Innovation Development in Colombia

The initiative

In February 2012, the government created iNNpulsa Colombia  to support innovation and competitiveness and to stimulate similar levels of hyper-growth in a greater number of companies. “Financed by the Ministry of Commerce, Industry and Tourism and operated by the Development and Innovation Unit of Bancóldex”, the agency was given a budget of US$138 million for the years 2012-2013. (Bancóldex is a portmanteau word, abbreviating  Banco de Comercio Exterior, the Bank of Foreign Trade.) [1]

It had three main objectives:

• Promoting a change of mindset to overcome the cultural barriers that hinder business hyper-growth.
• Correcting market and system flaws by injecting resources where they are needed and connecting supply and demand.
• Strengthening regional stakeholders so they can promote business hyper-growth locally.

These objectives were classified within three major tasks: mindset and culture, business hyper-growth, and regional business growth.

The challenge

In 2010, a study of over 6,000 Colombian companies showed that 4.6 percent of these companies had extraordinary growth, and that this 4.6 percent generated three-quarters of the entire sample's combined operating income.

Colombia ranked 66th among 144 world economies in terms of business innovation and sophistication. The government wanted to improve the country's economic growth and position in the world rankings by focusing on encouraging more startups, growing existing SMEs within a climate of entrepreneurship.

The public impact

During its first four years, iNNpulsa channelled COP439 billion (US$161.6 million) into support for entrepreneurship and innovation. “In 2013, iNNpulsa offered seed capital to innovative start-ups, with grants of up to 70% of their initial capital or a maximum of COP350m (US$175,000). [2] Out of 600 companies that applied from all sectors, iNNpulsa supported 52. … As of April 2014, it had granted COP90 billion (US$45 million) since its inception in 2012, and attracted another COP35 billion (US$17.5 million) from the private sector, according to iNNpulsa.”

Solar Ciencia Agrícola SAS provides an example of business hyper-growth, resulting at least in part from investment from iNNpulsa. In 2010, Solar Ciencia Agrícola SAS had sales of more than COP300 million and in 2013 they were hoping to close the year with at least COP2 billion in sales. In that year, iNNpulsa Colombia helped the company win a COP309 million project. Germán Andrés, CEO of Solar considered that this investment was crucial to the company's hyper-growth. “‘iNNpulsa Colombia changed our lives. I had estimated all this for a period of at least five years and, thanks to this initiative, I'll manage to do it in one'.” [3]

Stakeholder engagement

The main stakeholders in iNNpulsa Colombia are:

• Bancóldex, which operated the programme through its Development and Innovation Unit.
• The Ministry of Commerce, Industry and Tourism.
• The Inter-American Development Bank (IDB). “Support from the IDB has enabled the establishment of the Bavaria Angel-Investor Network, which groups private investors to boost support for innovative firms in Colombia. The network currently has 63 angel investors across the country, and is actively searching for new opportunities. Another important network is Medellin-based Ruta N, which is equally supported by the IDB.” [4]
• The Colombian entrepreneurs and the startups that they run.

Political commitment

iNNpulsa Colombia was started and funded by the government. It was also granted the status of a governmental agency, due to the strong support from President Santos, who “approved the creation of iNNpulsa as a governmental institution to support and promote ... entrepreneurial growth“. [5] It operates within Bancóldex, which is also showing a growing interest in sustaining the venture capital industry to facilitate start-up expansion in Colombia.

The Minister of Trade, Industry, and Tourism was very supportive of iNNpulsa. "‘We Want to Make Colombia a Country of Entrepreneurs' ... this was stated by the minister Sergio Diaz-Granados, who participated in an event that brought together over 500 entrepreneurs in July, 2013.” [6]

Public confidence

In Colombia, there is a lack of trust in banks and more widely in the institutions of government. “‘In Latin America, 65% of people don’t use banks, because they just don’t trust banks,’ [said] Aflore CEO, Ana Barrera.” [7] The agency is run from within Bancóldex, the Banco de Comercio Exterior, and this means that it enjoys limited public confidence.

Clarity of objectives

There are three main objectives to iNNpulsa in achieving hyper-growth: overcoming the cultural barriers that impede rapid growth; injecting resources where they were needed; and strengthening regional stakeholders  so they can promote business hyper-growth locally. It has a more general purpose of encouraging startups and operating as a seed accelerator.

Strength of evidence

There had been other, similar initiatives in Latin America, for example the Start-Up Chile programme, which the Chilean government launched in  2010 as a seed accelerator to foster a culture of entrepreneurship in the country and position Chile as the innovation and entrepreneurship hub of Latin America.

iNNpulsa Colombia has put in place strong assessment procedures to evaluate any proposals. It uses a scorecard system, rating applications based  two major criteria : technical (the bidder's experience and methodology); and economic (financial and budgetary capability).

Feasibility

iNNpulsa has received significant government funding to assure its financial feasibility through iNNpulsa Colombia, which covers startups, and the iNNpulsa Mipyme programme which is a modernisation fund to support businesses with at least two years of activity.

“iNNpulsa Mipyme can grant up to COP400m (US$200,000) to develop specific innovative products or services, or to help small and medium-sized enterprises (SMEs) to strengthen their position in their sectors.” [8] The funding model is a partnership between the government and the private sector. For each COP2.2 that the fund provides as co-financing, the private sector contributes COP1.

Management

iNNpulsa Colombia is a government agency and has its own team of managers, with Catalina Ortiz Lalinde as its general manager. The agency’s application process is well organised and it has, according to Lalinde, ‘“a pipeline made up of about a thousand companies that could eventually join the portfolio’”. [9] The agency is supported by Bancóldex, and therefore has considerable administrative support from government.

Measurement

The indicators were not defined at design time, but the agency started capturing relevant  information post-implementation. The indicators capture the outcome, and include:

• The number of startups and SMEs that have received funding from iNNpulsa.
• The funding allocated in total, and the proportion of government and private sector funding.
• The funding allocated by region.

Alignment

iNNpulsa is well aligned with government policy as a part of Bancóldex. It has good relationships with regions, as well as with the capital, Bogotá. Connect Region Bogotá, Colombia ANDI and iNNpulsa, in partnership with other institutions, launched Innova Circuit, a collaborative innovation programme enabling companies, researchers and entrepreneurs to work in synergy to solve challenges in a sustainable way. There is an alliance in Barranquilla with the local chamber of commerce, while there is an important network of investors through Medellin-based Ruta N, which is also supported by the IDB.

There are also alliances in the private sector, for example the startup accelerator, MassChallenge, has partnered with iNNpulsa to help Colombian entrepreneurs succeed on the global stage. These include foreign investors, for example in 2015 Mexico's IBBA Investment Group was interested in supporting enterprises in Colombia through iNNpulsa.

Bibliography

Our tasks, iNNpulsa Colombia

State support programmes and a growing appetite from private investors are helping fuel the rise of innovative firms,  Oxford Business Group

UNESCO Science Report: Towards 2030, 20 November 2015, UNESCO

iNNpulsa: The Initiative that Has Put Colombia on the World Entrepreneurial Map, Clarisa Herrera, 10 August 2015, PanAmerican News

"We Want to Make Colombia a Country of Entrepreneurs", 12 July 2013, Ministerio de Comercio, Industria y Turismo, República de Colombia

Local startup banking on gaining trust of Colombia's middle class, Andrew Wight, 27 November 2013, Colombia Reports