Is a business incubator the best way to help startups to cope with their day-to-day challenges? To help them grow and become sucess stories that will make other local entrepreneurs dream? This is a recurrent question in Latin America, where almost every single country has realized the need to become a hub for entrepreneurs, if possible the most attractive of the region, to retain the most of the add-value generated by technological innovation.
Uruguay getting into the race for being the regional tech hub
If there is no clear answer whether building a startup incubator ecosytem is an effective solution to create a thriving startup community. Chile has chosen to concentrate all its effort in one giant acceleration program: Start-Up Chile, and even if there are still issues to solve before becoming an attractive tech hub, Chile has indeed the most extensive startup network in the world. Uruguay, contrary to Chile, was lacking an incubator ecosystem. Until very recently, there was only one incubator in Uruguay: Ingenio. Now there are five more after a call of the ANII, the government innovation agency, for new incubators. There’s now a brand new network of incubators in Montevideo, and it will help the tech scene to grow even more.
Ingenio is the oldest incubator in Uruguay. And used to be the only one.
A disruptive lab on a conservative continent
Uruguay is a true disruption laboratory. There’s a culture of trying new things (see our interview of Moneero, an international startup based in Uruguay), especially within the government and public authorities. It is a rather permissive country is the sense that there is few regulation and legislative obstacles to new concepts, such as the drones.
Even though it is a tiny country, there are plenty of incentives for entrepreneurs to establish in the country. The tax system favors international companies that have no activity within the Uruguayan territory, which is actually next to two economic giants: Brazil and Argentina. All countries are part of the Mercosur Free Trade Area. It has become a financial trade place where it is possible to do business in Argentinian pesos or Brazilian reals without establishing a proper company on their territory. A welcome opportunity once you’ve realized how complicated it is to do business in these protectionist countries, famous for their administrative burdens and bureaucracy. Last but not least, it is stable and safe, both politically and economically.
A view on Montevideo, once the first host of the World Cup, today an emerging tech hub
Yet another strategy to create an innovation hub
Almost every government in Latin America has initiated a series of policies to support entrepreneurship and foment innovation with the hope of being the region’s most attractive tech hub. Together with the Inter-American Development Bank, Uruguay has launched in 2013 the PAFE program to support aspiring entrepreneurs, including financially. The idea is to attract private investment in the country, the VCs and Business Angels being too few.
Prosperitas Capital Partners is one of the very few VC in Uruguay.
To do so, the ANII has decided to head the incentives towards the incubator sphere. USD200,000 for each incubator, plus a USD25,000 equity-free grant for each startup accepted in one of them. An indirect investment in the startup scene that should showcase wether this is a better solution than investing directly in emerging projects such as Start-Up Chile.
PedidosYa, a continentwide success story made in Uruguay
Casestudy: the daVinci Foundation
We met Óliver Socas, general manager of the daVinci Foundation’s startup incubator.
Their case is typical of what has happened in Uruguay lately. The daVinci Foundation, which already counts with 7 years supporting innovation in Uruguay, answered the call of the ANII and applied to the incubator’s financing program. They got the USD200,000 grant, have been working on the project since early 2014 and started operations on september 2014. Oriented mainly on TICs, they’re “pro-paperless” which means they favor projects that aim at digitalizing something. They have also an “anti-paternalism” view as they take no equity in the startups. Their aim is just generating a positive impact on the Uruguayan ecosystem.
The daVinci program consists of a 6 months incubation period, which can be extended for another 6 months. Once a startup has complished the first semester, a jury sees if there is an opportunity in keeping on with the incubation program. Depending on what the stage of development the startup is currently in, daVinci may help to get in touch with a network of investors, business angels and VCs.
An average 40 startups from all Latin America applies for each call. daVinci filters by business model and by business plan, before they present a selection of projects to an ANII jury, which ultimately decides which startups will take the USD 25,000 grant.
daVinci offers a range of services to early-stage startup, from corwoking space to business networking
Uruguay already complies with all the requirements to become an attractive startup hub.
It will take time before we can say if Uruguay’s strategy to develop the tech scene through the creation of an incubator ecosystem was a productive policy. There won’t be any success story coming from a uruguayan incubator before at least a year or two, at best. It is not clear anyway wether creating an incubator ecosystem is the best option to generate pro-innovation change. What is sure is it depends on many of the country’s features: its stage of developement regarding new technologies; its business culture; its general perception of innovation; the amount of people that can be regarded as early adopters; the constitution of the financial sphere (more private equity or more VCs?); the education in engineering schools; and so on.
Uruguay can already write “done” on most of this to-do-list items. It’s an open, stable, pro-business and pro-innovation environment, secondary education is widely spread (it is all paid by the State), and Uruguayans are used to test new technologic solutions. The incubator ecosystem may only be the missing link, the Uruguayan tech scene is likely to be a productive one in the following years.