We tried that in Quebec during the mid-90's. The goal was to create a Silicon Valley in Montreal. Then other regions got upset and it was made province-wide.
Then non-technology entrepreneurs got upset and the definition of "technology" was enlarged to include anything that had a web site.
Then the money dried up and we still don't have more world-class technology companies than before.
The morale of the story: Silicon Valley is what it is because there is a critical mass of venture capital and world class universities within a small region. That's not something that's easy to replicate in 40K increments.
The false assumption you're making is that the ambition of the program is to replicate the success of Silicon Valley or that anything short of that is not worthwhile.
Chile wins if this program generates positive ROI on the investment, even if it generates only 1% of success of Silicon Valley.
Economic stimulation, if done properly, works. I find it amazing that a government initiative makes so much sense and is executed, as far as I can tell, so well, so big props to Chilean government for doing that.
Given the number of times I've heard the Chilean government talk about establishing a Chilean "Silicon Valley", I think we can all safely assume that's more or less what they're trying to do.
As someone who has been living and working in Chile for more than 10 years now, I'm not at all surprised to see them throw money at the issue yet again, instead of working on changing the way things work. But I've already talked about that stuff before: http://news.ycombinator.com/item?id=2068429
> What's the point in creating "Silicon Valleys" everywhere anyway?
The idea is that if you have a lot of businesses near to each other in the same business sector, you can get synergy between them. the whole is greatrer than the sum of the parts.
I'm in Santiago now and can confirm this an amazing program. There are some great companies down here and the application process is only getting more competitive as more people find out about it.
March 15th is the last day to submit applications for this round, so don't put off applying if you're at all interested. Stay up late and get your proposal finished.
The U.S. budget for 2011 is $3,690,000,000,000. Can we spare just a sliver of that for innovation and job creation?
Imagine a national contest, YC-ish if you will. 500 businesses walk away with $100K each. That costs just $50M.
What would you get in return? You'd get tens of thousands of people racking their brains and being brave and innovating. Even if they weren't chosen, many of them would have a solid plan and go for it.
If we really believe that creating new jobs is our top national priority, then we need to find new ways to create new jobs. After all, that's where 80% of jobs come from: new companies.
I can already imagine some of my friends screaming: "You Socialist bastard!". No.
It could be done to reward merit, and it would provide critical support to promising startups right when they need it most. This is not about handouts- its about rewarding and encouraging innovation and supporting job growth.
This actually is a socialist suggestion. I do not like government handouts.
What I would support is tax credit: if you feel like doing a startup, under some rules, the government could give you a $100k tax credit.
Giving away $100k for people to put businesses into the ground doesn't seem smart to me. Otoh, each business is supposed to make money and if you don't become profitable, might as well shut down.
The U.S. gives out billions of dollars every year to all kinds of businesses. If having an open competition to win grants is socialist, then we're already a socialist country.
In any case, attacking this as a "socialist" idea is an ad hominem attack. Not that its the best idea ever, but calling it "socialist" doesn't detract from the merits of it one way or the other.
The OP said he likes something and perhaps it looks like something socialist, I've answered saying that that is socialist and that I do not like it and that I would support something else.
I don't see it as an ad hominem, nor was it intended. Just two disagreeing opinions.
Actually, this is just a recent annoyance of mine. In my country (Romania) the government just released something like this: they are giving away 10.000 eur to new companies started by young people, based on some form of contest (they read a business plan, etc).
This annoys me for multiple reasons, but one if very personal: I am disqualified from that contest because I already have a company. So I am literally paying taxes that are wasted so another guy gets free money from the government based on how good he is at writing business plans (or bribing).
What they could have done instead is say: all companies with young owners get a 10.000 eur tax deduction (maybe, for example, if they create one extra workplace). This way, you have to actually prove that your company is profitable, not that you are good at writing business plans.
I see how you're upset that "your" tax money is being given to someone else to start a business, but its probably worth noting that only some excrutiatingly small % of your taxes are going to this.
I think that other governments can and should learn from experiments like the one in Romania. But from a policy perspective, it seems like a somewhat reasonable way to spur new company creation.
Apple was founded with the proceeds from selling a VW bus and an HP calculator. Maybe with inflation that's $20k in today's dollars. And they were building hardware.
If anything the cost of doing significant startups in the intervening years has declined, certainly for software, but also for hardware too. Apple had to build their own factories, even after they got venture funding. Now nobodies can hire factories on demand for your hardware.
$100k in the right hands would do a hell of a lot. However, the government isn't usually the best at determining the right hands.
I don't think US would need any such contest to attract talent - all the gov needs to do is allowing people to open businesses there and be granted a visa. I'm pretty sure a lot more than 500 companies would apply in a matter of seconds (mine included)
I think this is an area where the government should mostly help by 1) getting out of the way 2) funding basic research and education, and 3) fixing the health care fuckup so that it's not absolutely insane for many people to leave the protective cover of the health insurance they get at a big company. Trying to spend 100K at a time is probably not going to do much in the long term.
Hacker Dojo work has caused me to run into a number of governments / entities with money trying to do things like this by either directly handing out cash or handing out goodies and tax breaks. One of the oddest/largest is in Vietnam http://www.quangtrungsoft.com.vn/
This doesn't prove it's a good idea, but it does help to realize that there are enough of these programs going that they can at least learn from each other's mistakes.
I mentioned my possible intentions to apply for this to my Spanish teacher one day, yet she cautioned me saying Chile like many South American countries is quite racist towards blacks and that I should consider somewhere like Brazil instead if I was still interested in the region, since it is much more welcoming and less prejudiced than somewhere like Chile.
Curious what those actually living in or from the region perceive as to the racial climate there in Chile and Sourh America in general.
I've lived in Chile 8 years and haven't seen any racism first hand. I see it all the time in Michigan even within my own family. The racism that does exist is concentrated towards Peruvian immigrants and Mapuche.
The much larger problems are class and sex discrimination. There is definitely a "nanny" class that the middle/upper income people view differently and vice versa. You would be largely exempt from this as a foreigner and would have no problems interacting with both groups. For women, the sexism is an obstacle although not a huge one. Offhand I can think of five female entrepreneurs I know personally in the tourism industry. They are from Chile, Cuba, Austria, US, and Argentina.
Chileans are overall very respectful of foreigners. They are self conscious due to Chile's small population and are open with foreigners and appreciate what they bring to the table.
There are very few black people. I have talked to a few that are US basketball players on contract to local teams for a year or two. They generally seem to enjoy the experience. Brazil has more blacks but it also has more corruption, more crime, and a higher cost of living.
Whatever you decide, I highly recommend living abroad as there are few better learning experiences.
This is also my perception of Chile (and my prejudice extends it to most Latin America); rather than racism there's a lot of classism and looking at external appearances (dressing well, kids going to private or public school etc). If someone's black they'll be classified more according to being a 'professional foreigner' or a 'poor immigrant'.
Argentina is incredibly racist, although it was not immediately obvious to me as a white guy. I don't know how racist Chile is. Brazil is the least racist place I've ever been.
I'm inclined to say the same about Argentina and Uruguay, where I've traveled a few times, but not lived. I've also been to Brazil, and can tell you people of darker skin are quite the norm, as in the caribbean like Venezuela, though I wouldn't recommend going there for other reasons.
I don't think south america is any more racist than any developed country at all. We have a lot of black people in important positions (specially in brazil/venezuela/uruguay, where there are a lot of artists, sports people and politicians). There are, though, a bit more poor black people than poor whites, which kind of "justifies" the prejudice in some regions (mostly south of brazil). It's important to notice that racism is A LOT more common with indian-descendants and people from poorer regions (mainly north and northeast) than black people.
disclaimer: I've never been to Chile, so I'm not sure if any of this applies there...
From what I understood from my teacher, mostly southern region of South America (Argentina, Chile) is heavily prejudiced against blacks and indigenous peoples.
It's a government program, so there are some less agile/more bureaucratic, for instance "Upload complete passports: Make sure that Number, Nationality, Gender, Picture, Date of Birth, Residency are legible. You must scan all pages." instead of YC-style questions.
I've never been to Chile, and I don't think my company is technically a startup anymore (otherwise I'd apply), but I highly encourage anyone who's even remotely considering this to apply.
The cash isn't the important part, in my mind; it's the experience of living in a very different culture and part of the world for a year, with more or less a full safety net. The amount of entrepreneurial good that could be done for the world if Americans--with their can-do spirit and work ethic--were more aware of the people outside their borders would be staggering. And I'm not saying that in a derogatory way, just that with a country as big as the States, it's often hard for Silicon Valley to give some thought to the business-solvable problems people have in New York, let alone Tierra del Fuego.
I think they got scared by what my product was about to do (self-healing computer networks, which would undermine their nascent IT industry). It's sitting on the backburner for now while I am working on something a bit less threatening to properly fund the main product.
It's a manipulative take on this that tries to appeal to (irrational) emotion and not rational analysis.
We pay taxes and that's not going to change.
This money goes to government which then allocates in various ways to provide services to people of the country.
Part of this money can be thought of as an investment i.e. government spends money (e.g. on infrastructure like building roads) in hopes that this will generate more economic activity which will enrich the country as a whole.
The only important question is: is this program a better investment that others?
That is hard to tell, but at least to me it appears to be a great one. The cost (on the scale that governments operate) is puny and potential upside (companies that keep operating in Chile, hire Chilean people, pay Chilean taxes) huge.
That sounds like a good bargain. Each startup only needs to create 8 jobs for a year (or 4 for 2 years, or 0.8 for 10 years) in order to pay it back. Right?
Sounds more like forced labor to me. If this money was returned to those taxpayers, there would be more resources for the private Chilean economy to create jobs.
He's saying the market is better than allocating money than government.
If the politicians and bureaucrats are so good at investing, why don't they do it privately instead of working for the government?
You are assuming that government is better at allocating resources than the market. If the government is better at investing than private capital, why even have a market economy? Why not have a command economy like in the Soviet Union?
The average Chilean would spend his money as he pleased, which would go to businesses that are satisfying a real demand, rather than something a bureaucrat guesses might fulfill a demand.
~40 people work at Airbnb. And a ton of others make money renting their place, or save money when traveling. Massive, massive value creation there in addition to the jobs.
Airbnb is a great company (I'm a user and like it a lot) but not a typical web startup. Take all YC startups and divide by number of employees, what's the average?
The conditions of the grants are that they create local jobs I believe. So 2,344 Chileans will create at least 300 jobs for 300 fellow Chileans. I wouldn't say those tax payers are "wasting" 40% of their working lives, but you are entitled to your opinion on this. I think its a smart and cheap move to get their entrepreneurial community rolling. All net jobs in the US over the last 30 years have come from startups/small businesses.
There's actually no requirement to hire locally, but the parent poster is wrong for a number of reasons.
First because some companies are already generating revenues and spending that cash locally. Add those inflows to the matching funds participants are expected to provide (most end up spending more) and it's clear Chile's exposure per startup is lot less than $40,000. And that's without considering the multiplier effect all this spending has on the local economy.
How the exact numbers run will depend on how they pick the teams, but I'm guessing that if two to three percent of the participants take investment or stay on permanently the program will be a net plus. Which makes it an income transfer if it works - but one from other parts of the world to Chile. And it's a good deal for entrepreneurs too so what is not to love?
Someone on the program now came to our Dublin OpenCoffee meetup last week to talk about it.
He said that due to the cost of living, he was able to employ some very smart individuals who he wouldn't be able to afford to pay if he lived, say, here in Ireland. And mentioned that other startups were doing the same.
So even if it's not a requirement it happily happens anyway due to economics/cost-of-living/etc which sounds great.
Actually the government is displacing whatever private venture market exists in Chile. If there is a lack of venture capital in Chile, the government should address the taxes and regulations that are stifling startup activity.
The Chilean government is actively facilitating the growth of private venture markets by reducing taxes on venture gains to a point far below those in the United States. Part of the point of this program is attracting high growth businesses into an environment where local financial networks can invest at their own risk and connect with networks outside Chile.
If you believe in markets you should realize the Chilean government is doing something innovative and pro-entrepreneur at very low initial cost and likely negative cost in aggregate. I'd put it in the same boat as the matching funds programs run by Hong Kong and Singapore, with the major difference that the individual sums invested are much smaller and there is less bureaucracy involved.
That's just stupid. It implies that none of these startups will pay back a single penny in taxes. You might as well argue that the Chilean state shouldn't pay for education or roads or whatever.
If even one of these startups is really successful, it will pay for the programme on its own.
Pretty good, and getting better all the time. I'm not sure about the prices and speeds, but can tell you telecoms here sometimes feature P2P capabilities on ads.
Then non-technology entrepreneurs got upset and the definition of "technology" was enlarged to include anything that had a web site.
Then the money dried up and we still don't have more world-class technology companies than before.
The morale of the story: Silicon Valley is what it is because there is a critical mass of venture capital and world class universities within a small region. That's not something that's easy to replicate in 40K increments.