So, after 6 months of stay in beautiful Santiago, my stay has come to an end and now is time to set sail and move on to unexplored waters. I’ll keep this post brief and focus on the two things that, in my point of view, make the program not as successful as it could (should) be.
The first, cold truth, is that there’s no VC money in Chile. And I mean no money at. All. The causes of this are interesting, although somewhat ironic: Chile’s economy is very monopolistic and centered around the government by nature. So centered, in fact, that all the Venture Funds in the country actually borrow money from the government for “free”, meaning there’s not a single fully-private VC fund in the country (although there are “Angel Funds”, who apparently never invest on anything too). In a way, it’s a similar problem as to the one pointed by the controversial programmer Zed Shaw with regards to New York: “if you, as an investor, have the option to put your money on something seemingly equal in return but a thousand times safer, what would you do?”
The second problem - and a bigger one, as I am guilty for spreading the misconception - is Startup Chile itself. As I figured out by travelling abroad in recent weeks, it seems everyone knows Startup Chile already. It started as a beta in late 2010 and invited it’s first group of 100 companies early this year (2011), having selected two subsequent groups to a total of over 300 companies already). It started out as a very unique idea - bring outside entrepreneurs and give them what they need to bootstrap an entrepreneurial culture inside a country that values a government job more than anything and relies on monopolies from telecommunications to civil aviation - and was actually executed well on its first couple of months.
The ACTUAL mission of Startup Chile is very clear (and I was kindly reminded of it a couple of times by the lead paper-tosser executive officer): the MISSION is bringing entrepreneurs from around the world to instill an entrepreneurial mindset on the locals. That would be not such a great issue if they actually stated this on their propaganda: it’s a fine statement and one most of us gladly DID anyway - my company’s video pitch alone brought more awareness to Startup Chile than any other video they made (thanks Yeti!), not to mention the speeches and mentoring of students at the local universities.
The big, big problem here is the claim that they’ll throw 40 thousand dollars on your lap to develop your project. You see, the “reimbursements” - the core of the Startup Chile “carrot on a stick” strategy - is a long, broken and biased process, specially devised by some devil from the high ranks of hell. It’s very simple: you can spend whatever you want and they’ll reimburse 90% of it.
Except if it’s paying yourself or rent.
Or if it crosses a maximum value (something between 5k or 8k per expense).
Or if your name on the credit card reads “John B Doe” instead of “John Doe”.
Or if you didn’t pay or credit card. Wait, no. Wait, yes. Wait, no. Wait, yes.
Or if you spent it on your company’s name, not yours.
Or if it’s an airplane ticket (no, taxis and busses are not reimbursable).
Or if it’s a hotel and one of the financial team members knows that there is a cheaper hotel in the city you went to.
Or if the contract with that Russian programmer who lives in a village was faxed (thus not authenticated as a “real signature”).
Or if the financial individual thinks you’re “spending money in the future” (e.g buying a 2-year renewal of a domain name - 1 year is ok, when you prove them it’s the minimum godaddy allows you to).
Or (and that’s the best wildcard of all) when their CEO thinks you’re “misusing the money”, in which case you have to give it back.
Yes, all these things and many more happened (thankfully not all of them to ME). And yes, as one can guess, it’s totally arbitrary (there’s a dude who even got the aforementioned taxis reimbursed and another one who pre-paid 10 YEARS of hosting with no penalty in both cases). The most frustrating part of all that is that most (if not all) of these arbitrary decisions are made on a case-by-case-basis AFTER you spend the money (and none of this is written in contract anywhere) and you’re given A SINGLE DAY to fix everything. Which means you’ll spend A LOT MORE than “just 10%”. if you even consider getting to use the entire 40k grant. In our case (not among the worst, I have to add), we ended up spending less than 30k of THEIR money while having to spend MUCH more than 4k of OUR money due to repeated denials of legitimate expenses such as Facebook Ads, business trips, equipment purchases and even programmer salaries. The heads of the program (executive officer and financial team) don’t really care and are quick at labeling your failure to guess their arbitrary rules “administrative incompetence”.
It’s worth making it clear that their “technical” guys (video makers, human resources, secretaries and related personel) are on it for the mission and are wonderful and deeply involved individuals. It’s also very ironical that none of the “good guys” (and gals) was a government thug before, kinda reassuring the view we have of government employees in Brazil.
Plus, getting to meet and work along a dozen other entrepreneurs working their asses out is *always* a great experience, which made every second of our stay worth a lot.
The entire Startup Chile “experiment” has just begun - me, along with more then a dozen of the “guinea pigs”, left it somewhat let down by all the broken promisses (and process). Some people simply “got over it” and “found ways to make things work”. Clever, clever people.
Time will tell whether they’ll use these failures as a learning tool or press it harder on the neck of the new waves of “noobies”. After all, as long as there are more bodies coming, there’s no need to bother about each individual’s complaints. Vietnam style.
As for the investment climate in the country, one should only expect it to stay the same, as stories about local VCs misadventures and opportunists trying to make a quick buck from the government abound. Maybe, when the prediction of “the new Facebook coming from Chile” proves itself true (despite the complete absence of *all* the environmental aspects that allowed Facebook to flourish), the cornerstone of change would have been placed. And it won’t be government money, but crazy individuals with more than they can spend and no political ties to hold them to the status quo, things WILL change.
Just maybe.
From: Greg Cooper, Hervalicio.us, 28/12/11
