The Silicon Valley of South America?

October 27, 2012 • Chile, Print, Theme • Views: 971

The rooms of Start-Up Chile’s new headquarters at Centro Movistar Innova (CMI), a renovated former mansion, are quiet, but the light-filled space pulses with the creative energy of ideas being implemented. Entrepreneurs tap busily on their laptops, pausing occasionally to consult with colleagues. Although the offices are in Santiago, most of the entrepreneurs hail from thousands of miles away. A poster on the wall exhorts them to “embrace the change.” In fact, this group is part of the change—an effort to initiate a cultural and economic shift that will transform Chile into Latin America’s hub for innovation and entrepreneurship.

Such a venture at first seems like an attempt to reproduce Silicon Valley, leading some observers to dub Santiago “Chilecon Valley.” Silicon Valley and other centers of entrepreneurship have succeeded largely because of their proximity to universities with strong science and technology programs. Paul Graham, co-founder of a renowned start-up incubator, explained that “within the US, there are no technology hubs without first-rate universities—or at least, first-rate computer science departments.”

The theory goes that universities draw a critical mass of people with the ideas and skills to found high-tech companies and flourishing start-ups. More than just entrepreneurs are necessary; however, investors are also crucial. Some argue that governments are far less effective than investors with prior start-up experience. Graham described bureaucrats as “the exact opposite sort of people from startup investors,” and said such an effort would be as absurd as “Vogue editors running a math journal.”

Sitting in the offices of Start-Up Chile, such an idea no longer seems quite so ridiculous. Start-Up Chile was created and funded in 2010 by the Chilean Economic Development Agency (COFRO), a government branch, to boost entrepreneurship in Chile. As one participant explained, if a nation lacks a good, in this case start-ups, it can either create it from scratch or import it.

Rather than initially cultivating local entrepreneurs, with Start-Up Chile, the Chilean government has chosen the latter option: importing entrepreneurs and investing in them, with the hope that this will eventually spur on homegrown start-ups. Ivan Vera, a Chilean venture capitalist, doubts that Silicon Valley can truly be replicated. As he explained “it would be stupid to try to imitate Silicon Valley here in Chile. It is like imitating Oktoberfest.” Instead, Vera believes Chile should find a way to connect itself to other centers of innovation.

To do so, Chile has created a model of its own. Initially the program did this by offering foreign applicants work visas, office space, and a $40,000 grant to launch their early-stage ventures. In return, admitted entrepreneurs agreed to spend a minimum of six months in Chile establishing their companies and conducting entrepreneurship outreach efforts. Although many entrepreneurs are initially attracted by the equity-free money, according to Vijay Kailas, a Start-Up Chile participant and founder of Ante-Up, a mobile app for sports betting, “there’s a lot more than just the subsidy that the government provided.” With fellow entrepreneurs hailing from everywhere from Malaysia to Argentina, members of Start-Up Chile benefit enormously from joining a global network.

Chilean universities are not at the epicenter of this entrepreneurship trend, but they have not been entirely excluded either. A growing number of Chilean universities have established entrepreneurship programs and “incubators” where students can develop start-ups.

The relationship between these universities and Start-Up Chile is far less direct than that between Stanford and Silicon Valley, however. Chile’s strongest technological university, Federico Santa María Technical University, is more than 70 miles from Start-Up Chile’s headquarters.

Despite its atypical model, Start-Up Chile has achieved considerable success. Although created and funded by the government,  Start-up Chile enjoys much flexibility. As Horacio Melo, the program’s executive director explained, “The treatment that CORFO has with us is they give us all the freedom to do a lot of the things that normally in government you cannot.” The government backs the program in hopes that start-ups will help drive Chile’s long-term economic growth. As Vera explained, it is part of an effort to shift Chile’s resource-based economy from one of “atoms,” to one of “bytes.”

Although start-ups may boost Chile’s long-term productivity, the Start-Up Chile model’s long-term sustainability remains in doubt. The program received criticism for initially excluding Chilean applicants, but has since opened to all and Chileans now comprise approximately a quarter of participants.

Still, Start-Up Chile struggles to fully realize its goals in a risk-averse culture. For long-term success, this must change. Ultimately Melo envisions that “the ecosystem should exist without Start-Up Chile.” But since many of the foreign participants will leave after six months, it is entrepreneurial Chileans who will remain and whose ventures will sustain and expand the new system.

RACHEL BROWN ’15 is in Saybrook College. Contact her at rachel.brown@yale.edu.

Tags: , , , , ,

One Response to The Silicon Valley of South America?

  1. MJ Guerra says:

    I was wondering if you can give me any insight on the use of Autonomy products in Chile.