I spent two weeks of December in Chile as a guest of Professor Cristóbal García, Director of EmprendeUC at the Catholic University of Chile, which just signed up a 3-year collaboration partnership with Stanford’s Technology Ventures Program. I did a keynote on innovation hubs at the newly created DoFuture program, spoke at Santiago’s Startup Weekend on Customer and Agile Development, and at a conference in Patagonia supported by the Ministry of Economy’s Innovation Division.
I got smarter about the world outside of Silicon Valley, met some wonderful people who made me feel part of their family and shared some thoughts about entrepreneurship.
This editorial is a personal view of what I saw in what I call “Chilecon Valley,” in no way does it represent the views of the fine institutions I teach at. Read this with all the usual caveats: visiting a place for a few weeks doesn’t make you an expert (heck I’ve lived in Silicon Valley for over 30 years and I’m still surprised), I’m not an economist, and the odds are I misunderstood or misinterpreted what I saw or just didn’t see enough.
The Chilean Experiment
Chile has decided that it wants to be an innovation hub in South America. In my short time in Chile, I spent time meeting with: Chilean entrepreneurs as part of Santiago’s Startup Weekend as well as EmprendeUC-DUOC New Ventures Contest Awards ceremony, the Innovation Division of the Ministry of Economy, the Chilean Economic Development Agency (CORFO) which sponsored Start-Up Chile and Do Future in Patagonia as well as Fundacion Chile, the main R&D agency and the National Innovation Council, universities including the business, design and engineering schools in the Catholic University of Chile who are hard at work teaching and encouraging their students to think big and to start companies and independent non profits such as the Innovation Forum, which encourage entrepreneurship and innovation in education.
The Good News
Entrepreneurship and innovation is being talked about continually in Chile. This isn’t some small-time effort. The country is dead serious in all levels of government and universities about making this happen. They’ve been thinking hard and smart about the lessons to be learned not only from Silicon Valley, but with only 16 million people, they are also looking for lessons from other small innovation clusters such as Israel, Singapore and Finland. These countries are great models of countries too small to sustain startups of scale on just domestic consumption yet have managed to create innovation with a global reach.
What Needs Work
As an outsider I was incredibly impressed with how far Chile has progressed in making the country an innovation hub. However I had questions about the challenges that still needed to be addressed.
Perhaps it was just who I was meeting, but for a country so focused on innovation and startups the lack of venture capitalists was noticeable. Given the interesting things going on in the engineering labs I visited and the startups I met, one would have thought the place would have been crawling with VCs fighting over deals. Instead it felt like the government—through CORFO—was doing most of the risk capital investing. Given that great VCs are much, much more than just a bag of money, this means that startups lack experienced board members with practical experience. There seemed to be very few who knew how to coach entrepreneurs and to build companies. Finally, it wasn’t clear if everyone was on the same page; that for a Chilean startup to scale it was going to have to reach past Chile and go global. There seemed to be few tools, techniques and strategies to do so.
A sign of progress will be when some of the CORFO guys leave the government and start their own VC firms.
Entrepreneurship in Chile seems to be disconnected from the country’s largest industries and core resources. The clearest example is the country’s copper mining industry, which contributes 20 percent of the Chilean Gross Domestic Product (Chile produces 35 percent of the world’s mined copper). The largest company, the state-run Chilean National Copper Corp (CODELCO), has $23 billion in sales. Yet the copper companies import nearly 100 percent of the advanced technology they use. Interestingly, CODELCO is required to contribute 10 percent of its revenues to the armed forces, but the mining industry seems to have little or no connection with innovation and entrepreneurship efforts in universities and startups. (Perhaps it’s because the Ministry responsible for Mining is separate from the Ministry responsible for the Economy and Innovation).
I suggested that Chile’s mining industry could contribute to building innovation leadership by funding a multi-tiered initiative in the country’s leading universities: professional management training (obvious and immediate payback), applied engineering (top 10 annual challenges from the mining companies), and basic research (copper based materials science, robotics, materials handling).
Small Business vs. Scalable Startup vs. Corporate Entrepreneurship
There’s confusion in both the government and universities about the difference between small business entrepreneurship (startups designed to be family businesses), scalable startup entrepreneurship (startups designed from day one to scale big inside Chile and then expand globally), and corporate entrepreneurship.
I suggested that they think about educating (and funding) each class of entrepreneurs differently and realize different regions of Chile have different needs. In Santiago, the concept that startups are not smaller versions of large companies and that traditional business school classes and methods don’t apply, is starting to take hold and will help shape how they educate entrepreneurs. In contrast, over lunch with the governor of Ultima Esperanza (the “Last Hope” province on the southern tip of Chile) it became clear that there’s a pressing need for training and education in small business entrepreneurship, dramatically different then the scalable startup education wanted in Santiago. These three types of entrepreneurship models need to be explicitly recognized, encouraged and managed.