PrintSend to friend

For a couple of entrepreneurs from Wisconsin in their mid-twenties, the offer of US$40,000 to bootstrap for six months in sunny Chile sounded almost too good to be true. But this was exactly what brought Nathan Lustig and Jesse Davis to Chile last year as part of the pilot project of the Start Up Chile program.

Run by Chile’s economic development agency, CORFO, Start Up Chile aims to make Chile into a center of innovation and entrepreneurship for the region - the Singapore of Latin America – by importing entrepreneurs like Lustig and Davis and paying their bills.

With no strings attached, a one-year visa and a “soft landing kit” including networking events with fellow entrepreneurs, it is “the deal of a lifetime”, says the program’s executive director, Jean Boudeguer.

And Lustig couldn’t agree more. He is honest about what first drew him to Chile after reading about Start Up Chile in the magazine TechCrunch: the “free money”, the chance to meet new people and the opportunity to live outside the US in a warm climate.

He and Davis applied to the program with their start-up Entrustet, a website that lets customers decide who inherits their digital assets after they’re gone. They were accepted in September and the program far exceeded their expectations.

“We met more people than we thought we would and did more businesswise and personally,” says Lustig.

The global press coverage didn’t hurt either. Entrustet has expanded its client base, which now includes Chilean clients, says Lustig. He returned to Wisconsin in May to drum up more B2B business, but Chile is still very much on his mind. That’s because he invested some of his personal savings in a Chilean start-up founded by George Cadena, another entrepreneur in the Start Up program.

A California native, Cadena was selected for his start-up Aeterna Sol, which designs solar panels that track the sun as it moves across the sky. He is developing a pilot project in the Atacama Desert with Ferrocarril de Antofagasta a Bolivia (FCAB), but the technology is still at an early stage, he says.

Meanwhile, the 29-year old is focused on another project: Studio Snaps. “Chileans love photos and they love Facebook so I wanted to combine these,” he says.

Studio Snaps provides open air photo booths to companies, institutions and individuals for marketing and social events. The booths, which are operated by the user through a touch screen, take photos that can be uploaded to Facebook or printed out on laminated strips with a company logo.

“It’s like a branded memory of the event that people can take with them,” says Cadena. The booths were launched at the Start Up Chile gala in January and were a big hit at Lacoste’s VIP tent at Lollapalooza in April. Other clients include the Chilean reality TV show “40 or 20”.

The booths are a much more effective marketing tool than handing out flyers or giving out free drinks at a party since people interact with them and tag themselves in photos on Facebook, explains Cadena.

The data collected can also be analyzed using special marketing software being developed by the “geek” of the Studio Snaps gang, Daniel Wilhelm, a friend of Cadena’s and a PhD graduate from Caltech.

But Cadena also needed someone who knows the local market. Through a friend, he met Juan Pablo Salas, a Chilean student in the marketing program at the Universidad del Desarollo. Salas is now a partner in Studio Snaps and its sales manager with two other Chilean salespeople.

Photo booths are common in outdoor events in the US, but not in Chile. “These booths are a novelty here and my challenge is to explain how they work,” he says.

After six months, Studio Snaps is breaking even on word of mouth alone and it plans to expand in South America, later opening offices in London and the US, says Cadena.

“Chile is the perfect gateway to South America and a proving ground for young ideas without a lot of traction,” he notes.

But the company needs capital to grow, which is where Start Up Chile can help. The program was originally limited to foreigners or Chileans resident in foreign countries, but the rules have changed this year allowing residents of Chile to apply. According to Salas, this is welcome news because Chilean entrepreneurs could also use the leg up. “We’re good too,” he says.

If all goes to plan, Studio Snaps will receive US$ 40,000 this year to cover its operating expenses in Chile and the US for a few more months.

“The biggest pull to get entrepreneurs to Chile is making it free and, if they are real entrepreneurs, they will do good things,” says Cadena. Similar programs in other countries require entrepreneurs to give up part of their equity but he says these are doomed to failure: “You can’t cage the bird.”

The risk, of course, is that the bird will fly away. Only a third of the 24 start-ups that took part in the pilot program have stayed. These include Piehole, which provides voiceover services, and AI Merchant, which lets clients sell products they don’t own on E-bay and then buy them elsewhere at a lower price to make a profit.

But none of these look likely to become the next Facebook and some of the most promising start-ups like Entrustet and Cruisewise, an online cruise booking system co-founded by the Israeli Amit Aharoni, have gone back to the US.

Still, Cruisewise is considering locating its operations center in Chile which would create jobs, says Jean Boudeguer. And those who leave, like Lustig, have an emotional connection to Chile that could result in future investments, he adds.

Not every start-up will succeed but by throwing a wide enough net Boudeguer is hoping to snare a few big fish. Since its launch, the program has selected a total 112 start-ups from 28 countries and it plans to select another 200 by the end of this year. By opening up the program to Chileans, it is also fostering local talent.

“Start Up Chile is a start-up itself, it needs time to grow,” notes Cadena.

There is no formula for replicating Silicon Valley’s success but giving bright entrepreneurs the opportunity to bootstrap in Chile and connect with Chilean partners could pay off down the road. Only time will tell if the gamble is worth it, but it’s a good start.

Julian Dowling is editor of bUSiness CHILE