Creating the Next Silicon Valley—The Chilean Experiment

1/4/11Follow @sgblank

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coach entrepreneurs and to build companies. Finally, it wasn’t clear if everyone was on the same page; that for a Chilean startup to scale it was going to have to reach past Chile and go global. There seemed to be few tools, techniques and strategies to do so.

A sign of progress will be when some of the CORFO guys leave the government and start their own VC firms.

Corporate Connections

Entrepreneurship in Chile seems to be disconnected from the country’s largest industries and core resources. The clearest example is the country’s copper mining industry, which contributes 20% of the Chilean Gross Domestic Product. (Chile produces 35% of the world’s mined cooper.) The largest company, the state-run Chilean National Copper Corp CODELCO, has $23 billion in sales. Yet the copper companies import nearly 100% of the advanced technology they use. Interestingly, CODELCO is required to contribute 10% of its revenues to the armed forces, but the mining industry seems to have little or no connection with innovation and entrepreneurship efforts in universities and startups. (Perhaps it’s because the Ministry responsible for Mining is separate from the Ministry responsible for the Economy and Innovation.)

I suggested that Chile’s mining industry could contribute to building innovation leadership by funding a multi-tiered initiative in the country’s leading universities:

  1. Professional management training (obvious and immediate payback)
  2. Applied engineering (top 10 annual challenges from the mining companies)
  3. Basic research (copper based materials science, robotics, materials handling)

Small Business versus Scalable Startup versus Corporate Entrepreneurship

There’s confusion in both the Government and Universities about the difference between small business entrepreneurship (startups designed to be family businesses,) scalable startup entrepreneurship (startups designed from day one to scale big inside Chile and then expand globally) and corporate entrepreneurship.

I suggested that they think about educating (and funding) each class of entrepreneurs differently and realize different regions of Chile have different needs. In Santiago the concept that startups are not smaller versions of large companies and traditional business school classes and methods don’t apply, is starting to take hold and will help shape how they educate entrepreneurs. In contrast, over lunch with the governor of Ultima Esperanza (the “Last Hope” province on the Southern tip of Chile,) it became clear that there’s a pressing need for training and education in small business entrepreneurship, dramatically different then the scalable startup education wanted in Santiago.

These three types of entrepreneurship need to be explicitly recognized, encouraged and managed.

A Magnet For Talent

My sense is that Chile has not yet “declared a major.” Saying that you support entrepreneurship and innovation is a start, but the sentence needs to be finished. Entrepreneurship and innovation in what field? Where will Chile establish technical and innovative leadership? Is the only way they will attract talent by paying entrepreneurs to come to the country? Or will students and entrepreneurs come to Chile because it is one of the best places in the world for innovation in certain specific industries (pick your favorite – alternative energy? materials science? food science? cellulose outputs? video games and film? South American web commerce hub? automated mining? UAV’s? etc.)

Already there are multiple centers of excellence in the engineering schools in Santiago with strong entrepreneurial professors. Yet no dean, provost or government minister seems to want to issue a declarative sentence that says, “For the next five years we’re going to focus on building world-class leadership in these three areas.” (Perhaps because the cost of a public failure is so high in Chile. See below.)

I suggested that what seems to be missing is a stated goal for Chile to become a magnet for talent in specific domains. Why will people from South America stream to Chile, besides its magnificent geography? In what fields will Chile’s universities and entrepreneurial culture create such an irresistible pull?

A Culture That Does Not Accept Failure

Chileans I met were concerned that their culture was not accepting of business and/or personal failure. This is not the land of second chances where failure means you are an experienced entrepreneur. Partially due to a lack of bankruptcy or commercial courts, the bankruptcy process in Chile is draconian. In discussions with accounting and financial professionals, I learned that getting caught up in it feels like … Next Page »

Steve Blank is the co-author of The Startup Owner's Manual and author of the Four Steps to the Epiphany, which details his Customer Development process for minimizing risk and optimizing chances for startup success. A retired serial entrepreneur, Steve teaches at Stanford University Engineering School and at U.C. Berkeley's Haas Business School. He blogs at www.steveblank.com. Follow @sgblank

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  • Randy Havre

    Aloha,

    I agree with most of your thoughts having been doing business in Chile for 8 years although I am a VC in Hawaii. The bankruptcy thing is really a big hurdle. (one of my portfolio companies was applying for a small grant from CORFO and they wanted SS#’s for the CEO and Brd) They just recently became a PCT country. Even though, my wife and I have many friends there and I will continue my activities. Mahalo.

  • http://www.thecrowdfundingrevolution.com/ Kevin Lawton

    Hey Steve,

    Love the Chile article. I’d like to see them pick up on an advanced crowdfunding platform, right from the beginning. Fwiw, I’m the author of “The Crowdfunding Revolution | Social Networking Meets Venture Financing”, which besides laying out the rationale for crowdfunding, gives a future road-map.

    Also, I live around the Bay Area and will be giving a talk at Stanford, Wednesday Feb 9. Happy to chat.

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