Overshadowed by the snow-capped Andes mountains, surrounded by miles of luscious vineyards, Chile’s capital city has generally been more of a destination for wine lovers or a stop-off point for travellers reaching other parts of the region. But much to the surprise of Chileans and global techies alike, Santiago has become an unlikely entrepreneurial hub.
Seed accelerator Start-Up Chile launched there in 2010 and has worked with more than 1,300 small businesses. The publicly-funded programme, created by the government, has since been replicated in more than 50 countries around the world. “Start-Up Chile often pops up in conversations, there’s this international appreciation of its pioneering effort,” says Christian Busch, associate director of the Innovation Co-creation Lab at the London School of Economics.
The initiative was the brainchild of Nicolas Shea, a Chilean businessman, while he was an adviser of entrepreneurship and innovation to the Chilean government. The programme picks promising young businesses and gives the founders equity-free grants of at least 10m Chilean pesos (£12,000), and a year-long visa to work on their ideas in the country.
It was a concept, he says, aimed to speed up the economic and social development of the country. Despite being one of the fastest growing economies in Latin America, Chile’s income per capita still falls short of that of higher-income countries. “And if you think about entrepreneurship, it’s an important driving force in growth,” he says. “What we’ve achieved as a programme and country is phenomenal.”
With a population of only 18 million, Chile is an unlikely entrepreneurial hub, bordered by an extensive mountain range and the expanse of the Pacific Ocean. Yet it is still a fairly cheap place in which to live and work. Entrepreneurs from 79 countries have been involved in Start-Up Chile so far, making it one of the most diverse startup programmes out there.
It offers three programmes: the “S Factory”, pre-acceleration for female entrepreneurs who receive 10m pesos (this was started to encourage more women into entrepreneurship); “Seed”, an acceleration programme for startups with a functional product and early validation, who receive 20m pesos (£24,000); and “Scale”, follow-on support for startups incorporated in Chile, who receive 60m (£72,000) pesos.
Businesses also receive mentoring, workshops, co-working office space and access to investors. In return, they are asked to give something back to the local society, whether that’s taking part in hackathons, or giving talks at universities.
A study by Gust and Fundacity rated Chile in the top five countries in the world for startups. It found that the country invests the second highest amount in its entrepreneurial community – the government invests $15m (£12m) per year, compared to the UK’s $9.9m (£8m). The study also named Start-Up Chile the third most active accelerator in the world. It is wholly publicly funded and is estimated that the startups it has supported have a total value of $1.35bn.
So great is Start-Up Chile’s perceived success globally, that it has earned itself the nickname “Chilecon Valley”.
And while Chile’s startup ecosystem lags far behind Silicon Valley in terms of growth and size, there’s a special community here. Chilean culture is typically inclusive, warm and social. Briton Milo Spencer-Harper, founder of Magi Metrics, which helps businesses advertise on Instagram, says he was able to make a lot of friends and contacts while there. “There’s a lot of technical and moral support, which is important – it can be quite a lonely existence as a sole founder,” he adds.
When asked why he chose to develop his business idea in South America, rather than closer to home, he says: “I heard about Start-Up Chile through word of mouth [and came] across multiple people who were positive about the programme. I think South America is a fascinating continent, and Chile is one of the more stable and safe countries.
“I also liked the idea of giving back to the Chilean entrepreneurial community. While, I was there I mentored a team of Chilean university students who had created a cushion which connects to your smartphone and helps detect the risk of pressure ulcers for the disabled who are confined to wheelchairs. Being able to help them was a great experience.”
Benefits for Chile
Busch, from the London School of Economics, was in Chile a year ago researching how to build ecosystems for innovation. He says Start-Up Chile has been successful in creating an entrepreneurial culture in Santiago that was absent before. “How they built the ecosystem from the bottom up, I found that particularly inspiring. I spoke to young people who say it is now a viable career path, and entrepreneurship is now more accepted by traditional, conservative parents.” Academia has also embraced the startup culture with an entrepreneurship programme at the University of Chile.
A potential hurdle for the accelerator will be making sure Chile retains the economic benefits of the programme. With 24% of startups on the programme originating from Chile, they are gradually making strides within the domestic market as well as internationally. This is a real focus for the accelerator, which currently has a 32% retention rate among the startups it works with – most entrepreneurs will go back to their countries of origin.
But ultimately, there is very little private capital available in the country, which leaves Chile far behind the US and Europe – even within the region, Brazil and Mexico are larger markets.
Andrés Macías, co-founder of Usheru, a cinema app that makes it easier for you to find and book tickets, was on the seed fund in February 2016 and is now back in Ireland. “For me there’s a big difference with, for example, European programmes. [There’s a] lack of private investors in Chile, so you can’t really compare the Latin American market.”
Alberto Rodriguez, the World Bank’s country director for Chile, Bolivia, Ecuador, Peru and Venezuela told the Wall Street journal that he was concerned that Chile is “helping a lot of companies to start, but the evidence of their growth is limited.” He argued that the country needs to focus on areas such as regulation and infrastructure to create a better environment for businesses.
Like elsewhere in the region, Chile suffers from high levels of bureaucracy. For young startups, being audited and sorting payment integration can be an incredibly frustrating process.
But there are particular strengths for those working in copper, agriculture and solar power, which drive the Chilean economy. The programme works particularly well for Pycno founder Nikita Gulin. His agricultural data management startup was developed during Start-Up Chile’s Scale programme. “What keeps me here is the market,” he says. “However, for some technical people it’s very difficult here. I believe the culture is not fully startup – not one you’d expect if you came from Europe. But for me, it’s [as beneficial to be here] as in California.”
Those at Start-Up Chile are aware of the issues startups face – there is for example, only one company to process card payments through in Chile. But Start-Up Chile’s communication manager Catalina Bräuchle is adamant that the bureaucracy issues “aren’t important in comparison to the other things you get in the programme”.
Indeed, equity-free money, free workspaces, cheap living costs in a beautiful country is an attractive deal. “There is nothing like it in the UK, nothing that generous,” says Spencer-Harper. And while it is certainly no Silicon Valley, Start-Up Chile has its own special charms.
“We’re the underdog,” says Shea. “It’s a long process, but it’s a great entry for new players who want to play in the Premier League.”
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