-Up Chile survives. It has already
delivered one hefty benefit, he says: “Chileans have seen what smart
graduates of Stanford and other leading universities can do, and said to
themselves: ‘Hey, I could do that too’.” If Start-Up Chile spurs locals
to think big, that would be no small achievement.