The capital city of Chile, Santiago is the country’s financial, cultural and political center. A forward thinking government initiative has begun the process of bringing Santiago into the entrepreneurial marketplace, with the intention of bringing Chilean companies to the world. By establishing a startup initiative that has set a standard for other nations to follow, Chile is making it clear that they are determined to have success in the entrepreneurial race. How is Santiago establishing itself as a startup market?

Startup Hubs Around the World: Santiago de Chile

© Shutterstock.com | Matyas Rehak

In this article, we’ll discover the 1) benefits of its location, 2) the tax incentives, 3) legal incentives, 4) investors, 5) resources, and 6) specialization of the area, along with 7) startups to watch.

LOCATION

Located in the tiny nation of Chile, Santiago is nestled between large mountain ranges, in the middle of the country’s central valley. A short flight to the United States allows entrepreneurs access to other startup markets such as Silicon Valley, and provides access to investors and suppliers.

Geographical Benefits

The beautiful city of Santiago is located in the narrow country of Chile, along the coast of South America. A short distance from both beaches and mountains make this a tropical paradise that attracts visitors from all around the world. For the entrepreneur looking to find a startup hub, Santiago offers the best of every possible world: business, entertainment and recreation. A well-established business center, it has the infrastructure already in place to support the business of entrepreneurship. As the capital city, it is the political center of the country, providing legal and governmental support to the further development of the startup market.

Drawing people from all across South America, Santiago is one of the doorways to the Latin American market. To increase its visibility as a startup market, the city needs to begin to promote itself as not only a place to work, but as a place to create. Capitalizing on the influence the city already has will help to springboard the startup community into a globalized position.

Advantages to choosing the city

The thriving community of Santiago is already geared towards success. As the financial center of the country, the city has the resources and tools necessary to create a culture of innovation and design. Its well-developed cultural offerings add depth to the city, providing inspiration and motivation for the entrepreneur and combining to create an environment where creativity is celebrated.

Although Santiago tends to be more of a conservative city, the continued push for innovation and the attractiveness of the city are working to bring new thoughts and plans to the startup market, making it one of the cities to watch for the future.

TAX INCENTIVES

Taxation in Santiago is competitive with other nations around the world. Corporate tax rates are currently set at 20%, a relatively low tax rate in comparison with other global rates. There is low government corruption, a stable government structure and strong property ownership rights.

Santiago, Chile - Startup

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Santiago recently unveiled their Start-Up Chile program (2010), which offers a host of benefits and advantages to companies establishing a startup in Chile. Entrepreneurs in Santiago can take advantage of this program as well. The purpose of the Start-Up Chile program is to attract high potential, early stage entrepreneurs to Chile in an effort to promote Chile’s startup culture and bring it onto the global stage as a viable hub for innovation and entrepreneurship in Latin America. To accomplish this goal, the Start-Up Chile program offers selected startups $40,000 in equity-free funding and a 1 year temporary visa, along with coaching, development and mentoring. As part of the startup agreement, the company must be located in Chile for six months, as well as attend various monthly meetings and participate in demo days.

The prospect of ‘free money’ to live in Santiago for a year while getting a startup off the ground appeals to many: for the 100 spots available, over 1700 companies applied for the most recent round of funding. It is hard to turn down the idea of receiving the funding, however, there are some hidden costs and expenses that must be considered when determining if Santiago is the right fit for your startup.

Foreign entrepreneurs who wish to locate in Santiago must take into account the language barrier of this Latin American company. The primary language of the nation is Spanish, which can cause additional hurdles for a company that is trying to become established. The Start-Up funding is a great way to finance the early stages of a company; however, it creates a catch-22 situation where the company must already be located in country to get the funding to find housing and office space.

LEGAL INCENTIVES

In an effort to boost the entrepreneurial spirit of the nation, Chile recently unveiled a new, online process for registering a company. Easily accomplished over the internet, the company can be legally incorporated in one day – making it one of the fastest startup times in the world. With strong government support, the legalities of starting a company in Santiago are minimal. The leaders of the Start-Up Chile movement have streamlined the process, and a secure government ensures that government corruption is virtually nonexistent. This allows for the entrepreneur to focus on building their company – and not worry about being fined, imprisoned or otherwise penalized for obscure legalities.

There is a sense of trust and camaraderie within the startup community of Santiago, an attitude that is infectious in the business world. The culture of Santiago is trusting of foreigners, allowing the entrepreneur to comfortably offer goods and services to the Chileans, without fear of reprisal. There is no social stigma for outsiders who wish to do business in the country, and the legal system is easy to navigate; successful companies can be seen in every area of industry.

Big corporations have begun to establish headquarters in the Santiago business district, creating an environment that fosters creativity, innovation and trust. This adds to the ease of doing business within Santiago, making it easier for entrepreneurs to establish their companies there. To effectively maximize the draw of Santiago as a startup hub, the entrepreneur community needs to develop and promote a core startup community. A well-established startup community that can provide training, support and networking opportunities will further grow the entrepreneurial hub in Santiago. There is a basic community, Santiago Startup Weekend, but a more organized and developed group would provide more resources and structure to their hub.

INVESTORS

One of the largest downsides to establishing a startup in Santiago is the lack of angel funds or venture capital groups. Chileans (and by extension, Santiagoans) are historically risk averse investors. The natives are predominantly conservative in business and planning, which creates a culture where entrepreneurs can be discouraged by the lack of support and funding. In addition, investors often overlook foreign companies, preferring to support national companies. For the entrepreneur who is trying to establish a company on foreign soil, this can be disconcerting.

Interest in the growing startup community has had an impact in the availability of investors. While Santiago has previously been lacking in the number of investors, the tide is beginning to turn. A predominately big-business focus is switching to newer, smaller companies as the tech market heats up in Santiago.

A drawback to the willingness of investors to fund startups is the overall high percentage of startups that fail in their early years. The Chilean people have an aversion to failure, so companies that are engaged in newer technology or who are on the edge of financial stability but just can’t seem to make it over the last hurdle are typically not considered for investor support.

The Chilean government, in conjunction with the Start-Up Santiago program, needs to emphasize the potential for return on investment to larger investment firms. A drawback to this plan is the large number of companies that establish themselves in Chile, and then relocate to another, investor friendly city during the middle stages of development. The absence of experienced startup entrepreneurs is another indicator of the lack of financial investors – when there aren’t enough people who have experience, investors tend to become nervous.

Fixing the gap caused by a lack of early stage funding must be a priority for Santiago to truly become competitive on the global scale. Encouraging companies to take risks on new technology or markets, and encouraging growing startups to remain in the city for the duration of its growth are top priorities for Santiago.

LOCAL RESOURCES

Entrepreneurs who take advantage of the Start-Up Chile funding can use the $40,000 to cover the expense of living arrangements. Unfortunately, however, the availability of housing is scarce, and the language barrier between the foreign entrepreneur and the landlord is a definite hurdle. There is an adjustment to living in the Santiago culture – something the entrepreneur must take into account while trying to establish their company.

A primary need of a startup is the easy access to customers. Having direct access to customers allows a company to maximize customer feedback, draw customer attention to new/fledgling services and easily promote the new company. By locating in a Latin American country, the company is uniquely positioned to reach the Latin American population. If your product or service is geared towards this market, Santiago is an excellent choice for startup location. If the company’s product or services are geared towards an American customer or market, establishing a company in Santiago will be counter-productive.

Santiago is well connected as a city: it boasts an international airport, a carefully planned subway system and a network of roads to connect the city. Transportation in and around Santiago is accessible and easy to use. As the cultural center of Chile, Santiago boasts of several museums, art centers and cultural landmarks, in addition to an extensive secondary education program that is offered through universities and colleges.

A young and vibrant city, the labor market is full of well-educated and available employees. The city is active with cultural activities and entertainment, an attraction that helps employees find something to do during their time off. The temperate climate allows for year round enjoyment of the beautiful surroundings, and the natural attractions of the mountains and ski resorts. Several sports teams play in Santiago, providing yet another attractive option for entertainment.

SPECIALIZATION

Santiago is home to a wide range of developed industries. This can be both a positive – there are a range of industries to cater to; and a negative – it is difficult to find a new industry in which to start. As the fledgling startup industry grows, it is unclear what direction the hub will take. There is a clear need for innovation and technology that can be directed towards one of Chile’s many industries. By focusing innovative technologies towards the Latin American culture, there are a vast number of fields that the startup market can approach.

Santiago is a fairly modern city; however there is a large socio-economic disparity between the wealthy and the ‘middle class’. Finding a way to bridge this gap or address some of the environmental concerns of air pollution, earthquake damage or transportation concerns are all key areas that startups could address.

STARTUPS TO WATCH

Uniplaces: No matter where you are in the world, Uniplaces can help you find and pay for student housing abroad. Using their unique system, users can check out pictures of an apartment, find out about amenities, ask questions about the neighborhood and book it – all from their computer. By connecting students with landlords, Uniplaces takes the guesswork out of apartment hunting, and saves you from having to wait until you get in country to find a place to live.

Agent Piggy: A virtual piggy bank for kids, Agent Piggy teaches children the benefits of earning, saving and donating money in a fun and unique way. Competing in fun challenges, logging in any allowances or other earnings and establishing a budget are just some of the activities that kids can participate in online. Parents love the interactive tool, and can help teach their children the importance of smart money skills. An online piggy market provides opportunities for donating to charity groups as well as buying items that kids love. Based on a set fee structure, the online piggy bank is a great way to teach good money habits while having fun.

Vendobots: The convenience of vending machines, with the ease of technology. Vendobots is a vending machine managing company that has a custom app and online platform to manage a network of machines. Little human intervention is necessary for the maintenance and replenishment of these machines – computer generated reports give quick snapshot information about product usage and sellouts.

Austral3D: Using the technology of video games such as Call of Duty, Austral 3D is designed to provide training and education for students studying industrial careers. With a flexible training program, and easy to understand material, the software quickly teaches students in an engaging manner the ins and outs of industrial workplaces. Students experience the realities of work in a 3D environment, making the realistic training vital to their success in the workplace. Using game methodology to train employees and students is a successful and captivating method of teaching and learning. Resources available include visualizations, simulations, virtual animations and 4D visualizations.

Motion Displays: Retail productivity software developers Motion Displays provides retail employees with the tools to convert inquiries into sales. Using handheld technology, retail employees are able to check inventories across locations in real time, as well as guide customers to exactly the product they need. Interactive software on handheld devices allows customers to respond to specific questions to determine the needed product, and then find the item in stock. Predictive analysis and collected data are used to give customers a successful shopping experience, and allows the company to gather customer input while driving up sales.

Image credit: Flickr | OuiShare under Attribution-ShareAlike 2.0 Generic.

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