Chile Economy — 14 June 2012

Near the La Moneda presidential palace in downtown Santiago and once again a few blocks away just beyond the towering Movistar skyscraper, hundreds of young entrepreneurs are busy stitching together tomorrow’s technology in what some have referred to as the “Santiago Valley”.   These young people–and they are for the most part young people–have come at the invitation of the Chilean government whose development corporation StartUpChile has poured over and selected the most viable, potentially profitable ideas for new startup businesses and have seeded them with $40,000 worth of capital.

In these two offices, which hum to the rhythm of bristling ideas and energy, there are software developers and visionaries who have developed products and ideas which they hope will free them from the drudgery of the corporate cubicle and allow them to profit from their ideas.  English is spoken here more than Spanish as 77% of those here are from the USA, Europe, Asia, Latin America while 23% of the start-up businesses here this year are Chilean.

New ideas are literally bouncing off the walls in these offices where coffee and croissants are given away and ample office space is provided free of charge.  Here is a French entrepreneur who has teamed up with a social networking site who has 85,000 farmers enrolled who hopes to pair up farmers with farmers markets.  One clever chap has taken the idea of the iPad touch screen device and made it as large as a table so that multiple people can work on it simultaneously.  Another company is improving processes and workflow at customer call centers and has signed up Groupon as one of their first customers.  Yet another company is working with hotels on a system which will let managers and hotel guests know much much electricity is being used or wasted and thus curtail their usage and costs.  A couple of the entrepreneurs here are back for a second time having already sold the first idea to other companies in the USA and having returned to Chile to do it again.  At least one successful businessman brought his ideas here instead of the Silicon Valley because Chile hands out free visas while the USA does not.

 

Bractlet

Matt Lynch and Alec Manfre are two mechanical engineers who recently graduated from Georgia Tech University in Atlanta, one of the top engineering schools in the USA.  In their senior year they, together with several other partners, worked on the prototype of  an idea which they have brought to fruition here in Chile with the assistance of startup funds from the Chilean government.  Having been in Chile 6 months already, their product to save electrical costs for hotels is already installed in one of Santiago’s leading hotels and more pilots are planned in Daytona Beach, Atlanta, and hopefully Patagonia and Hawaii, locations where energy costs are dear.  The two recently brought a programmer Brian Smith to Santiago so that Matt and Alec can do what they do best which is work the phones and promote their product to investors and clients alike.  The two work together as one and compliment each other as they talk to customers around the world on Skype and visit with customers in person here .  The StartupChile organization has helped them find local businessmen in the hotel and power generating industries.  They pitch their product to prospects and energy executives as smoothly and polished as grey-haired executives.  This is a only few short months after they have left their beer-swilling college fraternity days behind them and matured into businessmen carrying the burden of cash flow, profit, partnership, and make-or-break decisions.

 

Bractlet has the idea to install a smart wall adapter into hotel room’s electrical outlet.  The adapters transmits power usage data wirelessly to Bractlet’s servers as well as controllers installed in the junction box at the hotel.  A web page allows the management of the hotel to monitor electricity usage, for example pointing out rooms which are empty and send someone around to turn off the unattended appliances when the guests have left.  The guests themselves, who are increasingly energy conscience these days, can earn award points pictured as small trees which proliferate with the energy the savings.  The hotel can then deduct the costs savings from the bill, donate these funds to energy conservation organizations, or keep it and boost the hotel’s bottom line.  For Bractlet the profit comes from taking 30% of the electricity savings.  The product also works to monitor circuit breakers thus covering one large area at once.  This idea is an easy sell to educated customers at upscale hotels who have already been sold on the notion that wasting energy increases man’s carbon footprint and thus does harm to the environment.  For the businessman running the hotel the benefit in addition to being green is to reduce the electric bill.  This is especially true in countries like Chile and locations like Hawaii and Patagonia who often have to purchase electricity using the most expensive diesel powered utilities whose costs can be three times that of the mainland USA.

 

Arcaris

 

Arcaris is further along that Bractlet on the chronological timeline having moved from what is called the “accelator phase” (i.e. intial funding), beyond the “incubator phase” (i.e. further mentoring and additional capital), to the operational phase.  Unlike most of the StartupChile-funded companies who will leave Chile when their initial efforts are complete here ,these San Francisco based entrepenuers have left an office and staff here in upscale Providencia while they have themselves returned to the USA to build out the business.

Nicole Helgeson is a young woman with a wide smile who came to Chile from Wisconsin looking for opportunities here.  She is now a spokesman and business development person for Arcaris.  She explains that the companies offering PlayCall lets call center companies improve their internal communications with kind of an internal social media site through which employees can communicate with one another and with their supervisors and managers.  So intriguing is their idea that Groupon is one of their pilot customers.

Arcaris first had the idea to create software which would at one click route phone calls for customer support from the USA to offshore call centers.  StarupChile was intrigued with this and selected the companies two founders to travel to the Silicon Valley for 4 months and work at the Plug and Play center there where they could network with other entrepreneurs and then find what every startup wants which is an “Angel Investor”.   Seemingly dropping out of the sky like an angel, these investors weigh in with additional capital.  Arcaris found an angel investor in Spain who wrote that important check.

Arcaris learned on their first go around with StartUpChile one a trip–to, ironically, their hometown San Francisco–funded by the Chilean taxpayer–is that this market was aldready crowded with businesses.  So they refined their idea to improving operations at call centers instead of routing their phone calls and this is what caught the attention of Groupon and their other initial customers.

 

OctaneNation

 

Matt Beaubien is an entrepenuer from Canada who is working on a social network platform called “OctaneNation”.  His idea is to bring together people who are interested in automobiles so they can communicate in a forum-like setting plus buy and sell used auto parts on their site.

While his product is not let launched he explains he started developing his product before he came to Chile hiring an Indian outsourcing firm and Chilean contract computer programmers to help him.  This former Roush engineer who worked in France and got his MBA in Spain says his offering should be ready to launch in the next few weeks.

 

Free Money you Say?

 

The obvious question behind StartUpChile is why would the Chilean government hand over so much cash to foreigners who when they have completed their 6 month stint in Chile will likely take their capital and ideas and go back to whence they came.  Maitetxu Larraechea is the communications director of Chile.  This Chilean with Basque ancestry explains it like this:

The thing is that the main goal is not necessarily to create new businesses [here]. The objective of the program is to build an entrepreneurial hub in Chile.  We want the startups to be successful because they create jobs and they make this entrepreneurial hub better. Our goal is to strengthen the entrepreneurial system in chile.  Successful entrepreneurs make the system better.

It does not matter [that they go back to the USA or wherever] because we make sure while they are staying here they mentor local entrepreneurs, they talk to investors: its a good thing, it is good deal.  They contributed to the local ecosystem [business environment].

Chileans can Play As well

Of course Chile is not only giving awards to overseas countries.  In the fourth round of the program twenty three percent of the program participants were Chilean.  Here are a couple of their success stories.

Biofiltro

Matías Sjögren Raab is the sort of salesman and company leader who exudes charisma, charm, and confidence.  This former finance guy turned entrepreneur says he has taken an idea whose origins were academic and made it commercial.  Speaking from his office in the shadow of the new 70-story Costenera Center in Providencia, Santiago he says his two year old company is already profitable having installed dozens of natural waste and sewage treatment systems at agriculture and food processing companies across Chile, New Zealand, Spain, and elsewhere.  His customers include the largest poultry processor in Chile and some of the largest wineries here.  Giving a boost to his company BioFiltro was one of six finalists in the Global Ideas competition with competitors from 23 countries competing for $100,000.

The BioFiltro system “Turns waste water into clean water and organic fertilizer for agriculture”.  Earthworms eat polluted solids producing casts which are used for fertilizer. Sawdust and gravel treated with bacteria filter out solids.  At the end of the process a few drops of chlorine produce the final result: clean water for farm irrigation. This clean water discharged from farms and food processing plants is not only important for environmental stewardship but is an important factor in food safety.

With a gift for raising money, Matías has secured grants from StartUpChile, other sections of the Chilean Development Corporation (CORFO), and the Chilean Export organization (ProChile) as well as two partners.   He praises StartUpChile for being an easier bureaucracy to navigate saying, “When you are starting your company you need money.  I applied for grants and programs from the government.  At StartupChile the application is easier than the normal ones.”   ProChile paid for BioFiltro to travel to different countries to sell and promote their product.  For example Matías went to the Fresno area of California to promote his product to dairy producers there.  Matías says he used his 20 million pesos ($40,000 USD) funds he got from startup Chile to build new waste treatment machines and improve their efficiency.

Loogares

Loogares is the product of three friends who have know each other since they were 10 years old.  Their product offering is a web site that lets consumers rank restaurants, bars, clothing stores in a manner similar to the American company yelp.com.  They are operating in Santiago and Valparaiso, Chile and expanding to Buenos Aires where they found an Anghel investor, NXTP Labs.  This Anghel investor is what is called an “accelerator” meaning they take an equity position in the company unlike StartupChile who is an “incubator” who provides initial seed money. With StartupChile funds he was able to hire additional computer programmers and what he calls “community managers” who basically are sales people who entice local companies to buy advertising on the web site. Already his startup is profitable.

For more information or detail about StartUp Chile and its participants, please visit www.startupchile.org, call +56-2-862-4339, or email stgo@startupchile.org.


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(1) Reader Comment

  1. It’s good to know that Chile offers these opportunities to people from overseas. I would like to learn more about the impact of these entrepreneurs on the economy.

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