Chile Forum

...featuring a government program to attract tech entrepreneurs/startups:

http://techcrunch.com/2010/08/21/chop-s ... wants-you/

A key ingredient in the Silicon Valley stew that Chile wants to cook is probably not available locally, and you may not be able to import it. I'm referring to the venture (or if you prefer, vulture) capitalists that lubricate the financial gears for risky startup companies. These are experienced, knowledgeable guys willing to plop down their own money to own a part of something that, nine times out of ten, ends up returning zero on their investment. Banks won't do it, and government can't do it. When Chile creates it's own equivalent to this class of financiers, then it might have a shot at cooking the dish properly.

Economy minister Fontaine talking at length on this topic in front of Stanford students:
http://ecorner.stanford.edu/authorMater ... l?mid=2487

Being a newbie, I know I can't post links, so here's one of the five versions of this story my Dad sent me (as his not-so-subtle way of telling me to get a business plan together). It's all over the net.


October 20, 2010

Starting next week, Chile will offer $40,000 grants and free office space in Santiago to 25 US entrepreneurs who agree to live and work on a new venture there for up to six months.

Unlike US micro-incubator programs, Chile doesn’t want an equity stake in the company, says the program’s director Nicolas Shea Carey. They simply want US entrepreneurs to live in Chile, get to know the country and share a global perspective with Chilean entrepreneurs, while they’re working on the early phases of their business.

“The minute you step onto Chilean soil there will be a mentor waiting. We’ll help you open bank accounts, connect you to all the engineers and the engineering schools,” says Carey. Entrepreneurs will only be asked to stay for six months in exchange for the $40,000 but they’ll receive a one-year visa should they decide to stay longer.

Representatives from the Chilean government like Diego Alcaino are visiting universities around California over the next few weeks to find the rest of the first set of 25 entrepreneurs by the end of September. Alcaino expects that the chosen entrepreneurs will have technology business plans and a good recommendations from trusted sources like professors in business schools around California.

What does Chile hope to gain from this investment? “We want these entrepreneurs to start the next big company back in the US and to think about having R&D centers in Chile or some employees,” says Carey. One of the few strings attached to this is that entrepreneurs will be asked to attend networking events to meet local entrepreneurs.

Start-Up Chile plans to recruit the first 100 entrepreneurs from Silicon Valley over the next year and by 2014 bring 1000 entrepreneurs into the program investing about $4 million to fund them. They will be recruited from all over the United States and eventually technology hubs around the world, says Alcaino.

Sounds too good to be true? It’s not unlike the dozens of micro-incubators springing up around the US that simply want entrepreneurs to get a business started and expose them to that particular city. Still for a relatively minimal investment, the upsides could be huge, says Carey. Duke professor Vivek Wadhwa who is consulting with the Chilean government on this programs says no country has tried something like this yet but it could give Chile a huge edge in building its own entrepreneurial infrastructure rather than simply being an outsourcing hub.

I’ll check in with the first few entrepreneurs as they get set up in the next few weeks to see how the program is going so far.

That's actually true. Chile wants enterpreneurs with ideas and connections in the U.S.A. to develop new products and ideas.
In Chile we have so called "incubators" of new business,where Chileans apply. Such projects like Chilean salmon industry (that's huge) started in one of those experiments. Now Chile wants to try with young foreigners that can make the link between high tech and relations abroad, that could bring new edge technologies and business to our country, and that could provide for new exports, and the country is willing to invest in those "experiments"

Sounds like this is a continuation of the Start-Up Chile program? It was discussed in a few threads here in the forum, for example post47070.html?hilit=startup#p47070 and some others. There's more info at http://startupchile.wordpress.com. I was in contact with one of the developers for a while earlier this year, still to see how things turn out for him. There are entrepreneurs already in Chile, some of them have twitter accounts so you can follow them

Vivek Wadhwa writes on techcrunch.com, he had a badly-written ("chop-shop" ) article on this back in April (where I don't remember him declaring his interest as a consultant to the program). I hope his consulting is better than his writing.

FrankPintor is right, I merged the topics. Please use search to minimize duplication which makes the forum harder and harder to use, and makes us run in circles.

Guess I used the wrong search term. This was the first I heard of the program and I used $40,000 and $40K Live and learn. I hadn't seen the earlier article in the others on the same topic. Thanks for the link.

first, the author is taking credit for telling Chile to do this themselves? Really?

O.k., I go over this every time this mythical government program comes up. The bottom line is that $40,000 US (use to be $50,000 I think) in Chile means exactly jack for an IT startup. Seriously, run the numbers of what $40,000 US buys you starting a new biz. This is coming from a guy that has done IT startups both in Chile and other countries. It sounds like a lot at first, but try getting a company up and running and to a sustainable point in Chile and even worse in Santiago for only $40,000 US. You might get your doors open, but boy will you need a serious revenue stream fast or you are dead in the water.

For someone however with a little bit of money already, $40,000 US will definitely help and I hope it does work. I just think that $40,000 will just about cover the cost of the government bureaucracy involved, a secretary, a 1 year lease on an office (for those that do not get the office space given to them), and a few pisco sours. Don't forget a pile of lawyer fees to get in and get out of biz (when things go off the rails).

I don't think anyone should try this unless they already were going to try this without the help of the Chilean government, all other things being equal. By that i mean, you had some money, a good idea, whatever, and this is just a side dish that does not make or break your biz modal. don't be disappointed when it does not work out, and have a serious plan b-z not just on the shelf but rolling along.

Here is hypothetical biz budget for a basic IT biz:

Legal fees for incorporation, tax prep, POA, basic banking issues, so on (talking company structure only): $3,000 - $5,000 US
I mean everything (and it really depends on the company and biz), not just what lawyers will quote you in Chile for the initial incorporation paperwork. Don't forget we are talking a bunch of foreigners with special requirements (English speaking attorneys for example), perhaps foreign partner,company structures, so on, and so on. Yea you can find lawyers that will do this stuff for say $600 US, but that is just sufficient to get you in to trouble. this does not include dealing with this special government program bureaucracy. I would say double that to cover that paperwork and contracts.

Lease: 500,000 pesos x 12 months (depends on what you rent, but reasonable in Santiago): 6 million pesos ($12,000 US)
I would need to see the very fine print on that office space being offered to take it seriously. Do you really want to be out on the street in 6 months, or is there a catch to stay?

Office furniture, moving in cost: 1-2 million pesos ($2,000 US) obviously that is just the basics. a yard chair and lamp.

Secretary: $500 a month (no real experience) x 6 months = $3,000 US

Those are just some off the top of my head type expenses to expect in the first 6 months. That does not mean you hiring any talent. That does not mean you are buying computers, able to hire contractors, and so on. You can see how $40,000 US is not going to go so far.

Here is some food for thought, and has always been my guiding principle when evaluating a biz idea (perhaps they are myths, but good rules of thumb none the less). 6 out of 7 small biz fail in the first year, and in the IT industry likly much higher from what I have seen. Most small biz take at least 2 years to turn their first profit if they do survive, and again in the IT biz likely higher. $40,000 US divided over 2 years, means you have about $1,666 US per month to work for or less than a million pesos a month to make a biz fly in Santiago. In other words you are begging for change on the streets of Santiago. Honestly, if you were just trying to go after the $40,000 US I would recommend that you open a paper stand in los condes near a metro for a more secure investment return.

Basically, if you could not do this without the government incentives in the first place , don't do this. Personally, I would say starting a new venture in a foreign country is complicated in and of itself. Adding a bunch of government red tape will really really complicate things. You can have the advantages of Chile, and skip the red tape.

Also, let me really really point out that there are political strings attached to this. Do you really really think the Chilean government is going to give you the time of day for any project that is not for real? Do you think they are expending this much political capital on a program and you can get the $40,000 US and if you fail, so what?

Chilean politics does not work that way ever. You are partners with the government, no matter how they spin it. They don't want their pilot projects being a bunch of pot smoking hippy failures that took the money and closed their doors after 6 months. You will get a microscope inserted in to places microscopes should never go. The guys in this government are not stupid.

I could go on and on for why this is not as sweet a deal as it looks, but the real effect is a bunch of suckers will start down the road to applying, then find themselves too far in to back out once they start. So, we likely will get some more international IT companies starting in Chile. The $40,000 US however is just a teaser.