In January 2018 Magma Partners teamed up with Chinese coworking business, Kr Space, to launch the first China-Latin American accelerator to connect Chinese and Latin American entrepreneurs and investors.
With the recent news that Tencent invested $180M into Brazilian neobank Nubank at a $4B valuation, we’e seeing Chinese interest and investment in Latin America move beyond the common infrastructure projects backed by the Chinese government. The Chinese private sector is taking note of Latin America’s growing tech ecosystems and is capitalizing on opportunities to help the region follow a similar development path to China’s.
As the US pulls further away from Latin America, China is becoming an increasingly important partner for startups and companies across the region looking for investment and direction. As President Trump’s trade war intensifies, Chinese FDI into the US has dropped by 92% to $1.8B, while Chinese FDI to Latin America has surged to $15.3B in the first half of 2018.
This move by China is a strategic one. Latin America is ripe for investment and China and Chinese companies could be interesting partners for the region.
For one, Latin America is now a mobile-first market with over 200 million smartphone users. It is the second-fastest growing market for mobile in the world, and Latin American consumers are becoming quick adopters of new technologies and global apps.
I’m writing a bimonthly column for The Santiago Times, one of Chile’s English language newspapers, about doing business in Chile and the entrepreneurial ecosystem. My first article was published today and it overviews some of the changes I’ve seen in the Chilean entrepreneurial ecosystem since I first came to Chile in 2010. From the article:
But entrepreneurs in 2010 also had to face powerful cultural obstacles. Chile was risk averse and punished failure. A typical conversation went something like this:
Chilean: “What do you do?”
Me: “I have my own business.”
Chilean: Blank look … “But what do you do?”
Me: “I have my own business!”
Chilean: “So you don’t have a job?”
When new businesses failed, as many do, the typical Chilean response was that the entrepreneur was either: a) stupid, b) lazy, c) stole the money or d) all of the above. Almost none of my new Chilean friends even could imagine themselves starting a business and looked at me like an odd duck who was on a weird path — not the traditional one of getting a job at a big, prestigious company with a comfortable salary and three weeks of vacation, plus fifteen days of “feriados.”
A Chilean newspaper asked me an interesting question this week:
What should Chile do in 2014 to make it a better place to be an entrepreneur?
I don’t think my entire answer will get published in the newspaper, so I’ll republish it here. What do you think? And what would you do to make Chile a better place to do business?
1. Continue to push ASECH inspired entrepreneurial reforms
ASECH, the Chilean entrepreneurs association, has pushed laws like making it possible to incorporate a business in one day, for free, without going to a notary, pushed banks to allow entrepreneurs to open bank accounts much more easily, a entrepreneurship bankruptcy law, and has pushed for laws that force large companies to pay in 30-45 days, instead of 90-120 that’s fairly common in Chile. It’s been an incredible success and should be continued.
2. Force large Chilean companies to follow Chile’s competition laws
If you want to foment entrepreneurship, you need a level playing field. Chile currently doesn’t have a level playing field, as large companies routinely price fix and squeeze out new entrants to the market. And many large companies receive little to no punishment when they break the law. No laws need to be changed. Just enforce the ones on the books.
3. Push for a law that requires payment in 30-45 days for most sales
The majority of large companies in Chile pay suppliers, especially new ones, in 90-120 days. In the US its 30. Sometimes 45. If you start a new company in the US, you only need two months or so of operating capital before your sales start to pay your bills. In Chile six or seven months. This kills most people’s ability to start a business before they’ve even started.
4. Pass a personal bankruptcy law
I think it’s very unjust that a bank can loan you money without taking risk. Chilean banks know that they’ll get 100% of their money back at some point because there’s no personal bankruptcy law to discharge a debt. Chilean loans are very one sided contracts, which makes it more difficult to take risks and be an entrepreneur.
5. Tell the truth about entrepreneurship
Entrepreneurs are NOT rockstars or superheroes. Having your own business is a lifestyle and it’s not for everyone. It’s really difficult, but there are many benefits. I’d like to see the government and entrepreneurship groups talk about the reality of being an entrepreneur, rather than blinding building up entrepreneurship as rockstars and superheroes. I fear that when the first crop of entrepreneurs who’ve been told they’re superheroes just for starting a business fails, as most entrepreneurs do, they’ll be so burned that they won’t start another business.
Last Thursday was Demo Day for De-Pe, the class I teach at Universidad Catolica in Antofagasta, Chile. It was the culmination of a 12 week class designed to give the students in the class the tools they need to be successful running a business. Nine teams showed up to the first class twelve weeks ago. Some had an idea, others a functioning business, others just a dream. But by the last Thursday, everyone had something they could be proud of.
It was amazing to see the progress the entrepreneurs made by the end of the course and I’m really proud of all of our entrepreneurs who were willing to keep an open mind and improve their product each week.
But the best part, for me, was that each entrepreneur was working on a real problem. It was refreshing to see. Nobody was there because entreprneurship is cool. Nobody was there for the free food. Nobody was there for the free beer. Nobody was there to get famous. Nobody had the next photo sharing app or the next cat social network.
Everyone had a real problem they wanted to solve. Everyone was working on their idea because it was a problem they had. And that helped someone. By the end of the class, everyone found a niche where a customer was willing to pay them to solve the problem. There were no bullshit.
Our class follows a methodology we call EPIC. Luckily it works the same way in English and Spanish:
Enganchar – Engage
First, we break down the myths of entrepeneurship. You don’t need a ton of money. That it’s necessary to fail small in order to avoid failing big. That if you fail its not because you were stupid, lazy, stole the money or a combination of the three.
Poder – Power
Second, we empower the teams by giving them the tools they need to succeed. Entrepreneurship has become more scientific and we give the teams the best practices to be able to succeed. We force them to pivot to find a niche, simplify and find success on a small scale.
Integrar – Integrate
Third, we integrate our students into the entrepreneurial ecosystem. We bring local and international entrepreneurs to Antofagasta to help mentor students. We force the students out of the classroom to speak with their clients and share their ideas with entrepreneurs and actually listen to their feedback.
Fourth, students need to be able to communicate their value proposition to clients, to potential business partners and to potential investors. That’s the first step toward sales. We teach clear communication via multiple presentations that end in Demo Day.
While it was a bit of a long haul traveling to Antofagasta 8 times in 12 weeks, it was completely worth it. Our students are exactly what entrepreneruship should be, not the bullshit that’s permeating most entrepeneurial ecosystems. I have no doubt that a year from now all of our entrepreneurs will be successful in whatever they’re working on. Here’s some of our projects (spanish news story):
1st Prize – $5000
Veneno Detect – The world’s first rapid detection test for araña de rincón spider bites. The current test is to go to the hospital to wait for your flesh to start to rot. If it does, it’s araña de rincón, if it’s not, you’re safe.
2nd Prize – $3000
Ecocrea – Solar panel arrays for off the gird mining offices to replace diesel generators at lower cost.
3rd Prize – $2000
Standmat – 3d video animations to increase sales for companies wanting to sell to mining companies.