Foreign innovation drives startup economies. In the US alone, 51% of billion-dollar startups were founded by immigrants.
Cities across the world have taken notice: encouraging the free movement of information and talent is crucial to tech sector success. Santiago, Chile, is forging ahead with a government-backed plan to attract top talent.
A Government Experiment in Startups
The idea started with a question. According to Brookings, the Chilean government asked: “What would happen if we could bring the best and brightest entrepreneurs from all around the globe and insert them into the local ecosystem?” The aim was to position Chile as the innovation and entrepreneurship hub of South America.
Chile had some things going for it already, including business-friendly rules, efficient immigration policies and a relatively stable economy. What it lacked, Brookings noted, was a strong entrepreneurial culture among young people, and Santiago wasn’t a very international city. The program was designed to fill both gaps.
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As reported in Brookings, part of Santiago’s success as Latin America’s tech hub is due to a program called Start Up Chile. The government-backed incubator/accelerator offers $40K of seed capital to entrepreneurs from anywhere in the world, as long as they stay in Chile for at least six months.
How the Program Works
The money comes equity-free, which means founders don’t give up any part of their company in return. Brookings described the package as $40,000 USD, a one-year temporary visa, office space, and access to mentoring and coaching, with about 100 startups chosen each round.
There’s a catch, and it’s a clever one. Participants have to give back to the local community by earning “social capital points”: hosting workshops, mentoring local entrepreneurs, teaching classes or organizing hackathons. That way, the benefit doesn’t leave with the founders. Brookings reported that more than 200,000 Chileans had taken part in those community activities.
Since the program’s launch in 2011, $40 million USD has been invested in 1,309 startups. Out of these startups, 76% are run by foreign entrepreneurs, with 32% of the startups funded by Start Up Chile remaining in the country at the program’s completion. This influx of talent has given Santiago’s ecosystem an enormous boost, and has prompted the nickname “Chilecon Valley.”
The Challenge of Keeping Founders
That 32% figure points to the program’s biggest weakness. Brookings reported that as many as 80% of participants left Santiago after the six-month program, many of them for the United States, and that as much as 85% of the funding raised by Start-Up Chile companies came from abroad.
The program responded by changing its own model. It added follow-on funding of about $100,000 USD for a few top graduates in each group, also equity-free, on the condition that they incorporate in Chile and run their business there. As one of the program’s leaders told Brookings, “We have to pivot and grow just like the start-ups in our program because we are a start-up too.”
Start-Up Chile Today
The program is still running, managed by Chile’s economic development agency, Corfo. Start-Up Chile now describes itself as a public accelerator for startups that has had more than 3,000 startups go through its programs, and it still offers equity-free funding. Its programs are now split by stage: Build for early startups, Ignite for those looking for product-market fit, and Growth for those that are scaling.
According to the program’s impact page, companies in its portfolio have raised US$2.05 billion, and the portfolio is valued at about US$5.9 billion. Its featured alumni include NotCo, which uses artificial intelligence to develop plant-based replacements for animal-based foods.
What It Means for Other Startup Hubs
Start-Up Chile showed that a government can attract founders from around the world quickly, with money, visas and a simple pitch. The harder part is getting them to stay, and that’s where the program had to keep adjusting.
For other countries trying the same thing, the lesson is that attracting talent is only step one. Local investors, customers and reasons to build a company in the country over the long run matter just as much as the initial cheque.
Frequently Asked Questions
What is Start-Up Chile?
Start-Up Chile is a government-backed accelerator that offers equity-free funding to entrepreneurs from anywhere in the world. In its early rounds it offered $40,000 USD to founders who stayed in Chile for at least six months.
What did Start-Up Chile offer participants besides money?
Brookings described the package as including a one-year temporary visa, office space and access to mentoring and coaching. In return, participants had to earn "social capital points" by running workshops, mentoring local entrepreneurs, teaching or organizing hackathons.
Why is Santiago called Chilecon Valley?
The nickname came from the influx of foreign entrepreneurs brought in by Start-Up Chile. By the time of this article, $40 million USD had been invested in 1,309 startups, 76% of them run by foreign entrepreneurs.
What was Start-Up Chile's biggest challenge?
Keeping founders in the country. Brookings reported that as many as 80% of participants left Santiago after the program, so Start-Up Chile added follow-on funding for graduates who incorporated and operated in Chile.
Is Start-Up Chile still running?
Yes. Managed by Chile's development agency Corfo, Start-Up Chile says more than 3,000 startups have gone through its programs, and its portfolio companies have raised about US$2.05 billion.