nathan-lustig-startup-chile
Business Management

How One US Startup Made It… In Chile

If the globalising of technology-enabled business opportunity needed a case study then the story of Nathan Lustig, an American transplanted to Chile, might be a candidate.

In 2010, Lustig was living in Wisconsin, having not long since graduated from university there, when he heard about a scheme called Startup Chile. The scheme promised $40,000 and a visa for companies willing to try their luck. Lustig and his business partner went to Santiago to buy time and figure out how best to monetise his ‘digital will’ company Entrustet that helped transfer and/or delete online accounts when people died.

“We had a small team and wanted to expand our runway and stay six months,” he recalls. “It was a way to cover our costs. We were in Wisconsin in the winter and in Chile it was warm. All we knew was they farmed fruit, spoke Spanish, made great wine and we had just seen the trapped Chilean miners story.”

Despite this state of seeming unpreparedness, there was no major culture shock for Lustig.

“We didn’t know much when we got there but it didn’t feel all that different. It was pretty well developed and you’ve got the mountains. If you didn’t hear the language you could be in LA or Palo Alto.”

There were wrinkles to work through, notably dealing with a core team that had remained in the US. That took some of the velocity out of the company’s work, Lustig felt.

“Today [with improvements in conferencing systems] it would probably be slightly easier but the major challenges probably wouldn’t have changed. Your number-one advantage as a startup is that you’re faster than the rest and pretty agile.”

Business travel could also be a pain.

“Yeah, there were a couple of times when we had a client meeting. In the US, someone might say ‘We’re going to be in New York, do you think you can meet?’ and you say ‘Sure’ and buy the flight and from the centre you can be there in a couple of hours. In Chile that’s a 10-hour flight.”

But the plan worked out well generally, with Lustig selling the company, the seventh project under Startup Chile, back in the US for an undisclosed sum.

“We did OK,” he says of the exit. “It wasn’t a Facebook or a WhatsApp but we did OK.”

Six months after returning home to the US he was back in Chile.

“I had learned ‘half-Spanish’ and thought it wasn’t smart not to learn the rest so I came back.”

At first sniff it seems odd for citizens of the world’s greatest technology economy to up sticks for a Latin American country of 17 million people. But Lustig’s experience suggests there was method in his madness.

“There’s no question that Silicon Valley, New York and some of the others are the place to be for some types of business, but for others there are opportunities to see where you can adapt to local markets and cultures. If you want to build the next Facebook, go to Silicon Valley, but if you want go abroad, do it.”

Today, at 28, Lustig has already made two successful exits, the first (trading site ExchangeHut.com) while still at college and the second, Entrustet, having been started in college. His plan is to continue pursuing that process that starts with an idea, matures, develops and ends with a positive outcome.

Setting up shop in Chile also gave him something else: a life experience and a business experience, most recently in building out an Eventbrite-like events site, which took him to Colombia and Argentina and researching Brazil.

“Chile is a pretty small market so you have to look at Latin America as a whole, which is bigger than the US,” he says. But he adds that the challenge is the diversity of the constituent countries in LatAm. That makes addressing the total continent easier perhaps than in Europe with its many languages but harder than targeting the US.

“Latin America is less homogeneous than the US market. The language is mostly the same but the culture is quite different —but if you have a product you can do well. Chile and Colombia are almost totally different. Colombia is much more open and friendly; Chile is much more closed and harder to get in there. Chile is five or seven years ahead of Peru in terms of international business. Chile is like the US in 2003 or 2004 but Peru is like the US in 1999. Uruguay and Argentina are neighbours but totally different.”

He is full of praise for Startup Chile although he notes that it hasn’t succeeded in creating the one iconic “super successful” company that the project’s creators had hoped for.

“They wanted to change the perception of Chile [and make it] a startup hub and they’ve done that and become the hub for Latin America.”

Perceptions of entrepreneurialism have changed too.

“At first [when Lustig said he was an entrepreneur] they’d look at me like I was homeless, a bum and wondered why I didn’t have a nice cushy job. But with Startup Chile they’ve changed the culture.”

In April this year, Lustig announced his latest venture, Magma Partners, a seed fund for local startups. Is this an act of altruism and returning a favour or a way to make more money?

“Both. The way I look at business opportunities is that someone with good entrepreneurial skills can make money at whatever, so you might as well give something back. There’s a pretty good market opportunity and Chile is only a country of 17 million people. There’s a chance to shape the community. I see more and more entrepreneurs, some Chilean and some foreign, every day and it’s really amazing to see the change. The price has gone down for pretty much every aspect of starting a company but in Chile it’s less about starting it and more about seeing how people have done it in another country. Now, anybody who is interested can read entrepreneurial blogs to see how they do it. That knowledge is supercharging the developing world.”

What’s missing? A few things.

“If you look at what makes Silicon Valley great, it’s people knowing the right people. Broadband availability is just fine [in Chile]. Public education is not very good and a really good education is only available for people who have money. That has to change if Chile wants to be a world-class country.”

Red tape and bureaucracy are among other challenges.

“The rule that says every business no matter how small must have an accountant is to me just stupid and it’s really hard to get a bank account. “There’s a cultural thing too. Too many of the business models are about extraction [like farming and mining] and not value creation.”

Despite that critique, Lustig remains passionate about Chile.

“[Multinational IT services group] Sonda started in Chile and is massive in Latin America so there’s enough money to do some cool stuff. I’ll probably stay another year or two. I probably won’t be here forever but I’ll probably always have interests here.”

 

Martin Veitch is Editorial Director at IDG Connect

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Martin Veitch

Martin Veitch is Contributing Editor for IDG Connect

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