What can we learn from the successful Start-Up Chile accelerator?

Today is demo day for the top 20 startups from the 12th generation of one of the world’s most talked about business programmes — Start-Up Chile.

Tonight at 7pm Santiago time the 20 will present their ideas to national and international investors to raise funds to grow their businesses while they are in Chile. The batch were selected from among 70 other companies from the programme’s 12 generation.

Demo Day is guaranteed to prove nerve-wracking as the chosen few will have just five minutes to convince investors that their idea is worth funding. Judges will choose the winner, who will get a free flight to go to Silicon Valley to meet more potential investors.

Launched in 2010, Start-Up Chile provides US$40 000 of equity-free funding to early-stage, globally-scalable startups from around the world. The funding is accompanied by a one-year temporary visa that allows foreign entrepreneurs to execute business activities in the country.

In exchange, programme participants — who must stay in Chile during the six months of the programme — must take part in activities that promote entrepreneurship to Chileans. Over 200 000 Chileans have benefited. The idea is to get Chileans to think more globally and to collaborate with one another.

Over US$100m raised

Over 1 200 startups from 72 countries have taken part in the programme so far. Participants coming out of the programme have raised over US$100-million (this Techcrunch map shows where follow-on funding has been raised) and have created more than 1 500 jobs.

In May Start-Up Chile announced that the programme would begin offering US$100 000 in follow-on funding, in return they must stay in the South American country for a year and mentor others.

Read more: 7 Latin American startups shaped by current entrepreneurial trends

The change follows criticism from some in Chile that the programme, run by the Chilean government, had not done enough to keep attractive participants in the country.

Following in Chile’s footsteps a number of countries have begun creating their own startup pro­grammes, including Brazil, South Africa and Malaysia (see this earlier post).

Most Chilean entrepreneurship experts agree that the real success of Start-Up Chile has been in the social or cultural impact it has had on the country rather than its economic impact.

Drop the red tape and share

If anything the example of Start-Up Chile perhaps shows the power of global networks.

Entrepreneurship expert Vivek Wadhwa points out that none of the participants mention money as the biggest benefit from attending the programme. “They talk about the fact that they are with great entrepreneurs from all over the world who want to exchange information, and help,” he says.

The 2015 Global Startup Ecosystem says to nurture more technology startups countries should work on reducing red tape and lowering barriers (such as relaxing visa requirements or exchange control rules.)

This is because startup ecosystems have become increasingly interconnected (over a quarter of funding rounds have at least one overseas investor and over a quarter of team members are foreign employees).

Read more: The case of Chile’s SaferTaxi: adapting a global trend to a local market

In all three of emerging cities ranked among the top 20 startup ecosystems in the world (São Paulo, Moscow and Bangalore) it takes almost two months to finalise immigration papers, compared to 21 days in Silicon Valley.

Added to this startups in emerging cities employ few foreigners (two percent in Bangalore, five percent in Moscow and seven percent in Sao Paulo). In Silicon Valley a quarter of employees are foreigners.

Lowering barriers may also help to grow the number of international customers for startups – which ranges between nine percent in Bangalore and 31% in Moscow, compared to 36% in Silicon Valley.

Listen to Shea
While the report’s authors said Santiago, Chile (placed 20th in the 2012 rankings) had ended up peaking fairly quickly, they note that the city’s startup population is seeing slightly above the average growth when compared to other ecosystems.

In an interview last month the brains behind Start-Up Chile Nicolas Shea shared with the Stanford Business journal how countries can attract more entrepreneurs. In essence he says the programme has been a success because it of its simplicity.

“You just come to Chile, you get a one-year working visa, you get US$40 000 and this amazing office. So just start inviting entrepreneurs. Make it straightforward and do it. I promise you they will come.”

More people should listen to Shea.

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This article originally appeared on Small Business Insight, a Burn Media publishing partner. Stephen Timm writes on small business and is presently in Cape Town, South Africa. Click here to sign up to his monthly newsletter. Follow him on Twitter at @Smallbinsight and on Facebook.