Tag: welcu

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.