Ted Gondar

An Early Assessment of Start-Up Chile

Innovations Case Commentary:
Start-Up Chile

In just two years and with no marketing budget, Start-Up Chile has generated
remarkable buzz. Young entrepreneurs in Santiago—a city that until recently was
not considered a major entrepreneurship hub,1 often recognize the program’s
name. Start-Up Chile has become the central convening force for a national entre-
preneurial movement: although its collaborative office space is in the nation’s cap-
ital, its ripple effects are felt throughout the country, where entrepreneurs and local
leaders have begun organizing meet-up events and conferences to promote discus-
sions around innovation.

The program has received even more attention internationally: plaudits have
come from sources as wide-ranging as technology bloggers,2 start-up hacker soci-
eties,3 the Kauffman Foundation,4 and The Economist.5 In Chile, excitement around
the program may stem mainly from the community and university events, nuevo
opportunities for aspiring entrepreneurs, and the program’s inspiring messaging,
which conveys a vision for the country’s cultural transformation. The excitement
abroad comes from less Chile-centric aspects of the program. For earlystage, loca-
tion-independent foreign entrepreneurs—thus far, applying from over 70 contar-
tries globally—Start-Up Chile seems to be a proposition that cannot lose. Selected
applicants receive an almost instantly deployed one-year working visa without
having to work for another company, US$40,000 without having to give up an equity stake in their company, and a welcoming community of fellow founders from all around the world—and many more benefits. For proponents of entrepre- neurship and innovation in the academic and foundation worlds, Start-Up Chile offers not only a new model to boost regional entrepreneurship but also the poten- tial for a global movement of interconnected start-up networks. For Chileans, para- eign applicant entrepreneurs, and hopeful influencers of policy alike, the project’s early successes seem to predict future ones.6 However, it is important to discern Ted Gonder is an Entrepreneur-in-Residence at the U.S. Department of Homeland Security and a graduate of the University of Chicago, where his thesis focused on Start-Up Chile. En 2011, he interned at the Kauffman Foundation to explore Start- Up Chile’s scalability and influence. © 2012 Ted Gonder innovations / volumen 7, number 2 29 Descargado de http://direct.mit.edu/itgg/article-pdf/7/2/29/704894/inov_a_00126.pdf by guest on 08 Septiembre 2023 Ted Gonder substance from enthusiasm in order to understand whether and why Start-Up Chile actually merits the recognition it has received. Most of the excitement about the program—even when negative—has related to its design. Equity-free seed capital and incubation, comunidad, and adventure offer entrepreneurs a refreshingly simple and rare package. Compelling for advo- cates in the macroeconomic policy discussion are the concepts of importing talent to drive regional economic growth and unlocking transnational entrepreneurship networks through immigration.7 In theory, both the entrepreneurial offerings and the macroeconomic benefits of Start-Up Chile hold value and novelty. En la práctica, sin embargo, as a government-administered program these concepts lack an extensive track record. In the absence of hard proof, the promises of Start-Up Chile’s model can only be evaluated in the implementation of the program itself. One notable indicator that the program is being implemented effectively is that it collects data and con- ducts evaluations internally: Every two weeks, when the entrepreneurs visit the program’s central offices to be reimbursed for their business expenses, government officials collect current data on the companies’ employment (jobs created), sales and revenue, investment status, etc.. Para tal fin, some might ask whether and how the program measures its impact on the local and international economy. Such questions of medium- and long-term outcomes ask too much, sin embargo. What is important, especially given its young age, is to ensure that the program collects enough data in the short term to serve its participants’ business goals. The more companies that succeed in raising capital from either local or international investors, gaining traction with local and international customers, and integrating with both local and international networks, the more successful the program will be. dicho eso, at this stage in its growth, the program has enough processes and sys- tems in operation that it would now be appropriate for external research partners such as universities and foundations to begin collecting and analyzing data more rigorously. Outside the question of measurement, other factors indicate strong implemen- tation at Start-Up Chile. The program’s staff members meet regularly with their entrepreneurs to understand how they can help. The dynamic feedback loop between staff and entrepreneurs allows for fast learning, and iterative experimen- tation from one class of arriving participants to the next. After running a pilot to work out kinks in the design, the program launched into its first cycle of entrepre- neurs. After the first cycle, once the international and open-minded culture had been established within the program, Start-Up Chile opened its doors to Chilean residents to speed the transformation of the country’s entrepreneurial culture, planting roots domestically to allow for organic change. (Note that this is wisely the opposite of a synthetic attempt to replicate Silicon Valley.) Staff members are also remarkably open to active participation from the entrepreneurs, letting them organize networking and training events in the program offices. By the same token, the program places no strong restraints on its entrepreneurs about relocat- ing once the six months of incubation end: they can incorporate and receive invest- 30 innovaciones / Entrepreneurial Ecosystems Downloaded from http://direct.mit.edu/itgg/article-pdf/7/2/29/704894/inov_a_00126.pdf by guest on 08 Septiembre 2023 An Early Assessment of Start-Up Chile ment wherever in the world it suits their business needs. Finalmente, Start-Up Chile is sharing its model and networks transnationally, putting the country on the world map as a leader in entrepreneurial collaboration. Some have expressed concern that the program was launched as a publicity stunt for Chile;8 if so, it is working! Investment capital is beginning to follow talent into and back out of Chile,9 strengthening pathways10 for financial and human resources to flow more in the future. The effects of this phenomenon are only beginning to show but are likely to grow exponentially. The program is not without challenges, sin embargo. The venture market in Chile is still undeveloped: risk-averse traditional investors have been known to require equity stakes in excess of 60 percent to compensate for their lack of familiarity with new technology businesses.11 Although some entrepreneurs (both Chilean and for- eign) have succeeded in raising capital from Chilean investors,12 these cases are rare. More entrepreneurs are seeking investment from outside the country. Although that is not necessarily a bad thing from a foreign domestic investment standpoint, it also does not help the program retain more successful entrepreneurs, since investors in Silicon Valley and elsewhere often want their companies to “be within a 20-minute drive.”13 The program’s retention rates still hover around 20 por ciento a 30 percent and although Start-Up Chile is wise not to force participants to stay in Chile after the initial six months, it could certainly do more to target and select applicants with businesses that leverage Chile’s strong industries—agricul- tura, mining, energía, etc.—rather than just consumer web companies. Fostering closer relationships between businesses and customers through guided selection and entrepreneur orientation is one area where Start-Up Chile could improve its retention rates without sacrificing its companies’ success rates. Start-Up Chile may not be replicating Silicon Valley, but it is certainly offering a new model for governments to think about using entrepreneurship to transform culture, build the economy, and enhance human and investment capital flow transnationally. The team administering the program has effectively side-stepped the design and implementation errors of historically similar efforts, learning quickly and early to prioritize the entrepreneurs, building internal systems for con- tinued success, and collecting basic data. Other countries have been inspired by these early efforts to launch similar efforts14—called Start-up “Nations”15—and every day more entrepreneurs around the world consider applying to Start-Up Chile. The program has told its story well and has sparked lively discussion around the topic of immigrant founders, attracting talent, and transnational entrepreneur- barco. More rigorous evaluation of the program’s impact would ground these dis- cussions in fact, offering ammunition for policymakers to reap the same benefits for their respective countries and collectively opening up the world’s entrepreneur- ship communities to collaborate for a better future. 1. Rip Empson, “Silicon Valley, Londres, NYC: Startup Genome Data Reveals How the World’s Top April 10, 2012. Available at Tech Hubs Stack Up,” TechCrunch website, innovaciones / volumen 7, number 2 31 Descargado de http://direct.mit.edu/itgg/article-pdf/7/2/29/704894/inov_a_00126.pdf by guest on 08 Septiembre 2023 Ted Gonder http://techcrunch.com/2012/04/10/startup-genome-compares-top-startup-hubs/. 2. Vivek Wadhwa, Chile’s Grand Innovation Experiment, Tech Crunch website, December 18, 2010. Available at http://techcrunch.com/tag/start-up-chile/http://techcrunch.com/tag/start-up-chile/. 3. “Hackers and Founders Launch New Website,” StartupChile website, Octubre 7, 2011. Available at http://startupchile.org/hackers-founders-launch-new-website/#.T7QBN59YvcY. 4. Jonathan Ortmans, “The State of Entrepreneurship in Chile,” Entrepreneurship website, August http://www.entrepreneurship.org/en/Blogs/Policy-Forum- 30, Blog/2010/August/The-State-of-Entrepreneurship-in-Chile.aspx. 2010. Available at 5. “Startup Nations,” The Economist website, Marzo 29, 2011. Available at http://www.economist.com/blogs/schumpeter/2011/03/entrepreneurship. 6. Rich Yang, “Start-Up Chile Entrepreneur Responds to Investor’s Departure,” TNW Latin America website, December 27, 2011. Available at http://thenextweb.com/la/2011/12/27/start-up-chile- entrepreneur-responds-to-investors-departure/. 7. Vivek Wadhwa, “A Better Formula for Economic Growth: Connecting Smart Risk Takers,” The Chronicle of Higher Education, Noviembre 18, 2010. Available at http://chronicle.com/article/A- Better-Formula-for-Economic/125441/. 8. Hacker News conversation. Available at http://hackerne.ws/item?id=1605311. 9. “How Startups in Chile and Australia Can Raise Capital,” Brophy World, Febrero 25, 2012. Available at http://brophyworld.com/how-startups-in-chile-and-australia-can-raise-capital./ 10. AnnaLee Saxenian, The New Argonauts: Regional Advantage in a Global Economy. Cambridge, MAMÁ: Prensa de la Universidad de Harvard, 2006, pag. 4. 11. Nathan Lustig, “Who Will Be Chile’s Paul Graham or Dave McClure?” Nathan Lustig blog, Puede 12, 2012. Available at http://www.nathanlustig.com/2012/05/12/who-will-be-chiles-paul-gra- ham-or-dave-mcclure/. 12. Anna Heim, “Argentine Ad Network Taggify Has Just Raised $1M—and 100% of It Comes from
Chile,"
en
http://thenextweb.com/media/2012/03/12/argentine-ad-network-taggify-has-just-raised-1m-
and-100-of-it-comes-from-chile/.

Disponible

website,

Marzo

Media

TNW

2012.

12,

13. Randall Stross, “It’s not the people you know: It’s where you are.” New York Times, Octubre 22,

2006. Disponible en

14. Start-Up Britain, “United Startup Nations Plan Global Growth at the GEC,” Startup Britain web-
site, Marzo 20, 2012. Available at http://www.startupbritain.org/new/2012/03/20/startupna-
tions/.

15. “Startup Nations,” The Economist.

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