I’ve been living in Chile off and on since November 2010 when I arrived as part of the pilot round of Startup Chile.
When I got here as part of the pilot round in 2010, I didn’t know anything about Chile. I had the time of my life and ended up selling my business a few months after returning to the US. This is the book that I wished I had when I arrived.
I’ve now lived in Chile for over a year and will share everything I’ve learned. You’ll get the inside scoop about how to best take advantage of the program, and your time in Chile. The book is divided into four sections: Startup Chile 101, Living in Chile, Doing Business in Chile and Traveling in South America.
Startup Chile 101 talks about the program’s history, the reimbursement process and how to get the most out of the program. The second part covers Chilean culture, where to live, safety and a city guide detailing where to go out, have a beer or have a nice meal. Part three talks about the Chilean entrepreneurial culture, doing business in Chile and hiring talent. Finally, the last section has travelouges of places I’ve gone in South America where you might enjoy taking a trip for a long weekend.
The book costs $10 and I can guarantee it’s worth it. If you have any questions, comments or feedback, please shoot me an email, otherwise enjoy the book!
Note: This book is not authorized by Startup Chile or anyone in the program. All opinions, recommendations and advice are my own. Please don’t confuse this books with anything official.
Many are calling Facebook’s IPO a bust because it didn’t pop on the first day. Others are decrying the fact that Facebook “took all the profits for themselves” at the expense of individual investors. Facebook’s stock may or may not be overvalued (I think it is, by a lot), but calling it a bust and complaining that retail investors aren’t making the profits they are “entitled to” is ridiculous and misses the larger point. For example, in a Forbes article titled 7 Reasons Why the Facebook IPO was a Bust, Rich Karlgaard writes:
Facebook left nothing for the common investor. The insider pig pile of PE firms and celebrity Silicon Valley angels took it all. This is a rather new, post-Sarbanes-Oxley fact and it should make Americans very, very angry. When Microsoft when public in 1986, its market value was $780 million. Microsoft’s market value would rise more than 700 times in the next 13 years.Bill Gates made millionaires of thousands of ordinary public investors. When Google went public in 2004 at a $23 billion valuation, it left less on the table for you and me. Still, if you had invested in Google then and held your stock, you would be sitting atop a 9x return. Zuckerberg and his Facebook friends took it all.
That Facebook and its investors acted in its self interest shouldn’t be surprising and it shouldn’t make people mad. They have no responsibility to the average Joe clamoring for a quick buck by purchasing Facebook stock. Zuckerberg and his team are thinking “The average investor hasn’t done anything, they didn’t take any risks like our previous investors, they just want to piggyback onto our gains. They’re greedy.”
Facebook sold its private stock at the highest valuation they could, which brought Facebook and its previous investors the most cash possible. It was as if they were selling their company to the public, not opening it as a great investment opportunity. They viewed the new shareholders as suckers, not partners.
With the advent of private equity in the 80s and its explosive growth into the 2000s, the pension funds and institutional investors have gotten more creative and powerful. They invest earlier and in huge amounts, into the multi-billions. The only people who can’t get early exposure are the regular joes who “play the market.” Its now a casino and the game is rigged. Facebook, the banks and the press sold the story using the old narrative, instead of the new role of public capital markets.
Facebook’s IPO shows this new role. In a private equity driven, post Sarbannes Oxley world, the returns are getting shifted to those who took the initial risk, not retail investors. These initial investors are playing a game of musical chairs and retail investors are the last stop, the last idiots to buy into the game. It’s rigged so that the retail investors don’t have a seat if (when) the music stops. And it’s purposely designed that way.
What Facebook, its investors and the banks did isn’t new. It’s just the latest example. Groupon did the same thing, but worse. Months before they went public they took a series G round valued just shy of $1b. The founders and investors took $810m off the table and put it in their pockets. The new investors not only allowed this, they did so enthusiastically because they knew that Groupon would go public at a higher price and the “stupid” general public would be left holding the bag when the price inevitably fell. Groupon is now down 54% from it’s IPO price.
Retail investors should not be mad at Facebook for acting in its self interest and raising as much money as possible. Retail investors should be pissed at the banks who hyped Facebook as the next great investment opportunity and the press who bought into the hype and the outdated narrative. They should be pissed at additional government regulation that makes it hard for companies to go public earlier and leaves more gains for private equity. Anyone who bothered to look at Facebook and Groupon’s previous private rounds and private sales on Secondmarket would have been able to see this coming.
It’s the new normal. Tech companies don’t use the stock market as an efficient way to raise capital like it was intended. It’s a way to cash out previous rounds and leave potential losses with the general public. It’s one giant casino with the public as suckers. This farce will only stop when retail investors realize that tech IPOs are a loser for most of the general public or refuse to play in the casino…er stock market.
An article in Pulso, a Chilean business daily, titled Venture Capital: Critiques and changes proposed by entrepreneurs (Spanish, sorry!), has brought startup funding mainstream in Chile. As far as I know, this article, written by Javiera Quiroga, is the first one in a major newspaper talking about the problems occurring in Chilean venture capital. In summary, the article interviewed three successful entrepreneurs, Chileans Tomas Pollak and Nicolas Orellana and Argentinian Wences Caseres, who shared their experiences with venture capital in Chile. To summarize:
Chilean entrepreneurs said that the vast majority of Chilean venture capital funds are not entrepreneur friendly. They don’t use standardized term sheets, they try to take as much equity as possible (60%+), turning entrepreneurs into slaves, instead of partnering with entrepreneurs. They are mostly former bankers or private equity without technology experience. The vast majority just give money and don’t provide much else. The only way to fix the problem is for time to pass and the industry to mature.
The funds responded that there’s plenty of money around and that entrepreneurs are getting funded at a high rate.
I agree with the vast majority of what the entrepreneurs say in the article. I had contact with many of Chile’s investors either directly when we were looking to raise money with Entrustet and indirectly via speaking with Chilean and foreign entrepreneurs. Some people believe that the solution is more money in the Chilean investor community. If only there were more investors, they say, entrepreneurship would flourish.
I don’t agree. More money can’t hurt, but there is plenty of investor money in Chile. Startups with world class founders who execute and deliver what they promise get money, whether its from Chile, the US, Brazil or other countries.
The problem is that more Chilean startups fail than they should. Chile has a very educated, passionate and hard working base of potential entrepreneurs who lack experience, connections and the know how to run startups. A small percentage of Chile’s potential entrepreneurs are actually reaching the goals that they are capable of.
They don’t fail because of a lack of money. They fail because many inexperienced entrepreneurs without networks make correctable mistakes that sink their companies. Chile doesn’t need more VC. It needs smart money. It needs mentorship that comes with a check.
Chile needs mentor/investors who have successfully run startups. People who knows what lean startups are. How startups work in the US, but also understand Chilean culture. Best practices for funding. Someone to be a sounding board and tell startups when they are doing things wrong and give advice on how to make it better. Someone credible to call bullshit on poor planning and excuses. Someone to demand more and help create the roadmap to success.
Chile needs entrepreneurs turned investors who can mentor startups and give them the money they need to get a viable product that can bridge the gap to a Series A and steer them to good VC funds. This will force Chilean VCs to improve, like their Brazilian counterparts Monahees Capital, who use Silicon Valley standards in Brazil.
Two great examples are Oskar Hjertonsson and Daniel Undurraga, the founders of Needish and Clandescuento, which were later acquired by Groupon. After the acquisition, Oskar and Daniel were in charge of Groupon LatAm’s successful expansion across South America and are now investing in startups. But they’re not just throwing cash at startups. They’re using their expertise to mentor startups and push potential entrepreneurs to start their companies.
For example, after Nicolas Orellana organized the first Webprededor, Latin America’s most important tech and entrepreneurship conference, Oskar and Daniel told Nicolas that they would fund him if he developed his event management tool and started selling it to other companies. Nicolas founded Welcu shortly thereafter. Although Nico’s the type of entrepreneur who would find a way to succeed no matter what, they’ve been indispensable advisers and additional investors.
Welcu’s now been funded by 500 Startups and Tomorrow Ventures in California and additional Groupon LatAm executives. It’s grown from two guys in Chile to 35 employees and offices in Chile, Argentina, Brazil and Colombia and is still expanding quickly. Welcu is a perfect example of how successful entrepreneurs funded a new startup and continue to share their know how. There are other similar success stories in Chile, but Chile needs more of them and it should be an organized effort.
Chile needs a Dave McClure or Paul Graham who will formalize a seed mentorship program that can help startups navigate the beginning parts of the startup process and mold entrepreneurs who think like their entrepreneurial compatriots in California, NYC and other entrepreneurial hotbeds. That’s the gap in Chile’s market. So who’s it gonna be? Who will step up and fill the void as Chile’s Paul Graham or Dave McClure? Will it be you?
In mid January, I knew that Entrustet was going to be acquired and I started to look around for new things to do. I knew I didn’t want to rush into starting something right away: I’d been running startups non-stop since I was 19, with only a 6 week break between when the ink dried on the ExchangeHut acquisition and when I started Entrustet. I needed a break from the day to day pressure of running a startup. I needed to recharge so that when I found something I really wanted to work on, I’d be ready.
I knew I wanted to move out of Wisconsin, at least for awhile. I’d lived there my entire life. I went out to San Francisco and met with some friends and talked to my network in NYC. Nothing really piqued my interest. I decided to return to Santiago, where I’d spent six months as part of Startup Chile, to see what I could find. I was looking for a specific opportunity that met four specific criteria and if I couldn’t, I’d return to the US. I wanted to join a startup that:
Had traction and was generating significant revenue
Was expanding across Latin America so I could learn about the markets and expand my network
Forced me to work in Spanish all day so that I could finally get fully fluent
With a team of founders I could learn from
I talked to all of my contacts in Chile and looked at a bunch of different companies, but one kept hitting all of the metrics: Welcu.
I’d met Nico Orellana and Seba Gamboa in my first few weeks in Chile in 2010 at an asado (bbq). The two Chilean entrepreneurs were on their way to Palo Alto to try to raise money for their event management company. We ran into each other in person and on Twitter over the next year and a half and I always admired their progress. They arrived in Silicon Valley with a simple product and returned to Chile as 500 Startups alums, bosting funding from Eric Schmidt’s (ex-CEO Google) Tomorrow Ventures, the founders of Groupon LatAM and other Groupon execs in South America.
When I got back to Chile, I met with Nico over a michelada and he told me about Welcu’s agressive expansion plans to Colombia, Argentina and Brazil. In addition to Welcu, Nico and team organize Webprendedor, Latin America’s most important technology and entrepreneurship conference. Nico told me they needed help with marketing, pr, blogging social media and expansion strategy and offered me a sort of Entrepreneur in Residence position and head of marketing for Latin America.
It met all of my goals: Welcu is generating significant revenue and expanding quickly. I’d work in spanish all day, be learning about the Chilean, Argentine, Colombian and Brazilian markets and be learning from two great cofounders, along with an awesome team.
I joined Welcu two months ago as employee number 7. Now we’re 35 and have offices in Chile, Argentina, Colombia and are opening Brazil as we speak. We’re hiring as fast as we can. I work in spanish all day and provide lots of entertainment for my coworkers. My spanish is already so much better and I’m learning how business gets done in the rest of South America. Our tech team is incredible and Nico is a great entrepreneur who has many of the traits of my business partners from previous successful startups. We have a great team and it’s going to be fun as we continue to expand across South America. For me, this is the perfect opportunity. The only downside: my first winter in two years.
About a month ago, Deadmau5 (pronouced Deadmouse) was creating a new track. Instead of hiding for a month in a studio and then releasing the track to the world, he decided he would live stream video of his creative process. He’s always been a pioneer in fan interaction and using the internet to grow his fanbase, so this was his logical next step to bring fans closer to his music. His entire process of creating the track from start to finish would be available online, for free, to anyone, live.
Twitter was abuzz. As the track was coming along, Deadmau5 said that his next step would be to create some vocals. Chris James, an aspiring dj/producer in the UK was watching and decided to throw something together. He pulled some audio together and created some vocals. Next, he tweeted at Deadmau5 to share his creation. Deadmau5 talked about the tweet briefly on the broadcast, but didn’t listen to the track. Other viewers kept tweeting saying the he had to listen. It was that good. He obliged and was blown away, tweeting “DUDE… YOU FUCKING KIDDING ME???? god DAMN!”
Deadmau5 knew he had something amazing. Within minutes he got Chris on the phone, gave him writing credits and told him how to improve the vocals. All within 20 minutes. The next day, they integrated the vocals. A month later, Deadmau5 released The Veldt ft. Chris James, which I think is one of his best tracks in a long time. Two years ago, this sort of collaboration would never have happened and we wouldn’t have this awesome track.
I firmly believe that this Deadmau5 story is just the leading edge of the phenomenon, and that its not just limited to music. The internet gives those with something to offer unprecedented access to do amazing things. Whether its collaborating with Deadmau5, connecting with entrepreneurs, journalists or artists, anyone with a good enough idea has the power to get noticed. It’s an incredible change that is revolutionizing how we connect, create and live. We can reach out and collaborate to create amazing things, publicize injustices and change the world.
We no longer have the excuses “if only I had the right connections” or “it’s too hard, nobody will listen to me.” Just start. Do something awesome, be persistant and the rest will take care of itself. The internet has leveled the world. We all have the power to reach out and make our mark. There’s no better time than now to get started.
I’m excited to announce that Entrustet has been acquired by SecureSafe, the market leader in secure storage of digital information and digital inheritance. Since Jesse and I started Entrustet in a spare classroom at the University of Wisconsin, we’ve had one vision: to build a system to help you to create a plan for your digital assets that you can be assured will be carried out when you pass away.
We’ve done everything in our power to make our vision reality. We’ve created a product that works and helped people in over 20 countries protect their digital assets. We’ve helped families of the recently deceased find, access, transfer and delete online accounts and computer files. We’ve shed light on the entire topic of digital estate planning to the general population. We’ve worked with attorneys and legislators to help carve out some legal clarity in an evolving area of estate law.
Over the past three years, we’ve gotten to know the SecureSafe team very well. They are based in Zurich, Switzerland and their service is used by various Swiss Banks. We’ve gotten to know a great team with massive experience, and a very similar vision. As we worked together, we realized that SecureSafe had everything that we wanted in a partner. Their service is top notch and has more features, all backed by the Swiss banking privacy and security they are known for.
It’s a clear win-win: they share our vision of helping you securely store your online accounts and computer files, making them securely accessible anywhere in the world and enabling you to transfer or delete them when you pass away. Jesse and I will be continuing to work with the SecureSafe team to make sure everything goes smoothly. We’re both excited to see what our next steps are in our professional lives.
Looking back, Entrustet has been an incredible experience. I owe so much to Jesse for being an amazing partner. We have very complimentary skill sets and see the world through a different lens, but at the end of the day we share the most important things in common. His relentless optimism and ability to take a step back from situations and analyize them have taught me so much.
I still remember the day he pitched me Entrustet in the Wisconsin Business School library with a very rough powerpoint. I jumped in and we spent the next three years becoming amazing friends. I really couldn’t ask for anything more in a cofounder, and as Jesse put it, I’ll remember our times outside of the office even more than inside. What an incredible three years.
Helping start an industry and becoming thought leaders in the space. Seeing users actually benefit from our service, including helping families access and transfer online accounts after someone passed away. Getting more press than we could ever imagine and meeting tons of incredible people.
Entrustet changed my life. I learned so much from every part of running the business, but especially from Jesse. Entrustet took me to New York, San Francsico, Chicago, LA and Austin. It led me to Chile as part of the beta round of Startup Chile where I met amazing people and discovered a beautiful country. I got to speak at South By Southwest and even gave a speech in Spanish to Chile’s president at their equivilent of the White House. Entrustet led me to start Capital Entrepreneurs, Forward Technology Conference and to making tons of new friends.
But we didn’t do it alone. There are so many people and organizations who helped us get to this point. We owe so much to our investors, our advisers, Joseph Boucher, Tom Juszczyk, Allan Stern & Adaptive Engineering, Merlin Mentors, our 2010 intern class, Nathan Dosch and so many more. I couldn’t do this without the support of my parents who’ve always told me “do what you think is interesting and makes you happy, just as long as you don’t ask us to pay your bills!” Thanks to my friends who have put up with digital death talk for the past three years and those who were there with me through the ups and downs of startup life. It’s easy to take risks with family and friends who supports you. It’s been a great ride and I can’t wait to see what happens next!
