Since its launch in 2010, policymakers and geeks from around the world have been in awe of Start-Up Chile. Six years on a former director of the programme is now in a US territory to roll out a similar initiative there.
Sebastian Vidal (pictured above) heads Parallel18, an accelerator programme that’s looking to turn Puerto Rico, which is struggling with a debt crisis, into an attractive global destination for start-ups.
The application process for the first round of the programmes closes on January 29.
His posting to the troubled island is another major validation of Start-Up Chile, still one of the most talked about initiatives among policymakers.
Vidal, who was part of Start-Up Chile from its early days and then served as its director for a year and a half, says it all came about when the Chilean programme began working a lot more with other countries to try get similar programmes started there. The list includes Peru, Brazil, Lebanon and Malaysia.
He says that it was following a visit to Chile from the Chilean consul to Puerto Rico at the end of 2014, that the idea for the programme came about. But Vidal says he never realised that the opportunity to do so “was so big”.
He says the idea is to attract entrepreneurs to the island to try to stimulate a local start-up scene in a bid to get some of the hot tech talent that is regularly snapped by big US companies, to stay and build businesses.
The programme will leverage off the island's good infrastructure, the regional Latin American market, good transport links (with direct flights with several US cities), local tax incentives (which Vidal reckons can help cut a start-up's costs by over 20%) and an attractive quality of life that is more affordable (in rent) than the US.
Parallel18 will take on two cohorts of 40 start-ups a year that will enrol in the four-month programme.
Participants will each get $40,000, while there will also be a follow-on fund for more successful start-ups. The programme draws its funding from public money held by the Puerto Rico Science, Technology and Research Trust.
Those joining the programme will, like in Start-Up Chile, have to participate in seminars to encourage a local start-up scene (they will do this by working closely with universities).
Won't solve all island's problems
However Vidal is clear that the goal of the programme is not to solve all of the island’s economic challenges.
"Parallel 18 is not going to solve the most important problems that Puerto Rico has, but it is going to add value in a specific layer that they were not adding value (in) before - that is the knowledge economy, putting a message in the mind of the talent of Puerto Rico."
He says however that as they grow start-up from the programme, will also likely create jobs and benefit the economy..
"Of course we're not hoping to have that in the first year, but of course three years, four years (down the line) that's something that we are working to (realise)."
The question of economic impact is one that still hangs over Start-Up Chile.
While some critics question the economic impact of the Chilean initiative, Vidal points out that today those former participants from the programme that have chosen to stay in Chile, are running firms generating annual sales of $40 or $50 million a year.
Up to August last year the Chilean programme had assisted over 1,200 start-ups from 72 countries, with participants coming out of the programme have raised over $100 million and creating more than 1,500 jobs (see this earlier post).
Ultimately its about building companies and Vidal points to an important realisation that he and the team at Start-Up Chile made three years into the programme - namely that even with a substantial flow of entrepreneurs, one can’t create a successful ecosystem, without successful companies.
It’s perhaps because of this that the Puerto Rican programme is looking to recruit participants that already have had some traction with their start-up.
To qualify for the programme entrepreneurs have to have been running their company for at least three years, rather than the two years specified by Start-Up Chile.
Vidal this this will help Puerto Rico to see results “in the mid-term” rather than the long-term.
Three important things
So what then are the essential ingredients to a successful start-up programme? Vidal says there are three important ones.
Firstly the tech start-up sector of that particular country has to focus on solving the most important problems facing their particular ecosystem (Puerto Rico's is its brain drain).
"What I've seen in these years is that they (policymakers) always want to replicate something else," cautions Vidal.
Secondly, if governments want to work with start-ups they must understand that entrepreneurs work at a different speed to bureaucrats. Processes need to be faster.
To address this governments can either hire an independent team to run the programme or they can make the processes around the programme more efficient.
Here Vidal points to how the programme was able to cut the usual time Corfo (the government agency that oversees the programme) took to disburse state grants from three months to three weeks.
"This is all about willingness. It's not about me the president telling you that you need to do it. The person (at the programme) that is going to receive all the profiles of the entrepreneurs, it depends on he or she to take those profiles and work with them efficiently and fast, and to not leave them in the desk for two months or two weeks, which normally happens in government because of the bureaucracy."
Finally, governments must also ensure that the right infrastructure is in place for start-ups. This includes access to talent, banking, investment and basic services like accountancy and good tax laws.
As the world economy continues to slow more governments are beginning to realise the critical role that start-ups can play. But running a good programme will still not be easy.
Download the Start-Up Chile book from: www.startupchile.org/supbook-results/. Click here. Follow Small Business Insight on Twitter at @Smallbinsight.
Stephen Timm is a