Category: Startup Chile

Startup Chile Generation 8 Application Help

Startup Chile is opening the eighth round of applications today, June 10th. This application period will run from June 10th until June 27th with the winners being announced August 29th. In the round seven application process 1577  startups from more than 57 countries applied for the right to come to Chile for $20m Chilean pesos (US$42,000). Chile invited 100 of the 1577 companies who applied and they will begin to arrive July 3rd.

Startup Chile has become more competitive as the number of applications has grown. Round seven had applications grow from 1421 in round six to 1577. More than 1700 companies will likely apply to Round 8. More than 600 companies have already gone through the program since the pilot round in 2010.

It’s a great program, especially for entrepreneurs who are bootstrapping or already have developed a product but need more time to figure out the correct business model for their business. It’s a perfect fit if you’re looking to target the South American market.

My company, Entrustet, was part of the pilot phase of Start-Up Chile and I’ve been in Chile since November 2010. I blogged extensively about my experiences in the program and in Chile, along with advice on how to get selected for Start-Up Chile. I tracked down the stats from the pilot round companies a year later, which was published on The Next Web. I also wrote Startup Chile 101, the book that will tell you everything you need to know about living, working and doing business in Chile.

Since the third round, I’ve helped startups review their applications and prepare them to get accepted into Startup Chile. Overall I’ve now reviewed, 35 applications for prospective Startup Chile teams and 20 have been accepted.

Round 3 – 6/9 66%
Round 4 – 3/4 75%
Round 5 – 3/6 50%
Round 6 – 3/6 50%
Round 7 – 5/10 50%

Overall: 20/35 57%

In rounds five through seven, 6.4% of applicants were accepted into the program and 50% of the applications I’ve reviewed have made it. Three companies had applied two times previously and were accepted after we worked together. Another team needed to completely redo their video and we worked together to make it happen. I thought two more of the teams that I worked with completely deserved to make it in this round.

I can help you craft an application that emphasizes the criteria that the judges are looking for, correct your grammar into perfect English and give you the tips you need to have the best chance at getting selected.

If you need help with your application, please contact me. Editing, writing, review, advice. I charge a small flat fee to review and edit your application, plus a larger success fee if you are selected for the program after I’ve helped you.

Want help? Got questions? Want a quote? Email me: nate at nathanlustig dot com or fill out my contact form.

Note: I WILL NOT write paid letters of recommendation.

Starting a Business and Opening a Bank Account in The US and Chile

I finally finished the process of legally creating a Chilean business and getting my business bank account. I also just created another US business and opened a bank account. Here’s the process and time required for each.

USA – Wisconsin LLC, Federal Tax ID Number and Business Checking Account

LLC and Tax ID Number

  1. Go to Department of Financial Institutions website
  2. Fill out application form
  3. Pay $130 online with credit card
  4. Go to IRS website
  5. Fill out forms
  6. Click Submit

Total time: 10 minutes

Documents received: LLC registration paperwork from State of Wisconsin. Tax ID number (FEIN) from the IRS.

Bank Account

  1. Walk into bank with LLC paperwork and Tax ID Number
  2. Fill out four page form
  3. Sign your name
  4. Deposit a check for $55.00
  5. Print your debit card in the bank

Total Time: 20 minutes, plus travel time.

  • Total time – 30 minutes
  • Total money spent – $130
  • Deposit held by bank $55
  • Bank Account Cost: Free

Chile – SpA, RUT and Business Bank Account

An SpA is basically a Chilean LLC, the RUT is the tax ID number.

SpA

  1. Find an attorney, pay a retainer
  2. Fill out paperwork with attorney
  3. Wait for attorney to finish paperwork
  4. Go to notary and sign paperwork. Fingerprint three places. Pay $200
  5. Wait for notary to send paperwork to attorney’s office
  6. Send attorney copy of Carnet (national ID card) and other identification documents
  7. Attorney takes paperwork to SII (Chilean IRS) to apply for RUT (tax id number)
  8. Get listed in legal Chilean business registry. Pay $50.
  9. Wait for SII to process your paperwork
  10. Receive confirmation, pay attorney

Total Time: Five weeks. Mine was a special case because of visa issues, but three weeks is totally normal.

Total Costs and fees: $2500. Maybe as low as $1500 without visa issues.

Bank Account

I needed a bank account to accept money from the US and use it to purchase goods in Chile. I didn’t need credit cards, lines of credit, loans or anything else. Just a place to deposit money and spend money. I went to five banks and this was the only bank that actually gave me an account. See end of post for each bank’s requirements.

  1. Go to bank
  2. Ask for account
  3. You must have a personal account at the bank to get a business account
  4. Fill out ten page personal bank account application form
  5. Sign 8 times, 8 fingerprints
  6. Show proof of income in Chile of at least $900 per month
  7. Show an employment contract
  8. Get a credit report
  9. Show a business plan
  10. Send in your resume
  11. Send bank statements at other banks or foreign banks
  12. Recommendation letter from bank with at least 5 years and $10,000 deposits
  13. Wait
  14. Wait some more
  15. Send in more paperwork
  16. Sign paperwork again
  17. Put at $3000 untouchable deposit to securitize account
  18. Wait two weeks to get checks, credit cards or be able to access online banking.

Total Time: 4 weeks.

Summary

  • Total time – 9 weeks
  • Total money spent – $2500
  • Deposit held by bank – $3000
  • Bank Account Cost – 10/month
  • Documents Signed – 12
  • Fingerprints – 12
  • Trips to bank – 5

 

opeing a business usa chile large

Conclusion

Chile’s banking and business creation system are both extremely bureaucratic, cost a lot and hold bank entrepreneurship. Asech, Chile’s entrepreneurship association, is doing great work to force the government to make it easier. They’ve taken on the notary lobby and passed a law that allows you to create a business in one day. In reality it takes at least a week the first time through, but it’s great progress. Right now only one type of business is available online, but more will be available shortly.

Asech is also working with a bank to allow an immediate deposit account for new businesses. This is still awhile off it seems, but when it’s approved, it will make Chile much more competitive. All of these barriers to business creation shield the elites and entrenched interests in power and prevent competition and entrepreneurship. Asech and the government are doing a good job to try to make things better, but its extremely slow. If you’re interested in seeing my attempts to open an account at multiple banks, read on:

Bank Requirements

Bank 1

I went for my first meeting after an introduction from a friend. The banker met me, was really nice, seemed very interested in my business. We met for 60 minutes. He told me that I had to open a personal account and then get a business account. I had to send a business plan, a resume, any press i’d gotten in Chile, my bank statements from US banks, my bank statements from my Chilean banks, a letter of recommendation from a bank where I had $10,000 and at least 5 years as a client, a contract or independent contractor payments of at least $2000 per month for the last three months in Chile, a deposit of $2000,

He told me it’d be ready in three days if I sent the information. I immediately emailed in all of the documents. No response. I emailed back the next day. No response. Next day, no response. Finally he responded and said he never got my documents. I sent them again. He confirmed receipt.

A week later, I still hadn’t heard back and emailed again. No response. Another week later I tried again. No response. Three weeks later, I’ve never heard back.

  • Trips to bank – 1
  • Documents sent – 34
  • Minimum salary required – $2000/month in Chile
  • Total time – five weeks
  • Account cost: $20/month
  • Result: Stopped responding to my emails

Bank 2

I went to this bank on a friend’s introduction. They told me I needed a personal account and asked me to fill out the forms. It was six pages of normal questions and two pages of very personal questions. They asked for every document imaginable, same as bank 2. I filled out the forms, send in the documents, but could not prove that I made sufficient money in Chile each month and they told me I was not approved for a personal or business account.

  • Time spent: two weeks
  • Forms Filled: 2
  • Fingerprints: 16
  • Minimum Salary – $2800
  • Account cost: $15/month
  • Result: Denied

Bank 3

I met with a private bank from one of the major Chilean banks. They told me they would open my account if I could prove I had $1m in net worth in Chile. I don’t. They kindly showed me the door.

  • Time spent: 45 minutes
  • Net worth required: $1,000,000
  • Result: Denied

Bank 4

I met with this bank on an introduction. The executive was really nice and helped me fill out all the forms. I send in the same documents as bank 1. I didn’t hear back for two weeks, but finally was approved, if I could show $1500 per month in Chilean earnings and deposit $1000.

  • Trips to bank – 1
  • Documents sent – 34
  • Minimum salary required – $1000/month in Chile
  • Total time – three weeks
  • Account cost: $10/month
  • Result: No response for two weeks, then halfway approved

Bank 5 – Where I have my account

I was already a client at this bank, so I didn’t have to get a personal account. I walked in, talked to my personal executive, she took me to the banking executive. We filled out paperwork and they told me I was approved. I had to show business documents, a resume, my identification. And I had to deposit $3000 in a 1 month CD that is renewed each month in order to open the account. This bank was the nicest to me of any of the banks I met with.

  • Trips to bank – 5
  • Documents sent – 12
  • Fingerprints – 12
  • Forms filled – 9
  • Minimum salary – $900/month
  • Time spent – 10 hours
  • Deposit held – $3000
  • Total time – four weeks
  • Account cost – $20/month
  • Result – Approved!

 

Weonomics

Weonomics. Noun. The study of peculiar Chilean economic behavior in business dealings.

There are some clear cultural difference between doing business in the US and in Chile. I’ve taken to calling it Weonomics. (Gringo readers, weon is the ubiquitous Chilean word meaning anything from dude to asshole.) Clearly not all Chileans subscribe to the principles of Weonomics, but I run into enough Weonomics experts each week that I felt I had to write about it. I have a feeling that most foreigners in Chile will identify with this post, but I’m also interested to see the response from Chilean friends. Please enjoy.

Negotiation

A typical US negotiation.

  • Seller asking price $45,000
  • My offer price: $37,000
  • Seller counteroffer: $43,000
  • My counteroffer: $39,000
  • Final price: $41,000

Pretty simple, right? A sales price, a counter offer and meet somewhere in the middle. You’d think negotiation would work similarly in any part of the world, but not with many Chileans.

Weonomics:

  • Seller asking price $45,000
  • My offer price: $37,000
  • Seller counteroffer: $48,000
  • My counteroffer: See ya!

Seriously? Who in their right mind thinks they’ll close a deal counteroffering by RAISING their initial price?  But this is a principal tenant of Weonomics. The worst case I’ve seen was when a friend was trying to purchase a house. The opening price was $140,000. My friend bid $120,000. The counter offer? $210,000. Weonomics at its finest.

Lowball/HighBall

Someone’s first offer is rarely close to a real offer. It’s almost always a borderline insultingly lowball offer, or a pie in the sky number that only an idiot would pay. A friend closed a deal with a major Chilean company that pays him $20,000 per month. Their first offer? $500 per month. Many Chilean real estate prices are listed above market value in hopes that someone will come along and just buy it. You’ll rarely find a business deal that’s priced to get a deal done quickly.

Meeting Cancellations and No Shows

I’ve been stood up more in the past six months that I ever have been in my entire life combined. I had a string of five meetings on monday and tuesday that all cancelled less than 30 minutes before the meeting was supposed to start. Two didn’t even show up at all. One of the no shows told me it was my fault because “maybe I didn’t understand spanish fully.” The only problem? She’d emailed me the day before explicitly setting the meeting. It was impossible to mistake. That’s Weonomics.

No/Yes

You rarely ever hear a true yes or no in Chilean business. Each answer can mean multiple things. See chart:weonomics

One time I ordered sushi for delivery on a national holiday. The person who answered the phone told me I shouldn’t order because it would be an hour and a half wait for my food. I thought about it, but put the order in anyway and made myself a small snack to tide myself over. 20 minutes later, my sushi arrived, just as I was finishing my snack. Her no, it’ll take too long, was simply trying to get out of more work. Weonomics at work.

So what do you think? Am I right? Do you notice any of these too? Or any other ones? Do you do them yourself? Or am I just un gringo que no cacha nada?

Hat Tip: Skinner Layne for originally coining the phrase.

Public Radio International Interview About Startup Chile

Public Radio International’s America Abroad interviewed me this week for a segment called Attracting Global Talent to Ireland and Chile (listen here)The program focuses on what the US can learn about foreign programs that are attracting immigrant entrepreneurs. The first part is about an Irish program called High Potential Startup Funding which gives entrepreneurs investment to create their business, while the second part is where I come in, talking about Startup Chile. My parts starts at about 9:15 of the program and my favorite quote is at 17:00.

In about minute 14, the program interviews Professor Veronique De Rugy from George Mason University who says government should stay out of entrepreneurship because they pick winners and create an uneven playing field. She cites examples like politicly connected Solyndra to pan programs like Ireland and Chile’s programs. I agree governments shouldn’t pick winners, but her examples are actually supporting Startup Chile.

Solyndra got $535m in guaranteed loans. The whole goal of Startup Chile is to not invest billons in loan guarantees, research parks and other investments that as De Rugy put it are “crappy investments,” but rather to invest in thousands of companies, change the ecosystem and attract smart foreigners to Chile.

For the Solyndra money, the US could have run Startup Chile for 130 years! Imagine empowering individual small entrepreneurs instead of big politicly connected companies. That’s not picking winners. As I said in the interview, “its one of the cheapest and most cost effective government programs out there” because nearly all of the money gets recycled into the Chilean economy.