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Foreign venture capital arrives in Chile to invest in new start-ups

19 April 2013

(CORFO) In recent months, six new venture capital funds, including three formed with foreign capital, have been approved in Chile, which will invest US$ 159 million in new start-ups. Of this amount, US$90 million is contributed by CORFO, the Chilean Economic Development Agency.

The maturation of a series of initiatives designed to support entrepreneurship and innovation, together with new programs such as CORFO’s Start-Up Chile initiative, have contributed to positioning Chile on the global map for entrepreneurship and venture capital, making the country an attractive destination for international players in the industry.

In the first months of 2013, CORFO has committed US$ 90 million to venture capital investments, notably exceeding funds invested in the industry last year.

In recent months, CORFO has approved 6 new investment funds , of which three are formed with foreign capital, marking a milestone for the local industry. These three funds (NXTP Labs, Amérigo Chile and Ecus Agri-Food) will invest close to US$67 million in new local start-ups, of which US$40 million will be provided by CORFO and US$27 million by private investors.

These foreign venture capital funds will be accompanied by three national funds, Waste to Energy, Minería Activa III and Genesis Ventures.

“The involvement of foreign venture capital funds is new in Chile, and is an example of how efforts to make Chile a hub of entrepreneurship and innovation are bearing fruit,” said CORFO’s Executive Vice-President, Hernán Cheyre.

Another important factor is that four of the approved funds’ managers are new, which will create dynamism in the local industry. “This initiative attracts new actors to the development of Chile’s Venture Capital industry, allowing Chilean businesses to not only access financing, but also new know-how, skills and international networks,” said CORFO’s Deputy Manager of Investment and Financing, Nicolás Sorensen.

Changes in the industry
Between 1999 and 2010, CORFO approved 30 investment funds and credit lines amounting to US$450 million. However, approximately 75% of the investments made were concentrated in private equity companies, which are established and consolidated businesses.

For this reason, last year CORFO inaugurated new Venture Capital programs with a focus on financing business in early and growth stages, as opposed to fully developed companies. The goal of these programs is to spur venture capital or financing of new start-ups and other new companies in Chile, in particular companies with high growth potential and higher levels of risk, and that additionally require the technical and operational support of a strategic partner.

Since the debut of these changes in CORFO’s Venture Capital programs, 30 funds have expressed interest in participating. Six of these have now been approved.

These results confirm the findings of international studies by organizations including GEM, OECD, World Economic Forum and LAVCA, which place Chile in first place in Latin America in terms of its venture capital industry.