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Who Will be Chile’s Paul Graham or Dave McClure?

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?

I’m Joining Welcu and Moving Back to Chile

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.

My 2011

My year end review is always one of my favorite posts to write each year (2009, 2010, 2000-2010).  So without further ado, here’s what I did in 2011.

2011 was an amazing yet tumultuous year.  I rung in 2011 in Pasadena, CA at the Rose Bowl with my family and friends.  Although the Badgers lost, I got to see a friend I hadn’t seen in three years and had a great time.  The next week, I did an hour long interview for NPR for the first time while San Francisco for Entrustet.  I returned to Chile with Jesse to continue working on Entrustet in the Startup Chile program.  As 2011 rolled on, I got closer to my new friends from Startup Chile and now consider them some of my closest friends in the world.

Salar de Uyuni

I continued to travel, going all over Chile and into Bolivia.  The Salar de Uyuni still is the most beautiful place I’ve seen on earth, closely followed by Torres del Paine in Patagonia, which I visited with my brother and one of my best friends.  My parents made the trip to visit me in Chile and we explored Pucon and the lakes region.  Two of my best friends from Wisconsin came to visit and we went to La Serena and Valle del Elqui.  I got to Mendoza, Pichilemu, San Pedro de Atacama, Buenos Aires, Hawaii, Austin, San Francisco and Los Angeles.

2011 was a banner year for Wisconsin sports.  Although the Badgers lost in the Rose Bowl to start the year, they were in the National Title hunt for most of 2011 and I find myself going back to Cali (Cali), for another new year.  The Packers went on an improbable run to win the Super Bowl from the sixth seed.  I watched with an international group of friends in Santiago as the mostly pro steelers crowd changed “roth-leeees-bour-geeer” over and over.  The Brewers had their best regular season ever, winning 96 games and getting within two games of the World Series.  The Packers are 14-1 and are favorites to repeat for the Super Bowl.  2011 might well be the golden year for Wisconsin sports.

Entrustet continued to grow, but slowly.  We continued to get press and were mentioned in over 125 publications in 2011.  We continued to sign up lawyers and work with insurance companies to try to help people protect their digital assets.  Jesse presented at South by Southwest and I moderated at panel on the Chilean Startup Scene.  We even had our first user pass away, proving that our system really works.

Friendsgiving 2011

On a personal level, I learned Spanish, made some amazing new friends and really grew a ton living outside my comfort zone abroad.  I have a new appreciation for the simple things in life like being able to coast through mundane life situations and watching as things come easily for me.  I  traveled back for Friendsgiving, the annual gathering of my best friends from college.  It was amazing to see all my friends I hadn’t seen in a long time.  I saw some great music in 2011, going to Lollapalooza Chile, South by Southwest in Austin and many others and I ended my time with Startup Chile by giving a speech to the President of Chile, completely in Spanish.

Looking back, 2011 has been the year of big changes.  I left Madison, traveled all over, continued to be an entrepreneur, found myself growing and changing, loving, making new friends.  If 2012 can match how much I enjoyed 2011, I know I’m doing something right.  I have no doubt it will.

Favorite Posts

A Tribute  – My favorite post of the year

How to Live Before you Die: What I Learned From Running Entrustet

How to Talk to the Media and Get Quoted in Press

Disconnecting

The Customer is not Always Right: Sometimes He’s an Asshole

Apologizing

Overcoming Self Deception

A Reflection on Living Abroad

Chronicle of a hospital visit in Buenos Aires

It was a little after midnight and we’d just finished a great dinner of Argentinian steak in Buenos Aires.  We were walking to a bar to have some after dinner drinks when all the sudden, my friend missteps on the broken sidewalk.  He goes tumbling to the ground.  We’re all laughing, including my friend who’s just fallen over.  He tries to get up, but quickly realizes there’s something wrong.  His arm is hanging there and he can’t move it.  Luckily, someone in our group had some medical experience and evaluated the situation and told us that we should go to the hospital.

We hail a cab and the cheerful driver told us he’d take us to the closest hospital.  He regails us with tales about how dislocated shoulders are somewhat common in Argentina because polo is a popular sport.  He doesn’t seem to concerned about my friend’s pain as we zoom around Buenos Aires’ curvy and somewhat bumpy streets.

We arrive to a run down, but very functional public hospital to find about 20 people sleeping outside the front door.  Unlike US hospitals, there is no long queue.  As we enter, I immediately speak to the person at the door who takes my friend’s information and tells us to wait in the first patient room.  The room is spacious, dimly lit, and filled with old style medical equiptment.  There were used medical supplies that hadn’t been thrown out, open razor blades on the counter and there didn’t seem to be much organization.

Hospital staff workers kept entering and exiting and we quickly realized that our room doubles as a supply closet.  A cheerful physicians assistant arrives and asks us what happened.  He does a few tests, then prescribes an xray.   My friends and I carry/drag our friend to the xray room, which uses machines that look like they were from the 80s.  My friend is unable to pose correctly because he is in too much pain and the ornery orderly gives up petulantely after two tries.  I try to convince her to try once more, but she refuses.

We’re sent back to our room and the cheerful assistant comes back and is not pleased that the xrays hadn’t worked.  He tells us he’s going to try to pop the shoulder back in.  He tells us to leave the room, then tries for 15 painful minutes.  The waiting room is dingy, has hardly any chairs and is filled with the typical people you’d see in any emergency room around the world.  There are the drunk/drugged out kids, elderly chronic care patients, car accident victims and their friends and family.  Everyone gets a number fairly quickly, but then has to wait for their care.

After awhile, the PA invites me back into the room, and asks me to help.  He rolls up a bedsheet, puts it under my friend’s arm, then tells me to pull as hard as I can while he pulls on my friends arm in the other direction.  We’re pulling REALLY hard, to the point where if I let go, the physicians assistant would go flying into the medical supplies closet.  I never thought I’d get to be a part of the medical treatment, but here I am, in Buenos Aires, attempting to help reinsert a shoulder into a socket.

After 20 minutes, we’re both exhausted.  The PA says he is going to find help and returns with reinforcements: two burly orderlies.   I’m sent out of the room and the three of them manhandle his arm.  Nothing’s working and my friend’s in pain.  The hospital staff is getting more frustrated by the minute.  Without saying anything, the orderly gives my friend a shot in his back to knock him out.

After he was out, the three orderlies spend the next hour twisting, pushing, pulling, cursing and smashing.  A friend and I are sitting outside of the room the entire time and keep hearing loud screams from the room, sometimes from our friend, other times from the frustrated orderlies.  It goes on forever.  Finally, the shoulder is back in its socket

Finally, his arm is back, but he’s completly knocked out.  The orderlies tell us to hang out in the room and 10 minutes later, our friend will wake up and will need an xray.  An hour later, he is still completely out.   Nobody comes to check on us, nobody gives us any info when we ask.  After an hour and a half, we decide to take matters into our own hands and attempt wake him up.  He is in a deep sleep.

We put both of our cell phone alarms next to his ear and splash water on his face.  Nothing.  We try again.  This time some rumblings, but mostly incoherant ramblings from the sedative and pain killer.  We decide to wait another 20 minutes.  We use our same tactics again and this time are able to rouse our friend.  We carry him to the xray room where the sullen tech takes xrays while I hold my unsteady friend up to make sure he doesn’t pass out and dislocated something new.  We search for an hour, but can’t find anyone to look at the xrays. It’s shift change and everyone is busy.

Finally, the xray tech says everything looks ok, but she doesn’t really know and that if our friend feels ok, we can leave.  There’s no organized discharge process.  We just walk out the front door with our still heavily sedated friend, xrays in hand, then find a taxi and head home.  We take the intake form with us for our records.  The hospital does not issue discharge papers or have any sort of record that we’d been there, other than my friends name at the front door.

We’d spent close to six hours in the hospital and our friend’s arm was popped back in.  We didn’t have to pay a dime.  The process was unorgainzed, the facilities dirty and a bit rundown, but in the end, they got the job done.  It was quite the contrast to the expensive, process and paperwork laden US based health care system that is terrified of being sued.  They got the job done in the end, but in a different way than I would have expected.

In the end, I wouldn’t go to that hospital for anything life threatening if I could avoid it, but I think its amazing that they can do basic medical care for free and at a decent level.  Figuring out how to merge the positives from my Buenos Aires experience with the positives from the US system could create a very compelling health care system.