In brief

In 2010, the Chilean government was concerned that its economy was too dependent on the export of commodities, particularly copper. In order to diversify its economy and create a climate of entrepreneurship, the government initiated Start-up Chile, a seed accelerator and innovation programme that encourages entrepreneurs from across the globe to start new businesses in Chile.

The challenge

By 2010, Chile’s economic position had improved dramatically since the fall of General Pinochet’s military dictatorship 20 years before. However, the country relied heavily on its exports of primary products such as copper, whose export accounted for a quarter of Chile’s GDP.
Given the volatility of commodity prices and the general principle that it should spread the risk of its export portfolio, the Chilean government looked to sectors other than mining to contribute to economic growth.

“Chile had business-friendly regulations, efficient immigration policies, and a relatively stable economy. However, Chile did not have a substantial entrepreneurial spirit amongst its young people and Santiago was not a very international city.” [1] It was the government’s goal to rectify these two shortcomings.

The initiative

The government saw an opportunity in the burgeoning tech sector and devised a strategy for turning Chile into a Latin American innovation hub. It created a new government agency, InnovaChile, and the Start-Up Chile programme, which it launched in 2010 as a seed accelerator to foster a culture of entrepreneurship in the country. Its objectives were to:

  • Encourage an entrepreneurial mindset in Chile.
  • Position Chile as the innovation and entrepreneurship hub of Latin America.
  • Attract young entrepreneurial talent from around the world to Chile to develop home-grown, high-growth start-ups.
  • Stimulate Chile’s long-term economic growth.

“Under the pilot scheme, successful applicants were offered US$40,000 in seed capital, a work visa and office space to launch their companies. The only requirement: spend six months working in Chile to establish their companies ... and engage in innovation and entrepreneurship outreach efforts with students and local businesses.” [2]

The public impact

In the first five years, from 2010 to 2015, over 1,200 startups and 3,000 entrepreneurs from across the world have been part of Start-Up Chile, raising more than US$135 million and creating more than 1,400 jobs. About half of the entrepreneurs have been operating in the ICT sector.

“A 2013 survey of Start-Up Chile grantees during the period 2010 to 2012 showed that around 83 percent of Chilean entrepreneurs started their activities in Chile.” [3] Start-Up Chile now has a large portfolio, receiving between 200 and 250 companies a year. As a result, it has grown into one of the biggest and most diverse startup communities, with more than 3,000 entrepreneurs.

It has generated over 1,500 jobs and raised more than six times the initial capital invested by the Chilean government.

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What did and didn't work

All cases in our Public Impact Observatory have been evaluated for performance against the elements of our Public Impact Fundamentals.

Legitimacy

Stakeholder Engagement Strong

The main internal stakeholder in Start-up Chile was the Chilean government, its engagement coming through the agencies of the Ministry of Economy, such as the Chilean Economic Development Agency (Corporación de Fomento de la Producción de Chile – CORFO) and its innovation branch, InnovaChile. The Chilean government continues to invest in Start-up Chile, both through supplying startup capital and by sponsoring one-year work visas.

The main external stakeholder has been the San Francisco-based firm, YouNoodle (formerly Yoodle), which has an office in Santiago, the Chilean capital. It judged the initial applications for funding and is now involved in assessing applications for the S Factory and Seed arms of Start-Up Chile. (It is also responsible for consulting on similar programmes, such as Start-up Denmark and Start-up Peru.)

The other main stakeholders are the local business people who act as mentors to the entrepreneurs, and the entrepreneurs themselves, together with the businesses that they run.

Political Commitment Strong

The Chilean government has been committed to developing the programme, since it was first suggested by Raul Rivera, the president of Foro Pro Innovación. “Start-up Chile is fully funded by the Chilean Government through the Ministry of Economy, the Ministry of Foreign Affairs and the Ministry of Internal Affairs.” [4] It is now in its sixth year and 16th generation of applications and shows no sign of losing momentum.

When asked about why the entrepreneurs were not obliged to remain in Chile after completing the six months programme, the Chilean president from 2010 to 2014, Sebastian Piñera, “would answer that having all these entrepreneurs at the same place at the same time creates connections that will eventually prove much more valuable than any direct foreign investment”. [5]

Public Confidence Fair

There are no surveys available about the Start-Up Chile stakeholders and this particular programme, but public opinion about the government during that period was fair. The public trusted the government and President Piñera won the 2009-10 election with a significant majority: 44 percent of the vote, 14 percent ahead of his nearest rival.

However, there were allegations of corruption against CORFO), the Ministry of Public Works, Chiledeportes– the government’s sports organisation – and multiple accusations of financial campaign fraud.

Policy

Clear Objectives Good

The initial objectives were to encourage entrepreneurship in Chile by attracting young entrepreneurial talent from around the world to develop home-grown, high-growth start-ups and stimulate the country’s economic growth (see The initiatives above).

Its focus was broadened in 2014, being “restructured to increase its economic impact on the national economy and to strengthen the country’s entrepreneurship culture and its innovation ecosystem”. This shows that its objectives have been consistent over time with its broadened focus an indication of success and expansion.

Evidence Strong

Evidence from CORFO’s 2009 pilot programme, the High Technology Investment Promotion Programme and Foro Pro Innovación was used to provide evidence to policymakers. Foro Pro Innovación brings together institutions and people to promote innovation in Chile and framed the guidelines for Start-up Chile. Competitions to select suitable candidates were held three times in that year, attracting over 5,000 applications from which over 240 projects were selected for the year.

Feasibility Strong

Start-up Chile’s finances are currently secure, its funding being provided by the government. Other facilities such as office space and work visas have been provided to the participants by CORFO so that the legal and organisational issues were resolved. The 2009 pilot programme had already established the technical feasibility and there was an element of mentorship.

The young entrepreneurs have access to mentorship from their more experienced counterparts. “Participants in Start-Up Chile effectively join a global network of forward-looking entrepreneurs and benefit from rapid and easy access to valuable resources, including mentors and investors, creating significant opportunities for entrepreneurial and innovative talent to grow.” [6]

Action

Management Strong

The assessment of applications received by Start Up Chile was conducted by YouNoodle, judging the candidates according to three criteria:

  • The quality of the founding team.
  • The merits of the project.
  • The impact it was likely to have on Chile’s entrepreneurial environment.

The programme has a tripartite structure, being organised into:

  • The S Factory, a pre-acceleration programme for female-led startups in the early concept stage.
  • Seed, a seed accelerator programme for companies with a functional product and early validation.
  • Scale, so that top-performing companies incorporated in Chile and looking to scale in Latin America and globally.

The entrepreneur and business academic, Vivek Wadhwa was a key consultant, identifying immigration as a means of promoting innovation and entrepreneurship in the country. He suggested that a bottom-up approach would be more effective than the top-down approach that had characterised the pilot programme.

Measurement Good

There were a number of parameters that used to measure the impact of the programme:

  • The number of startups and entrepreneurs from across the world who have been part of Start-Up Chile
  • The amount of seed capital and the number of jobs created (estimated at more than 1,500).
  • The proportion of Chilean entrepreneurs who started their activities in Chile.
  • The size of the Start-Up Chile portfolio.

There is also a qualitative assessment of the entrepreneurship culture, for example the programme’s effect on the entrepreneurial skills of Chilean participants, which was measured in ‘Boulevard of Broken Behaviors: Socio−Psychological Mechanisms of Entrepreneurship Policies’.

Alignment Strong

According to Horacio Melo, currently the executive director of Start-Up Chile, Wadhwa and Nicolas Shea were the individuals whose ideas helped seed the programme. Wadhwa was invited to Chile to discuss the ideas with Mario Castillo, formerly of CORFO, and Raul Rivera, the President of Foro Pro Innovación. The government actors, including the president and the agencies within the Ministry for Economy (CORFO and InnovaChile), cooperated in promoting the programme. YouNoodle selected the candidates on the basis that they would contribute to Chile’s entrepreneurial climate and to its economic growth.

Also the fact that the total number of application were 650 in the first round when it was launched, shows the high level of interest among the participants from around the world in Start-up Chile.