final ppt mp_04.10.15_felipe_magofke_slideshare
TRANSCRIPT
MP Committee:
Rosemary Fernholz, Ph.D I Fernando Fernholz, Ph.D I Francis Lethem, Ph.D
Felipe Magofke April 10, 2015
2
Master’s Project
Fostering Innovation in Chile: Challenges in “Start-Up” to “Build-Up” Entrepreneurship
RESEARCH FOR MASTER PROJECT: A GREAT JOURNEY!
CLIENT: CORFO (Vice. President Eduardo Bitran)
PROCESS MASTER PROJECT: More than 10 experts interviews 3 entrepreneurs surveys 3 workshops + 3 books More than 50 papers
PERSONAL EXPERIENCE: Working at the Ministry of
Economics and World Bank4
“The Production Development Corporation”, main agency of entrepreneurship and Innovation in Chile
INNOVATION+ACTION=START-UP TO BUILD -UP“The pure new idea is not adequate by itself to lead to implementation..... It
must be taken up by a strong character (entrepreneur) and implemented through his influence.” (Joseph A. Schumpeter)
• Small enterprises are more likely to innovate and face higher risk
• Ideas or inventions need to be translated into start-up businesses that build-up to continue and grow
5
Chile’s history of innovation highlights four main natural-resource based industries
OTHERCOPPER FISHERYFORESTRY
50%
#1 world producer
38% world’s reserves
Main export: raw
copper
Started 1820
#2 world’s producer of
salmon
40% world prod,
Start in 1973
10% 5% 35%
#10 world producer
75% subsidy
Exports start: 1974
Wine #5
Fruits
Other
CHILE IS KNOWN FOR INNOVATION IN SUCCESSFUL INDUSTRIES
Source: Pro Chile 2013 6
EXPORTS
SAMPLE: FISHERY INDUSTRY EXPERIENCE
0
1000000
2000000
3000000
4000000
5000000
6000000
7000000
8000000
9000000
1950 1960 1970 1980 1990 2000 2010 2020
Ton
s
YearsTOTAL FISH
1950’s to 1970’sDevelopment of the industry[growth in export sales, marketing network, ‘brand’ and standards]
1990s to 2010Decline due to overfishingExports a share of total exports ($ ) below 6% in 2012
Source: V. Toledo 2013
1970’s to 1990’s Rapid expansionExports as share of total exports ($) reaching 11% in 1999
7
(total Fish Landing Tons)
POLICY CHALLENGE:
What policies could the Chilean Government design to ensure leadership in innovation and strengthen “start-up” to
“build-up” entrepreneurship?8
1. Background: Chile and Corfo
2. Ecosystem for entrepreneurs and innovation in Chile
i. Entrepreneurship Profile
ii. Ecosystem
iii. Current Government Approaches
3. Chilean Challenges: Innovation and Entrepreneurship
4. Analysis
5. Proposal for Start-Up to Build-Up
6. Implementation Strategy
Fostering Innovation in Chile: Challenges in Start-Up to Build-Up Entrepreneurship
9
1.5%1.0%
2.4%
1.9%2.5%
2.6%
2.9%
0.2%
0.7%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
1985-1997 1998-2009 2010-2012
GD
P G
row
thTFP
Capital
Labor
Source: Ministry of Treasury, Central Bank of Chile10
9%20%
31%
50%
25%
26%35%
4%
2009 2012
Large: +$5 millionMedium: $1 – $5 millionSmall: $150,000 – $1 millionMicro: $1 – $150,000
Source: Corfo12
98.69%
15.36%
48.56%37.45%
1.31%
84.64%
51.44%62.55%
0.00%10.00%20.00%30.00%40.00%50.00%60.00%70.00%80.00%90.00%
100.00%
N° ofcompanies
Total sales N° ofdependent
workers
Wagesdependent
workers(miles de UF)
SMB Large
Composition of Companies, sales, jobs, wages (2014)
0
20,000
40,000
60,000
80,000
0.00
1.00
2.00
3.00
4.00
5.00
6.00
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
Nu
mb
er o
f co
mp
anie
s p
er y
ear
New
Den
sity
Year
New Density New Firms
Density and number of new companies (2004-2012)
2.1. ENTREPRENEURSHIP PROFILE: MANY NEW COMPANIES, LOW PERCENT AND SALES OF SMEs
Source: SII
Source: World Bank
13
2.1. WHERE ARE THEIR BUSINESS?
RM (Capital), 35%
Center South, 32%
South, 20%
North, 13%
70% concentrated in the Central (around the Capital) region
Source: Ministry of Economics14
2.1 PROFILE OF THE CHILEAN ENTREPRENEURS AND THEIR ENTERPRISES (>70,000 IN 2012): HALF ARE NOT REGISTERED
31%%
369%
%
34-55 age (48%)
1,730,000 Entrepreneurs 49% are FormalMostly family-owned or not incorporated (80%)
28.4
53.7
14.5
3.4
0
10
20
30
40
50
60
%
38.8
24.1
37.1
0
10
20
30
40
50
Too small Don't findbenefits
Cost anddifficulties
%
51% Informal;(no official registration)
60% say that cost/difficulty of registering is higher than benefits
Source: Ministry of Economics
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3. COMPANIES THAT FORMALLY REGISTER DO NOT ALWAYS START OPERATING
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
2006 2007 2008 2009 2010 2011 2012 2013
Nu
mb
er o
f co
mp
anie
s
New companies Companies starting operations
Companies out of business Net creationSource: SII I Felipe Magofke
16
3. LACK OF COLLABORATION AMONG COMPANIES
Companies Collaboration
No, 92.7
Yes, 7.3
Source: Ministry of Economics
17
3. R & D INVESTMENT IN CHILE IS CURRENTLY LOW
0.42
3.97
2.76
Chile Israel United States
Low % GDP Invested in R&D (2010)
Source: Ministry of Economics 18
Ecosystem for entrepreneurs and innovation in Chile: expert opinion (survey feedback) shows weaknesses such as R&D, education and financial support
Source: Global Entrepreneurship Monitor 2013
145
11
75
84
0 50 100 150 200
Yes, vigorously
Yes, but in the process ofshutting it down.
Yes, but with troubles.
No
Number of Companies
Are you still working primarily at this startup?
Why are you not working at your startup anymore?
23
25
7
10
8
0 5 10 15 20 25 30
I am keeping it on stand-by for now
I closed it
I merged it with another company
I retain ownership but someoneelse is in charge of it now
I sold my shares
Number of Companies
3. EXPERIENCE OF THE START-UP PROGRAM (2010-2013)
Source: Start-Up Chile 2013 I Felipe Magofke 19
1. Difficulties experienced (50% or above)2. Most leave Chile (75%)
Fostering Innovation in Chile: Challenges in Start-Up to Build-Up Entrepreneurship
4. INNOVATION SYSTEM LACKS SUPPORT FOR LOCAL ENTREPRENEURSHIP
Few Build-Up = Few companies start or move up from small to large. Lack of M&E
Source: Felipe Magofke
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SUPPORT SYSTEM
Fostering Innovation in Chile: Challenges in Start-Up to Build-Up Entrepreneurship
4. LOW RESPONSE FROM ENTREPRENEURS
Valley of Death
Rev
enu
e
Break even
• 70% own pocket • 10% FFF• 10% Bank• 10% Public
grants
• Low transition from S to M – L
• Most Start-up leave the country
• Just 15% of the sales
• Not enough $ support
• Few IPO• Few M&A
51% Informal
28.4
53.7
14.5
3.4
0
10
20
30
40
50
60
%
Source: Felipe Magofke
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4. ENTREPRENEURS AND INNOVATION ECOSYSTEM IN CHILE: SWOT ANALYSIS
Solid, stable macroeconomic Good Governance
Financial Support (VC, R&D) Low Collaboration among
stakeholders (Academia, peers, etc.)
Low Education and Human Capital Measuring and tracking success Centralization
Become the Entrepreneurship and Innovation hub for LA
Foreign Networking through start-up Chile (exports)
Depreciation of local currency Latin American trap Others countries taking the lead Corruption among politician and
business (last couple of months) Natural disasters (Currently in the
North)
Inte
rnal
Ori
gin
Exte
rnal
Ori
gin
Helpful Harmful
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4. LESSONS FROM ISRAEL AND US
Entrepreneurial culture and the mindset of people
Access to international financial markets and networks contribute to commercialization of research
A unique central government body for industrial R&D and innovation (Office of the Chief Scientist)
Small Business Innovation Research (SBIR)
Ecosystems and cluster models (Silicon Valley, Boston, Triangle, etc)
Advanced Technology ProgramStrong linkage with
universities and research
Source: World Bank & Charles W. Wessner23
GOAL SHORT TERM MEDIUM AND LONG TERM
Research & Development Expand R&D: e.g. Small Business Innovation Research (SBIR)
Increase the investment in R&D by 30% each year until reach 2% of the GDP
Culture and Ecosystem Implement the week of Innovation and Entrepreneurship for each School in the country
Add to the requirement of “Becas Chile” to join teams of innovation or mentor entrepreneurs
Collaboration Create a committee in each macro zones to design cluster by region
Partnership with private sector and academia to launch 5 innovation labs
Measures and Evaluation Create an Ecosystem Map Promote accountability for each
program
Create a platform to evaluate impact, as well as, track projects’ performance (MIT)
Linkage with other agencies and SII
Incentives Launch a grant that promote association among SME, Academia and Large Companies
Implement the Innovation and Entrepreneurship award by region
Develop a new proposal law for Venture Capital
5. PROPOSAL: MOVING FROM START-UP TO BUILD-UP
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6. STRATEGY OF IMPLEMENTATION
Big Announcement for the National Entrepreneurship Day (April 29th)
Lab of Innovation
around Competitive
Adv.
VC incentives, tax,
subsidiaries
Set a coordinate
plan with the Innovation
Commission
Collaboration Universities,
Private Sector, etc.
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