Corfo calls for IT tech startups to expand abroad in 6 months of launch

Monday, July 11, 2011

Chilean IT tech startups looking to expand abroad should be aiming to do so within six months of launch, Adrián Magendzo, entrepreneurship assistant director of InnovaChile, a program run by government business development agency Corfo, told BNamericas.

According to Magendzo, traditionally in the country there has been a view that Chilean companies wanting to expand abroad first have to be around for a few years to conquer the local market.

"It's no longer like that. Now we expect IT startups that have potential to go global to be doing that within six months of launch. We're looking for companies that get in contact with international networks of investors from the outset," Magendzo said.

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According to the executive, the globalization of Chilean companies is now "a strategic and priority issue within the country's economic policy. We have a presidential mandate for this."

InnovaChile has a series of ongoing initiatives to encourage enterprise that fall into four categories - "entrepreneurship," which refers to specific initiatives such as funding companies to go to Silicon Valley and meet investors; technology transfer; creating an entrepreneurial environment, which refers to appropriate regulation and educational institutions; and finally encouraging more innovation within established industries.


As regards the first category - entrepreneurship - Innova has a series of contacts with organizations, including the University of Texas and MIT in the US, where it can send startups to spend a kind of internship period to learn some of the ropes and establish contacts.

In May, Corfo, in conjunction with IT association Acti, entrepreneur organization Endeavor and US start-p incubator Plug & Play, selected nine Chilean entrepreneurs to go and spend three months at the Plug & Play lab in Silicon Valley.

An initiative that perhaps falls more into the innovation category is Startup Chile, which provides young non-Chilean entrepreneurs US$40,000 in seed capital to come to the country and try setting up a business.

"One of the effects this can have is a spillover of international entrepreneurs in Chile, so that stimulates local entrepreneurs. As well as creating a new business in Chile, they spread best practices, networks and culture," Magendzo said.

Then there is a system of technology transfer. Entrepreneurs that create companies in Chile to start using certain technology can access subsidies of US$300,000 per initiative. That is the first phase called "Idea to product." Then there is "product to market," where businesses can access a further US$120,000 to start selling the technology.


As regards financing, InnovaChile provides subsidies for establishing angel investment funds. One fund worthy of note is Austral Capital, which has offices in Chile and Silicon Valley.

"We pay for a general manager, an office - everything they need to systematically create investment opportunities for technology companies," Magendzo said.

Corfo also has its own venture capital fund, which is in a separate office from InnovaChile's and which can invest in established companies that are seeking to expand abroad. Convincing a traditionally conservative business class to take risks is one of the biggest challenges that Chile faces, according to Magendzo.

"It's a cultural issue that we have to overcome. Investment funds in general are conservative, and they don't like the stage of uncertainty. We're looking at that stage to encourage those funds to invest," he said.