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President Piñera with Geeks

The day started at the La Moneda presidential palace with a disappointment when the promised breakfast turned out to be just coffee and a cookie. But that setback was quickly forgotten as the 30-odd US entrepreneurs and investors brought to Chile by Geeks on a Plane, a program under which they travel to different countries to further the cause of entrepreneurship and, hopefully, spot interesting investment opportunities on the way, warmed to President Sebastián Piñera.

As one member of the group pointed out, just being with him was an important sign of his government’s interest in entrepreneurship - the day before, they had been stood up by the mayor of Río de Janeiro - and he pushed all the right buttons, talking about discipline and perseverance - of course, he said, luck is important but you’re more likely to get lucky if you get up early - and wanting to change the world. Or, in other words, what another member of the group described as “the essence of entrepreneurship”.

From there, shepherded by Endeavor, a US-based non-profit organization that supports entrepreneurship, the group headed for the buses that would take them on the two-hour drive south to lunch, meetings and networking at the Casa Silva vineyard. During the journey, Chilean entrepreneurs - kneeling on the front seat of the bus because, it was explained, Chile is “a country with rules” and standing up is forbidden on intercity buses - pitched their projects to the visiting geeks. And, as their stories began to unfold, so too did two different visions of the state of entrepreneurship in Chile.

According to Dave McClure, founding partner of 500 Startups, a Silicon Valley-based seed fund and start-up accelerator, and creator of Geeks on a Plane, Chile has Latin America’s most entrepreneurial culture. “Investors are more interested in Brazil, because the market is larger, but Chile has more spirit of entrepreneurship,” he said.

That view was echoed by Wenceslao Casares, the Argentine icon of entrepreneurship in Latin America who rose to fame in the 1990s as the founder of the Patagon financial services portal. One of the organizers of the Geeks on a Plane’s Latin American tour, he confessed that Chile had been sandwiched between Brazil and Argentina because the venture capitalists in the group would otherwise have skipped it. “But they would have been wrong,” he said.

Over the past decade, Casares has made several investments in Chile and says he has seen a remarkable change. “There wasn’t any venture capital in Chile ten years ago,” he recalled, “but now there’s more than in the rest of the region combined, including Brazil, and that’s really fast progress.”

Chile is an easy country in which to start a business, added Pepijn van der Kroght, a Dutch entrepreneur who settled in Chile where he co-founded DIL Brands, a packaging and industrial design company that has since expanded to Argentina, Brazil and Mexico. “In my experience, there aren’t any complications in Chile,” he said, “whereas, in Brazil, your most important person is your tax lawyer.”

Emphasis on challenges

Chilean entrepreneurs, however, were not quite so enthusiastic - “it’s very Chilean to complain about things,” commented Casares - but it can, of course, be difficult to appreciate a country’s progress whilst grappling with the day-to-day challenges of starting and sustaining a business.

Chile’s small domestic market is certainly a concern for many local entrepreneurs. It means that, in many industries targeted by service providers, there are only a handful of players, making it difficult to break into a new market, pointed out Max Grekin, founding partner of SKM, an e-learning company.

The answer, of course, is to expand to other countries as SKM has done. Or to use Chile as a platform as in the case of Betazeta, a Santiago-based company that, as Leo Prieto, its co-founder and one of Chile’s most established entrepreneurs, pointed out, operates the second most-visited network of blogs in the Spanish-speaking world.

Other local entrepreneurs highlighted difficulties in raising finance in Chile. The problem, they said, is not so much its availability as the strings attached to it.

“Chile is fine for raising amounts of up to, say, US$350,000,” argued Sergio López, a technology entrepreneur with several start-ups to his name, “but, beyond that, the terms can be disruptive for the development of the business.” The complaints focused on local venture capital funds wanting too much in terms of preferred shares and the fact that, because there are only three main funds - Aurus, Austral and Copec-UC - that all talk to each other, entrepreneurs have little leverage for playing one off against the other.

There was, however, consensus that conditions are improving constantly as both entrepreneurs and their potential backers learn from experience. And that, over the years, Chile’s governments have begun to provide more and better support for entrepreneurship.

A key initiative launched last year by the Piñera administration is Start-Up Chile, a program designed, with the bait of a US$40,000 grant, to persuade early-stage entrepreneurs from other countries to start their proposed businesses in Chile. Soon to be thrown open to home-grown entrepreneurs as well, it was originally regarded with some skepticism and, by its critics, as a gimmick.

“I was initially skeptical,” admitted Wenceslao Casares, “but my opinion has changed.” He now believes the initiative may fulfill a useful function by helping to plug Chilean entrepreneurs into international networks and putting the country on the world venture capital map.

The experience of Nathan Lustig, a young entrepreneur from Wisconsin and an early participant in the program, is encouraging. While in Chile, he not only progressed in developing the business for which he had been selected but also hooked up with a Chilean partner to launch a second venture that he hopes to expand in the United States on his return home.

But perhaps the single most important challenge for Chile is not to rest on its laurels. “If it does that, it will be overtaken by Brazil with its market size,” warned Casares, “but if it persists in its present efforts, it could become a Latin American center for venture capital.”

Or, as President Piñera told the Geeks on a Plane during their flying visit, a failure to innovate would mean stagnating and, in today’s world, that would, in turn, mean losing ground in the race for competitiveness.

Ruth Bradley is a freelance journalist based in Santiago and a former editor of bUSiness CHILE.