Tag: startup chile

Arnon Kohavi, Chilean Culture and the Chilean Startup Scene

Arnon Kohavi’s post on The Next Web titled Why this investor abandoned setting up a startup fund in Chile after just 6 months has provoked heated reaction inside and outside Chile.  I wanted to add to the discussion.  I’m the cofounder of Entrustet, the 7th team to arrive as part of Startup Chile in November 2010. I stayed in Chile after my 6 months in Startup Chile were over because I think Chile is a great place to live, the people are friendly and there are really big business opportunities. Plus I like pisco.

I’ve gotten to know a bit about Chile and the entrepreneur ecosystem and wanted to share my thoughts.  Parts of this post may seem harsh, but remember, I could write a similar post about Madison, WI or any other city not named New York or San Francisco.  I’ve summarized Kohavi’s main points about Chile and the entrepreneur ecosystem (read the entire interview) and tried to respond to each one.

Chile is less dynamic than Asia because it is controlled by a handful of rich families who don’t care about the young or the poor.  They give money to support entrepreneurship, but it’s only in Spanish and they do it to stroke their ego.  Conservative organizations like Opus Dei and a bigoted older generation don’t encourage social ascension. Chile’s main problem is mental isolation, not just geographic and Chilean startups have to move abroad to be successful.  The investors are private equity guys who don’t know entrepreneurship or entrepreneurs. In 10 years and with education, Chile can be dynamic, but its not ready yet. That’s why I’m going to Singapore.

So is Kohavi right?  For him, leaving makes perfect sense because he wants to make money NOW and I’m not sure Chile actually needs a real Series A fund right now.  It needs more mentoring and smaller infusions of capital on the angel/micro angel scale.  Kohavi’s business model was not correct for the time in Chile.  I think if he experimented with business models, he could have made a name for himself and his fund, but instead he chose to go to Singapore.  Nothing wrong with that at all.

Next, he hits a wide range of issues affecting Chilean culture and the entrepreneur ecosystem and its potential for growth.  Has he been fair to Chile?  Lets take a closer look based on what I’ve seen over the past year.

I believe that there are huge opportunities for home grown and foreign entrepreneurs in Chile and Latin America.  They are just harder to execute.  Chileans are smart, talented and hard working and there are some great Chilean entrepreneurs.  I don’t see Kohavi’s article as an attack on them.  In fact, I respect Chilean entrepreneurs even more because they are able to succeed in a tough environment. Entrepreneurship is hard enough in Silicon Valley. Adding in Chilean cultural barriers and a developing ecosystem adds many additional roadblocks.  It’s harder to be an entrepreneur in Chile than in the US.

Kohavi is right, Chile is a very conservative country controlled by a few powerful families, supported by a small, wealthy upper class.  Many of these powerful families have natural resources connections.  Chile is very class stratified and Kohavi is right that class ascension is not encouraged.  Its not quite overtly discouraged, but it’s extremely common to hear “what high school did you attend, what’s your last name, are you related to so and so” in social conversations and even business meetings. People know their place and the classes really don’t mix.  In the US we have the American Dream which states that if you get a good education and work hard, you can move up in society.  Whether the American Dream is actually true anymore or is now just a myth is very debatable, but upward mobility is instilled in us from the time we are 5 years old.

Like Sarah Lacy says, Chile’s wealthy are no different from old monied elite in the US, Europe, or anywhere else in the world.  Most elites like their power, their money and their lives and try to stay where they are and amass more land, money and power.  It’s normal.  But Chile is unique because the elite group is small enough that innovation can be stifled.  For example, I have a friend who wanted to implement a new process to save a few large companies lots of paperwork, time and money.  These companies could pass on their savings to consumers or earn more profit.

He got the right meetings through business associations and government contacts, but when he went to the sales meeting, the big wigs who organized the meeting trashed my friend’s idea in front of his potential client.  A few months later, my friend found out that the big wig was good friends with the guy who currently made a bunch of money managing the paperwork.  My friend’s solution would speed up commerce, save consumers money and time, but at the detriment of this guys friend.  This behavior is normal in all countries, but Chile is small enough that it can kill startups right in the beginning.  You don’t need the elites to buy into entrepreneurship, but it sure helps.

Chilean culture punishes failure and taking chances.  As the founder of a startup, people look at you like you’re unemployed, bouncing around with no direction in your life.  Companies are very conservative and there’s lots of red tape, paperwork and bureaucracy.  There’s also a very Chilean behavior, the “soft no”, where companies won’t say no directly and they’ll explore a deal for months on end with no desire to actually do anything.  I’ve also noticed that many Chileans are stubborn and very very unwilling to admit that they are wrong, as losing face/honor is more looked down on than in the US or Europe.  When working in startups or trying to make sales to large companies, this attitude is very hard to overcome.

People also are very open about nepotism.  In the States, one of my good friends got a job because his father was friends with the CEO of the company.  He does everything he can to hide that fact and works even harder to prove that he belongs.  In Chile, I see many people getting jobs because of connections, just like in the US, but in Chile people are proud that they’ve gotten the job that way.  It’s almost like a badge of honor.  That’s not good for a merit based startup ecosystem.

I’ve noticed a huge difference in attitude between Chileans who have lived and worked in the US, Europe or Australia compared with Chileans who have never been abroad for significant amounts of time.  Most who have lived abroad realize that being stubborn and refusing to admit they are wrong will not get them anywhere.

Kohavi is right on about most Chilean investors.  I spoke to just about every Chilean VC and angel network and the vast majority were bankers and private equity guys who knew nothing about startups.  They were investing in ideas, not entrepreneurs.  They tried to get the most equity possible (sometimes up to 60%!) and looked at it like a zero sum game, not as a partnership.  Industry standard is 20-35%.  This approach kills motivation in entrepreneurs and kills returns for investors.  But this it’s normal for a growing ecosystem, all of the VCs are learning on the fly.

So where do we go from here?

Chile has smart entrepreneurs, talented developers, great potential employees and has seen some successes (Needish, Zappedy, Welcu, Plataforma Arquitectura and others), but what makes life easier for entrepreneurs and really develops the Chilean startup ecosystem?  It’s not a bad thing that entrepreneurs have to leave Chile to succeed.  That’s how it is in most places not named New York, San Francisco and Austin.  The key is to create the development ecosystem so that companies can hire good talent and make entrepreneurship a viable model for a higher percentage of people so that the ecosystem grows over time.

Startup Chile

Startup Chile was founded to help change the culture by bringing foreigners, but they realized they were wrong to exclude Chileans after our first round.  Since then, they’ve accepted at least 55 Chilean startups.  The program is having some success: 8 of 23 startups in my round stayed and Chile is now on the world stage for its innovative program.

There are some downsides.  First, Startup Chile is going for quantity and critical mass over quality.  If it were me, I would have invited 25 high quality startups per round to avoid poor quality founders and people just looking for an adventure.  Creating the critical mass was not always in the plans, but after Vivek Wadhwa’s visit in 2010, plans changed.  To cope with the increased scale, they outsourced the judging to a group composed of many academics who don’t seem to understand startups. There are no interviews anymore, which leads to some companies who don’t deserve to be selected to slip in and some who would get selected in an interview to miss out.

Its unquestionable that Startup Chile has been a force for good. Unquestionable.  The team is incredibly dedicated and hard working, but I believe that the program won’t be as big of a success as it could have been, mostly because its brought too many lower quality startups because of focus on quantity, and the outsourced judges reliance on degrees from fancy universities instead of top notch entreprnerus who know how to get things done.

Global Connection

I would expand Global Connection, a government program to take Chilean entrepreneurs to foreign countries, to place smart, promising Chileans in top internships and jobs in the US, Europe and Australia.  I would select 300+ young Chileans every year and give them grants to encourage them to go abroad.  I believe that it’s not good enough to bring foreign entrepreneurs to Chile and give some Chileans money from Corfo.  It’s a start, but only part of the solution.  Chile needs to develop its intellectual capital and I think the best way to do it is to encourage Chileans to work abroad and then return home to share their experiences.

An ICQ like Success

Israel’s startup scene took off after ICQ was acquired for a ton of money.  Same thing happend in Madison after Jellyfish.  It showed everyone that they could start a startup and that it was a real career.  Chile needs a similar success.  Culture will not change without examples of success to show that entrepreneurship is a viable path.  It will be even better if the huge success comes from someone who’s already tried another startup and it did not succeed.

Overall, I think Chile is one of the most interesting places to start a business.  It has smart people, an involved government, lots of problems that need solving.  There are cultural issues that are holding many entrepreneurs back.  Some of these challenges are normal in a growing startup ecosystem, while others are particular to Chile.  I think Kohavi was naive about what to expect in Chile and I don’t read his interview as a knock on Chilean entrepreneurs.  I love this country and look at it as my second home. I still see huge potential in Chile and an ecosystem that’s made huge progress in the year since I arrived.

What do you think?

Here’s some other people’s comments on Kohavi’s comments:

Sarah Lacy – Attention World Don’t Give Arnon Kohavi Your Money

Mariano Amartino – De Chile, Startups y Oportunidades en Latinoamerica

Fayerwayer – Inversionista de riesgo abandona Chile

Do you need help with your Start-Up Chile application?

The newest Start-Up Chile application period is now open and the deadline is a week from tomorrow, Thursday October 27th.  Start-Up Chile will select the 100 best startups to invite to Chile.  Over 1300 companies have applied for the program in the past year.

It is a great program and I encourage all entrepreneurs who are in the bootstrapping phase or already have developed a product but need more time to figure out the correct business model to apply.

My company, Entrustet, was part of the pilot phase of Start-Up Chile and arrived in Chile in November 2010, just about a year ago.  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’ve written or reviewed five applications for Start-Up Chile teams and four have been selected for the program.  I can help you craft an application that emphasizes the criteria that the judges are looking for.

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 success fee if you are selected for the program after I’ve helped you.

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

Note: I WILL NOT write letters of recommendation for money.  I reserve these only for people I know well.

Lo Que Dije Al Presidente

El jueves pasado, tuve la oportunidad de contar mis experiencias en mis seis meses en Chile como parte del programa Start-Up Chile en un reunión con Geeks on a Plane, Startup Chile y el Presidente de Chile, Sebastián Piñera.

Cuando llegué a Chile, solo hablaba un poco de español, y nunca en mis sueños pensé que tendría la oportunidad de dar un discurso en un desayuno con el Presidente y un publico de mas de cien personas y cámaras de la prensa. Eso es lo que dije al Presidente Piñera y el resto del publico.

Hola, me llamo Nathan Lustig y soy el cofundador de Entrustet, la séptima compañía que llego a Santiago para Start-up Chile. Quiero decir gracias al Presidente Piñera para invitarnos a este desayuno y por la oportunidad de hablar un poco de Startup Chile.

En septiembre, vi un articulo en Techcrunch sobre la oportunidad de mudar mi compañía a Chile para seis meses. Llené la pagina web y cuatro semanas después, nos eligieron para el programa. Cuando llegué, no sabía mucho del programa, solo sabía que podría trabajar en mi compañía en otro lugar y con una beca. La oportunidad de evitar invierno en Wisconisn sólo fue un incentivo.

Ahora, seis meses después, mi tiempo en Chile está terminando. Puedo decir que estos meses fueron unos de los mejores meses de mi vida. Progresamos mucho en Entrustet pero más que eso, nos hicimos Buenos amigos con los emprendedores del programa. Nos hemos conectados al red de emprendimiento en Chile y hicimos amigos Chilenos dentro y fuera del programa.

Ahora, quiero hablar sobre el programa. Como dijo Jean [Boudegur], Start-up Chile, es un emprendimiento en si mismo y ahora esta creciendo muy rápido. Cien equipos van a llegar en los próximos dos meses. Quiero decir gracias a todos los personas en el gobierno porque sin su permiso, este programa innovadora no tendría éxito. Quiero decir gracias a todos los personas que trabaja en startup chile.

Este programa es muy especial, Creo que mucha gente no entiende eso, especialmente Chilenos. Cuando hablo a mis amigos sobre el programa, me dicen “si Chile puede hacerlo, otro países pueden. Pero en realidad, no. Este tipo de programa nunca ha ocurrido en estados unidos o Europa. El programa es el programa de gobierno mas innovador que he visto en mi vida y todos los Chilenos deberían estar orgullosos.

Han hecho algo magnifico que es el comienzo de algo increíble. Quiero ver como crecen el programa y el emprendimiento Chileno en el próximo año. Quiero terminar con otro agradacimiento a mis amigos emprendedores, startup chile y cada persona que apoya el programa. Gracias.

 

Juan Pablo Salas, Sebastián Piñera, George Cadena, Nathan Lustig

Gracias a Juan Pablo y Javiera para leer y corregir unos versiones de mi discurso y a Jean y Brenna para la oportunidad!

In English:

What I said to the President

Last Thursday, I had the opportunity to share my experiences of the last six months in Chile as part of the Startup Chile program at a breakfast with Geeks on a Plane, Startup Chile y the President of Chile, Sebastián Piñera.

When I arrived to Chile, I only spoke a little Spanish and I never thought in my wildest dreams that I’d have the opportunity to give a talk at a breakfast with the president, an audience of over 100 and the press.  This is what I said the President Piñera and the rest of the audience.

Hi, my name is Nathan Lustig and I am the cofounder of Entrustet, the seventh company that arrived in Santiago for Startup Chile.  I want to thank President Piñera for inviting us to this breakfast and for the opportunity to talk a little about Startup Chile.

In September, I saw an article in Techcrunch about the oporuntity to move my company to chile for six months.  I filled out the website and four weeks later, they picked us for the program.  When I arrived, I didn’t know much about the program, only that I would be able to work on my company in another location and have a grant.  The opportunity to avoid a Wisconsin winter was only an added bonus.

Now, six months later, my time in Chile is coming to an end.  I can say that these six months were some of the best months of my life.  We made a lot of progress on Entrustet, but more than that, we made good friends with all of the entrepreneurs in the proigram.  We were connected into the Chilean entrepreneurship network and we made friends with Chileans inside and outside of the program.

Now, I want to talk a little about the program.  Like Jean said, Startup Chile is a startup in it’s own right and it’s growing really fast.  100 team are going to arrive in the next two months.   I want to thank all of the people in the government because without your permission, this innovative program never would have been successful.  I want to say thanks to all of the people who work in startup chile.

This program is very special.  I believe that many people, especially Chileans, don’t understand this.  When I talk to my friends about the program, they say to me “If Chile can do it, other countries can.”  But in reality, it’s not the case.  This type of program would never had happened in the US or Europe.  The program is the most innovative government program I’ve seen in my life and every Chilean should be proud.

You’ve done something amazing and it’s the start of something incredible.  I want to see how the program and Chilean entrepreneurship growns in the next year.  I want to end by thanking my startup friends, Startup Chile and every person who supported the program.  Thank you.

 

SXSW 2011 Recap: Chile, Digital Death, Hashable and the NY Tech Scene

Last year was my first SXSW and I had a great time, but 2011 was even better.  Here’s a quick rundown on my SXSWi and some of the big themes I saw.

Chile is on the tech map

I was lucky enough to moderate the Chile Technology Summit with Juan Pablo Tapia, David Basulto, Paige Brown and Leonardo Maldonado.  We talked about the Chilean technology ecosystem, entrepreneurship, social media, Chilean startup success stories and some of the government programs that have really helped Chile’s tech community.  It was really fun to be able to tell people I met that I’d been living in Santiago, Chile for the past four months because just about everyone I met had heard of Startup Chile.  It was a great ice breaker and allowed me to talk about more cheery topics than digital death.

I can tell you 100% that Startup Chile should already be viewed as a success for the simple fact that almost every VC, angle, entrepreneur and social media person knew of Chile and the program.  Last year, I bet only 5% of SXSW attendees would have know anything about Chile.  Add that to the fact that of our $40,000, at least half will be going directly back into the Chilean economy and that between Jesse and me 8 friends/family will visit, Chile is making it’s money back.

Digital Death is Growing Quickly

We celebrated our 1 year anniversary of our launch on Monday.  Last year, Jesse gave a talk  about our industry to a crowd of 20.  This year, there were over 150 people in attendance, and Twitter was abuzz during our session.  We’ve been featured in over 100 top media outlets and have seen the number of companies who are doing something with data and death online grow from 5 to almost 50.  The Digital Beyond wrote a book.  1000Memories got $2.5 in funding from some of the top VCs in world and whenever I told people about Entrustet, people either had heard of us by name, or had heard a story about the industry.  I got to meet at least six of our users and randomly ran into people who had checked out it.  I expect the industry to keep growing quickly and can’t wait to see what happens at next year’s SXSW.

You're Dead, Your Data Isn't: What Happens Now?

Hashable was the big hit

I’d used Hashable in the past, but didn’t like it until this year’s SXSW.  The first night, I met Mike, the founder, who personally sold me on why I needed to download the app.  I ended up using it multiple times each day.  It was funny, whenever I met someone from NYC, they always wanted to do Hashable, but the adoption rate from Silicon Valley entrepreneurs was way less.  I don’t buy that the mainstream will use Hashable as a “checkin for people,” ie every time you meet someone, but I can see it catching on big time for exchanging e-business cards.   Hashable made my business cards obsolete for most people.  The only downside is that Hashable strips the personality of your business cards into about 100 characters available in a hashable tweet.  I get comments on our business cards all the time and I enjoy seeing the creativity in business cards each year at SXSW.

The NY Tech Mafia

Another big change from this year to last year was the emergence of the NY Tech scene.  There is so much energy coming out of NYC, not to mention startups, VC money and developer talent and it was interesting to see.  NYC based entrepreneurs were more likely to feel like they were a part of something bigger.  It seemed like they thought they were part of a movement, part of a nascent industry or an important moment in history.  They community seemed much closer than many of the San Fran entrepreneurs I met.  I think it’s great that technology startups are happening in other places than just the bay area.  I really enjoyed seeing the energy and genuine excitement from the NYC entrepreneurs.  It also seemed that many of the NYC entrepreneurs were more focused on using tech to something, compared to some of the San Fran startups who were more interested in the pure tech side.  Both are very valuable and I’m not picking sides.  It was fun to see as an outsider and a marked difference from last year.

There are so many group messaging companies

And I don’t see the use.  I first used a group messaging system two years ago for a friends bachelor party and it was great.  We had a group of 8 of us, all doing the same thing and on the same schedule.  It was great.  At SXSW, I was in multiple groups (or pods) and just got annoyed by all of the messages.  Most were not relevant to me.  The groups were too big, our schedules were different.  It just wasn’t helpful.  I can see group messaging being something you turn on for specific events, with specific groups, but I don’t see it for everyday use.  There is a ton of money in the space right now and it will be interesting to see if Facebook integrates group messaging into Facebook groups.

Bubble?

There were so many companies doing “social something” or “x for facebook” that by the end we were joking around that we were going to start the Kayak for canoes and rent boats in Lake Austin.  I think startups have become hot and that there are lots of people starting businesses now just for the money, which can be dangerous.  I think there are bubbles in certain types of Internet businesses, but don’t think its completely systemic, like the initial dot com bust.  It’ll be interesting to see what happens!

Cool Startups+Things I Saw at SXSW

SparkRelief – Crowd Sourced disaster relief.  They launched a site that allows anyone in Japan to offer housing to those displaced, for free.  Could be a cool model to empower citizens to take part in their own disaster relief.

Startup America – While I would prefer less rhetoric and government chest puffing, there are clearly very smart people working on this initiative and President Obama seems to be behind it.  I was left the panel optimistic about a part of government for the first time in a long time.  Please stop saying “winning the future” though.  If Bush would have said that, everyone would have (rightly) made fun of him.

Data – It’s amazing what people are doing with data.  I saw countless panels, companies and entrepreneurs doing cool stuff with data.  It’s going to be fun to see the next level of services created when data becomes ubiquitous.

Artsicle – Lets you rent art, sort of like netflix and connects artists with the people who are buying new art.  Cool idea.

#sxswla – Latin America was well represented.  But I’d like to see more panels next year featuring people from all over the world, not just in separate tracks.  Sort of like with the inclusion of a ton more women this year.

Flavors.me – Amazing design and simple personal pages.  Mom, when you read this, I bet you could set up a site if you wanted.  I’d know the Flavors guys from before, but it was great to meet in person.

Grubly – Cool startup that connects people who love to cook, with those who love to eat