This is a guest post by Robyn Klingler Vidra, CIV senior research fellow, see team for more information.
As Startup Chile is nearing the end of the first phase (due to end in 2014), in this post we ask “has Chile started up?” Has the USD 40 million to 1000 startups achieved the intended results?
Startup Chile, piloted in 2010 by Corfo, is a Chilean government program designed to attract international entrepreneurial talent to Chile. Startup Chile offered entrepreneurs – who passed an application process run by YouNoodle judges in Silicon Valley and Santiago – USD 40,000 of equity-free capital, a one year visa, airfare to Chile, work space and networking access. Entrepreneurs participating in the 24 week long program are encouraged to think globally, not local to Chile, as the program ultimately aims to establish Chile as the “definitive innovation and entrepreneurial hub of Latin America.” Said another way, through this program Chile wants to become the destination for (Spanish speaking) start-ups going global. Evidence of the global aim of the program is the use of English rather than Spanish as the primary language for program communications and activities. Startup Chile’s Demo Days abroad – including one in San Francisco – is another illustration of the global aim.
How should we measure the output of this program? Is it in the number of start-ups that spent one year (or, as the rules state, at least seven months) in Chile? Or the number of start-ups that stayed in Santiago for more than a year? Or the proportion of these start-ups who were able to go on to raise venture capital? What about the number or proportion of the start-ups that have built viable businesses?
First, the startup numbers in Chile. According to Startup Chile, the 2010 Pilot phase brought: 22 startups from 14 countries. The full launch in 2011 was hoped to bring 300 startups to Chile in 2011 and 1000 bootstrappers by 2014. In the first round of applications in 2011, only 330 startups applied, 87 of which were accepted to the program. Then in the second round of applications in July 2011, more than 650 startups applied for one of the 100 spots available. According to a Tech Crunch article in September 2012, through the first five rounds of the program, more than 5,000 startups had applied. Earlier this month Tech Crunch reiterated the success of the Startup Chile program by acclaiming the batch of nearly 100 startups in Startup Chile’s Generation Ten. This positive coverage came earlier this month as part of Tech Crunch’s coverage of a “startup surge” in South America.
However, Chile seems better at starting up companies than keeping them. According to a 1 July 2014 Tech Crunch article, “after completing the 6 month program, nearly 80 percent of entrepreneurs left Chile, 34 percent of them for the United States”. The high rate at which startups leave Chile – dubbed its “Startup Drain” – is not necessarily in conflict with the intention of Startup Chile – where Chile is just to be a primary platform for globally-focused startups to launch. Startup Chile – in line with its global aim – offers its participants internationalization mentorship. As an example, on 29 July 2014, Startup Chile are running their seventh Demo Day, in which the top 18 startups in this round of Startup Chile have four minutes to pitch their business to “rock star” international investors. The Demo Days (though there are Chilean participants) are not focused on local audiences, markets or opportunities.
More than the story of individual start-ups, for me it seems that the real measure of this USD 40 million program the publicity it has received. Prior to 2010 many of us would not have put Chile and start-ups in the same sentence. But now in 2014, Chile has received media coverage by several of the world’s major media outlets (including The Economist, BusinessWeek and Tech Crunch). Participants of the Startup Chile program have benefited from this exposure; the 25 Startup Chile companies that participated in the 2012 Demo Day in San Francisco were named and described in Tech Crunch. In addition, Startup Chile (according to its website) has built a decent social media following. As of 28 July 2014, Startup Chile has 19,700 fans on Facebook, 42,800 followers on Twitter and 1,200 subscribers on YouTube.
Startup Chile has also become a policy model for governments the world over. Most recently, in July 2014, the World Bank and the Development Bank launched Start-up Jamaica, which is directly based on the Chilean initiative. South America has deployed Startup Chile-inspired initiatives, including Start-Up Peru, Incubar (Argentina), and iNNpulsa (Colombia).
To conclude, it seems Chile has “started up” as a locale we associate with startup activity, as a model for venture policy design and as a cluster of early-stage startup activity (particularly during the 24 weeks of each Startup Chile round). The program has not overcome all issues – it has not alone transformed local risk tolerance and it has not resulted in startups staying in Santiago to grow their global businesses. But, governments around the world have spent significantly more than the USD 40 million that Startup Chile has spent on other policies to support venture activity (think of Russia’s Skolkovo Innovation Center). From that perspective, Startup Chile is – for good reason – an example of agile, targeted public policy to support entrepreneurship.