Flip-side of Startup Chile

My name is Maksim, and I’m a co-founder of SmartProgress, the Service to achieve goals. In this article I’ll reveal the flip-side of StartUp Chile and share my experience of participating in it.

Prehistory

Startup Chile is a program of the Chilean Government to attract innovative projects. In 2015, our project won the Grant in the amount of $33,000.

Acceptance of applications for the new 16th generation of Startup Chile is coming to an end, and while thousands of teams around the world are trying to prepare the perfect application for this grant, I’d like to tell about the hidden pitfalls which I encountered in the 12th generation.

At the first glance, as well as at the second — Startup Chile looks a fairy prospect for start-up: they give money, do not require a share in return; you have a chance to make a loud name in the media, a possibility to enter the foreign market; an accelerator program, mentoring support, the opportunity to visit Latin America and many other things. Besides, what makes it all sweet is the countless amount of positive feedback from people who have got through Startup Chile. But in the Internet there is hardly any information about the problems that you will face, if you still decide to fly to Chile; so I would like to highlight this aspect a little.

You will get the money only in Chile … or, maybe won’t…

Under the terms of the program, you’ll get the first half of the grant only 3 weeks after the program starts. This means that you will be covering the flight, accommodation, and all legal procedures for yourselves and members of your team on your own.

But even 3 weeks after the start, there is still a probability that you will not get the money. Delay in Startup Chile is normal, and be prepared for the fact that you’ll have to live without money for another month, and thus, pay for the rent, utilities, Internet at your own expense. Personally, I had my first half of the Grant transferred more than a month later than the promised date. The funny thing is, in a couple weeks I was supposed to report on how I had spent my money.

Grant is melting by leaps and bounds

At the moment of filing the Application, Startup Chile declared a Grant of $40,000. For many years it had been so, but then, the global financial crisis started again, and currencies of resource countries began to depreciate. Chile’s economy rests on mining — copper and other metals. And by my arrival in Chile the Grant had become $35,000. After all, as it turned out, it was not being paid in US dollars, but in Chilean pesos, and the program authorities had no intention to index the exchange rate differences. By the end of the program, the Grant had amounted to $32,000, but the site was still proudly displaying the figure of $40,000. Later, they updated information, of course, and indicated that the Grant was 20 mln Chilean pesos, which approximately made $30,000. Although today this figure is not relevant anymore and 20 mln CLP now is equal to $28,000.

Free Cheese

Nothing is free, and for the money received you have to work. The main objective of Startup Chile is to raise the entrepreneurial spirit in the country (RVA — Return Value Agenda). To do this, they actually need startuppers, and the grant is a lure for them.

To account for the first half of the grant and to get the second, you need to score a certain number of RVA points, which are given for workshops and lectures to local students, coaching local entrepreneurs. At the lectures you’ll have to tell about your experience in entrepreneurship, to teach how to create IT projects, find clients, program, or other issues that may be related to entrepreneurship and startup creation. These very points, and not your project development, will interest Startup Chile administration most.

Though Startup Chile organizes a certain number of events, but very few. Be prepared that you’ll have to do everything yourself: approve the theme of your lecture with the Startup Chile authority, find a place for the meeting, and find students or entrepreneurs as listeners. Points paid depend on the number of students and the length of the lecture. Conducting 1-hour lecture to an audience less than 100 people, it is necessary to perform 8 of such lectures to set the required number of points. Given that Chile has a very small percentage of people speaking English, the task is not that simple.

It looks like this: you go to all the city universities and look for a teacher who understands English, and, like a preacher, propose to tell his students a little about business. All this looks quite dreary and not at all cool. You feel like you are working just to tick the box, but not for the sake of real experience exchange.

Where is my money?

In my first paragraph I have already brushed over the high level of bureaucracy, but I’d like to draw special attention to this. Startup Chile will require strict compliance with terms and conditions in everything — your arrival in Chile, preparing your presentations, reports, scoring the required number of points, almost under penalty of public fagoting in the square, but their delay in paying the grant for a couple months, however, is not regarded as something awful. The second part of the Grant was paid to me almost 2 months later than the scheduled date and after a complaint I had written to whom it may have only concerned.

As a result, instead of the 6 months originally planned, it took me 8 months to spend in Chile. Thus, be prepared to fight the bureaucratic red tape long and fiercely.

I would also like to highlight another pitfall that lies here. Now you have received the first half of the grant, which must be spent quickly, because you really need to account for it, then you result in spelling out your budget so that all the money would be spent by a certain date — the receipt of the next part of the grant. You hire new developers, team members to speed-up the work. You spend all the money, report on your expenses, and expect to receive the second part of the grant shortly, but face reality instead — the money is not transferred. And you don’t know when exactly it will come — maybe tomorrow, maybe in a month, or even 2. Your supervisor is constantly apologizing and promising jam tomorrow for a few weeks, then, just starts ignoring you. As a result, you are cash-strapped, with your increased staff, waiting to get paid and not giving a hoot about your problems; they do their job honestly and expect their salary on time.

That’s a great deal of stress which you have to handle somehow, if, of course, you are not an irresponsible blase person who can easily stiff out his employees’ money. Otherwise, you are doomed to spend long sleepless nights contemplating what to do next and where to urgently get the money from. Startup Chile, thank you for my first gray hair!

Also, bear in mind the fact that though Startup Chile gives you a grant of 20 mln pesos, you will have to account for 22.22 mln pesos. That implies your 10% co-financing of the grant amount.

Another pitfall of all this, is that such mode of using the money makes you spend it less productively than you would like to. You will not be able to eke out the money. You’ll have to spend it and in a short term.

A check-up to check up the check-up

Startup Chile with each new generation is cracking down. A couple years ago, accelerator participants reported on their activities just talking with their supervisors, telling how their money had been spent and where they had given lectures. The 12th was already pretty tough.

The financial report had to be presented as a table with a list of all expenses. And each of them was to be accompanied by a stack of additional papers.
If it was an employee’s salary, it was necessary to provide:

• the original contract with the employee, that clearly stated what exactly he had to perform, in what period of time, how much money he would get and to which account;
• the bank statement, which reflects the transaction from your account onto the account of the employee;
• the employee’s passport copy.

The contract must be original, signed by the employee and sent to you by mail, no matter what the employee’s location is. Each particular type of expense has its own list of requirements what should be provided as evidence. Preparation of such a report takes about a week, and the output is a huge pile of papers. Each half of the grant should be separately accountable. If auditors don’t approve anything, they eliminate the expenditure from the report and demand to provide a corrected report within 48 hours.

While lecturing for RVA, you will have to make a list of all your listeners: names, passport details, emails. Also, you are to take some photos or a video of the lecture in process as a confirmation of the fact. After you provide all this information, the administration of Startup Chile will send the students an email with a questionnaire on the lecture in order to find out whether the lecture has been interesting and what new they have learned.

Waste of time for rubbish

And I haven’t told you yet about the weekly morning “platoons” — compulsory meetings in small groups of 10 people, where we discuss supposedly important issues. And about the “milestones”, where we discuss the ways of your project development with the curator. In addition, there are also public “pitches” where you have to make a presentation of your project in front of the rest startuppers and tell them what you have done within the Startup Chile. To me personally, it was an unexciting burden, as I had a clear scheme of my work, I knew exactly what I needed to do, but only had considerably less time for the project. To keep up with your own work schedule, you will probably have to significantly increase your workload. Out of interest, I once calculated how much time I had spent on Startup Chile and it came out about 2 months. Thus, within 2 months I was engaged only in Startup Chile activities, but not in my project.

Conclusion

To sum up all the above, be prepared for the depreciation of the grant due to the decline in the local currency and for the constant delays in payments. Be ready to devote up to one third of your time to the work on Startup Chile, to significantly increase your workload to stay on track with your own project schedule, to get a large dose of stress due to the struggle against the bureaucracy and the compliance with all program terms and conditions.

Is it worth trying? May each of you answer this question alone. For me — it was worth. It wasn’t that rosy as it had initially seemed, but the great experience, gained in the program, in the trial, I would say, outweighs all these disadvantages. For many projects, such trials are fatal, I saw some people close their projects themselves after the accelerator, some expelled from the Startup Chile by administration. It’s a kind of a test to check your ability to handle stress and the viability of your project.

If you pass through Startup Chile, get back home, and continue the work on your project — you are ready to transform from a startupper into a businessman.