Nathan Lustig is an entrepreneur who took part in Start-Up Chile in 2010 and now acts as managing partner at seed stage investment fund, Magma Partners. In the lightly edited Q&A below he shares his views on the Chilean startup landscape.
How would you describe the entrepreneurial tech scene in Chile?
Chile's entrepreneurial tech scene is one of the strongest in Latin America and is quickly maturing into an ecosystem. When I first arrived in Chile in 2010, there were a few successful Chilean startups, but the vast majority of Chileans didn't know what startups were, treated founders as if they didn't have a job, and almost looked down on them with pity. All of that has changed over the past seven years.
Is this a direct result of Start-Up Chile?
Start-Up Chile is a big part of the change, but not 100% of it. Start-Up Chile has brought over 1,700 companies to Chile and started to change the overall culture while putting Chile on the map as a top startup hub in Latin America. Other great Chilean entrepreneurs were already doing it before Start-Up Chile, and have continued to pave the way for more startups to find success.
How did you come to be involved in Start-Up Chile? And what did it mean for you?
I had started my company in Madison, Wisconsin in 2009 when my business partner and I were looking to escape the Wisconsin winter by moving to San Francisco, California or Austin, Texas. We saw an article in Forbes that said that the Chilean government was offering a $40K grant, office space, visas, bank accounts, and connections into the entrepreneurial ecosystem, and we jumped at the chance to participate. It didn't hurt that the program started in November, the beginning of summer in Chile, and right when the Wisconsin winter was just getting started.
We were part of the pilot round in 2010. I was the co-founder of the seventh company to participate in the program and had a great experience. My business partner and I stayed for the six months, iterated on our business, went back to the US, and then had our company acquired within nine months of returning.
After selling our business, I decided to come back to Chile to continue learning Spanish and look for more entrepreneurial opportunities. I spent the next two years teaching entrepreneurship at some of Chile's best universities, mentoring entrepreneurs, and dabbling in different startup opportunities.
What other tech entrepreneurship initiatives do you think are interesting in Latin America?
In recent years, most Latin American countries have tried to make their countries more startup friendly.
Compared to other Latin American countries, how well is Chile set up for entrepreneurialism?
Chile is one of the best places in Latin America to start a company. It has the best rule of law, ease of starting a business, dispute resolution, and stability of any Latin American country. Many of the Latin American multinationals are Chilean companies that have expanded across the region, which means that if you begin with the Chilean branch, it can be easy to expand to Peru, Colombia, Argentina, and even Mexico. Chile also has a highly trained workforce that is primed to work at startups if founders can convince them of their vision.
The downsides are that Chile's local market is small and that it's physically far away from the action. There are only 17 million people in Chile, whereas Mexico City has more than 20 million alone, which means that if you want to start a consumer-facing company, Chile may not be the best place, unless you're immediately expanding to larger markets quickly.
What kind of companies has Magma Partners invested in?
Magma Partners invests in two types of companies. Firstly, companies that have their tech and/or sales offices in Latin America, but whose target market is the United States.
Chile, Colombia, Argentina, and Mexico are great places for entrepreneurs to take advantage of great tech talent at reasonable prices, operate in similar time zones as the US, and to access good infrastructure to sell into the US market with highly qualified native-English speaking expats. At Magma Partners, we have a process that helps entrepreneurs based in Latin America break into the US market, and we seek out ambitious entrepreneurs who want a partner to help them achieve their goals of succeeding in the US.
Secondly, companies located in Latin America that target the Latin American market. Most US-based SaaS B2B companies do not end up selling to Latin American medium and large companies. We have the connections and the experience to help SaaS B2B companies that target medium and large companies increase their sales and efficiency.
What particular startup trends are you noticing in the city?
Entrepreneurs are getting better, and the tech talent is getting better. We see more startup ideas founded by more experienced teams each and every year. We also see more Latin American, and especially Chilean, companies losing their fear of the US market and competing on par in the big leagues in the US. There is now more access to capital, especially with Latin America's AngelList, Founderlist.la, starting to gain traction and more wealthy individuals are starting to angel invest.
What is the advantage of Santiago over other Latin American cities?
Santiago is the most modern, safest, and organized city in Latin America. It affords entrepreneurs an excellent quality of life, access to top tech talent, and infrastructure from both private and public entities that help founders succeed.
Start-Up Chile's 200 new companies per year attract interesting entrepreneurs from around the world, many of whom stay. Additionally, Chile has a very liberal immigration policy: if you start a business that can support you, or you work for any Chilean company, you can get a permanent visa fairly easily.
Santiago may be home to Start-Up Chile but how much competition does it get as a centre from entrepreneurialism from other Latin American cities like Buenos Aires, Sao Paulo and Medellin?
I don't think Buenos Aires, Medellín, Sao Paulo, Mexico City, and Santiago compete with each other. I look at each of these cities as strong poles for an entire continent. Each city will have its strengths and weaknesses, but as we see more startups expanding outside of their home market, these cities will be more complementary than they already are.
Is there anything else you’d like to share?
We're always looking for top entrepreneurs who would like to partner with experienced entrepreneurs and investors, especially those who would like to target the US market.
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