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Chile has a fast-growing group of young entrepreneurs with exciting ideas and potential to build high-growth businesses while creating new jobs and opportunities for Chilean workers, but who will finance such innovations?

Deposit-taking institutions, including banks, are not able to assume such risks –in Chile or in any other country. Strategic investors with liquidity are present but the spark of innovation is often extinguished when a young start-up is taken over and proven methods are applied.

To kindle that spark, “smart equity” is needed from investors experienced in guiding entrepreneurs to build high-impact businesses and with the money to support the underlying business plan at an early stage of development.

This type of financing is known as “venture capital”. While Chile has a nascent venture capital industry, the industry needs to connect with global investors and gain experience in fostering fast-growth companies.

The United States is home to the world’s largest venture capital firms with a long history of promoting entrepreneurship and innovation. Harnessing this experience, and giving entrepreneurs a chance to meet potential investors, was AmCham’s goal in bringing a group of leading U.S. venture capitalists to Chile in January.

AmCham organized the mission in partnership with the Economy Ministry, the Chilean Economic Development Agency (CORFO), the U.S. Department of Commerce, NGO Endeavor Chile, the Chilean Association of Investment Funds (ACAFI), and local venture capital fund Austral Capital.

The mission was a follow-up to AmCham’s September 2010 California mission in parallel with President Piñera’s official visit to the state. During that visit AmCham organized a private meeting between venture capitalists in Silicon Valley and Economy Minister Juan Andrés Fontaine. 

AmCham worked with Randy Mitchell, Senior Advisor for Entrepreneurship and Venture Capital at the U.S. Department of Commerce and Chairman of the OECD Working Party for Entrepreneurship, and received the full support of the U.S. Embassy in Santiago including U.S. Ambassador Alejandro Wolff who hosted a reception at his residence.

The three-day mission, on January 5-7, included senior partners from Thomas H. Lee Partners, Pantheon Ventures Inc., Greenspring Associates, Mission Ventures, and Volition Capital – all major firms in the U.S. venture industry.

The executives met with Minister Fontaine and the executive vice-president of CORFO, Hernan Cheyre, to discuss how to integrate Chile into the global venture capital network. They also participated in two seminars. The first, at the Ritz Carlton Hotel, included a discussion of industry trends and the role of venture capital in building high-growth companies. Here local players were able to discuss business opportunities and eventual partnerships.

The second seminar, held at Adolfo Ibañez University, gave entrepreneurs a chance to present their projects and opened the delegates’ eyes to potentially attractive investment opportunities. Presentations were given by Minister Fontaine; Larry Cheng, Managing Partner at Volition Capital; Susan Segal, President and CEO of the Council of the Americas; and leading Chilean entrepreneurs including Fernando Fischmann of Crystal Lagoons.

The executives also met with local pension fund managers and family offices to explore the potential for limited partnerships. The venture industry offers Chilean investors an interesting option for diversification and building a new knowledge base.

There was also plenty of opportunity to meet with Chilean entrepreneurs in informal settings including a roundtable luncheon with Andrés Navarro, President and CEO of Sonda, and one of Chile’s most successful entrepreneurs.  Salvador Said, Chairman of Endeavor Chile, also hosted a private dinner at which entrepreneurs had the chance to interact with members of the delegation.

Preliminary results of the mission are positive. One of the venture groups is considering establishing an office in Chile, another has found a potential local partner for investing in a start-up business and others are including Chile in their ongoing development plans, both as a source of funding and of investments.

Overall, progress was made in integrating Chile with the venture capital world, thereby creating a more favorable environment for the country’s entrepreneurs and bridging the financing gap for innovation. AmCham thanks all of its partners for making the mission such a success.

Another similar mission is tentatively planned in 2012. In the meantime, AmCham is exploring the possibility of bringing corporate venture capitalists to Chile later in 2011. Such missions are important to attract investment in innovation that will accelerate Chile’s economic growth - a mission to which the Chamber is firmly committed.

Kathleen C. Barclay is principal of the consulting firm Asesorias KCB Ltda and chair of bUSiness CHILE’s Editorial Board.

For more information contact Nora Balzarotti at AmCham’s Research Department, Tel. 290-9768, nora.balzarotti@amchamchile.cl