Friday, 23 June 2017 12:43

The lure of Chilecon Valley

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ONE 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.

These 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.

Many 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.

 


Mr 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?”“Start-Up 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).

Like 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

The 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.

Companies 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.

Start-Up 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?

Judged 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.

Gauging 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 conferences.

Pablo 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.

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