Start-up Latin America

Promoting Innovation in the Region

The OECD Development Centre

Annalisa Primi
Economist, OECD Development Centre
annalisa.primi@oecd.org

Buenos Aires, October 7th , 2013

 Summary
I. Start-ups and the knowledge economy
II. Promoting start-ups (WHY? WHO? HOW?)
III.Some examples from OECD countries
IV. What is Latin America doing?
V. The policy mix for start-up promotion in
Argentina, Brazil, Chile, Colombia, Mexico,
Peru
VI. Policy Recommendations and Next steps
Start-ups and the knowledge economy

• A changing economic landscape (global

trends + LAC trends)
• A growing importance of innovation in
national development strategies
• A renewed discussion on the role of the
state in the economy (and its influences on
development policy)
Start-ups: WHAT ARE THEY?
 Start-ups: WHAT ARE THEY?

Different definitions, based on:

• Performance (high impact, high growth, gazelles)
• Innovative content (new solutions, new demand, new
business models)
We refer to the new technological or innovation-intensive
business for which support mechanisms are being designed in
Latin American countries

difficult to Challenges in designing

define targeted policies
 Promoting start-ups: WHY?
• Fostering structural change & enabling new
sources of growth
• Positive externalities (experimentation, learning
and knowledge flows)
• Competing globally in knowledge economy
• Creating synergies with new private sector
trends (ex. New forms of FDIs, open innovation
models, etc.)
• In certain cases, low-cost, high-impact actions
 Promoting start-ups: WHAT TO DO?

What role for public policies?

Shifting up gears

Learning,
Technology
Financing transfer &
entrepreneurial
capabilities
 Promoting start-ups: WHO?

Universities
National and Research
Governments Institutions Need for:
- Coordination
- Spaces for dialogue
-Good practice-sharing
Private-Sector
State and Local
Governments
 Promoting start-ups: HOW?

– Promotion of the science and tech base

– Promotion of cluster development INDIRECT
ACTIONS
– Promotion of soft&hard infrastructure
– ...

– Financing
– Business Services & Entrepreneurial TARGETED
Training ACTIONS

– Regulatory Framework
 Promoting start-ups: HOW?
Seed Capital Angel investors / Venture Capital
FINANCING
Networks

Business Incubators

BUSINESS Business Training

SERVICES AND Accelerators
ENTREPRENEURIAL Technology Transfers
TRAINING University Spin-offs
Corporate Spin-offs

Legislation
REGULATORY Fiscal incentives and
FRAMEWORK special taxes

SEED START-UP GROWTH EXPANSION

Source: Based on: OECD (2011a), Financing High-Growth Firms: The Role of Angel Investors, OECD, Paris; INNO-Grips
(2011), “Policies in support of high-growth innovative SMEs”, INNO-Grips Policy Brief, No. 2, June 2011; LAVCA
(2012), 2012 Scorecard: The Private Equity and Venture Capital Environment in Latin America, LAVCA, New York.
Some examples from OECD countries

• Australia
Incentives to push the
• Finland private sector until it
• Israel becomes autonomous
What is Latin America doing?
 Latin America is increasing its investments in
R&D but it is still far from the OECD average…

R&D investment in Latin America (% of GDP)

Source: Based on data from the United Nations Educational, Scientific and Cultural Organization (UNESCO), Red de
Indicadores de Ciencia y Tecnología Iberoamericana e Interamericana (RICYT), the OECD’s Main Science and
Technology Indicators (MSTI) database, Brazil’s Ministry of Science and Technology, Mexico’s National Institute of
Statistics and Geography (INEGI), Chile’s Ministry of Economy, Development and Tourism, the World Bank database,
and Cuba’s National Office for Statistics.
 …and private-sector commitment is still low

Private-sector investment in R&D

Israel

Finland

USA

Australia

Source: Based on data from UNESCO, Red de Indicadores de Ciencia y Tecnología Iberoamericana eInteramericana
(RICYT) and the OECD’s Main Science and Technology Indicators (MSTI) database.
 But despite this…the wind is (slowly changing) and
Start-ups are gaining momentum in Latin America
innovation strategies
Innovation policy evolution:
Combined
Linear
Linear supply supply and Towards a
Demand
model demand new model?
model
model

Variety in country approaches&strategies

Argentina => a strong science base
Brazil => “a big push”
Chile => the global orientation
Colombia and Peru => emerging efforts
Mexico => improving the regulatory framework
 What are L.A. countries doing to promote Start-ups?
Need to be created
Implemented In development Recently created
or reformed

Cat. Tool Argentina Brazil Chile Colombia Mexico Peru

Seed capital
Financing

Angel investors

Venture capital

Incubators
entrepreneurial training
Business services and

Accelerators

Corporate spin-offs
Technology transfer and
university spin-offs

Business training
Ease of founding or closing
framework
Regulatory

down businesses
Taxation and special
legislation

Note: This table is not meant to present an international classification. It is based on qualitative information gathered
in the country case studies in Chapters 4 to 9 of this report. The goal is to summarise visually the variety of tools
created to support innovative entrepreneurship and how developed they are in the countries in the region.
Source: Based on the country case studies in Chapters 4, 5, 6, 7, 8 and 9 of this document.
 Seed capital
Argentina,2012 Grants to FONSOFT
entrepreneurs Angel investors/ Venture capital
Empretecno Technology-Based Networks* PROFIET (MCyT)
Businesses (FONARSEC)
FINANCING Entrepreneurial Activity Support
(SePyME)

Technology transfers: Technology Platform Projects (FONCyT);

Non-Repayable R&D Grants (FONTAR)
University spin-offs: Science and Technology Research Start Up
Projects; Technology Platform Projects (FONCyT)
Corporate spin-offs: Public-Private Consortia (FONARSEC)

Business incubators
BUSINESS Results-based support system (federal Accelerators*
SERVICES and provincial)
AND
ENTREPRENEURIAL Business training
TRAINING Training Programme for Tech. Transfer
Managers and Specialists (FONARSEC)
Empretecno Project Flow Facilitators
(FONARSEC)
Highly Qualified Human Resources (FONTAR)
Entrepreneurship Learning Programme
(Ministry of Industry)

REGULATORY Fiscal incentives and special taxes

Tax incentive (one-year exemption) for investment in
FRAMEWORK tech start-ups (PROFIET programme, MCyT)

SEED START-UP GROWTH EXPANSION

Source: Based on official information from Argentina and interviews conducted in Argentina with experts and policy makers.
 Seed capital Angel investors/ Venture capital
Brazil,2012 PRIME Networks INOVAR Fund Incubator
INOVAR Semente (FINEP) INOVAR Semente (FINEP) (FINEP)
Criatec (BNDES) Criatec (BNDES) CRIATEC + CRIATEC II
Juro Zero (SDS/BADESC) Funds (BNDES)
FINANCING BNDESPAR emerging
enterprises capitalisation
Start-up Brasil Programme (BNDES)
(MCTI, in collaboration with private accelerators)

Business incubators Accelerators

PNI (MCTI-FINEP) CRIATEC (BNDES)

Business training
BUSINESS FINEP forums for seed and venture
SERVICES capital and for business start-up
AND SEBRAE SENAI system
ENTREPRENEURIAL Technology transfers
TRAINING SIBRATEC innovation centres network (FINEP)
University spin-offs: No information
Corporate spin-offs: No information

Legislation to start businesses; institutional conditions to foster stock-exchange

listing; M&A; long amount of time needed to start and close a business

Fiscal incent. and special taxes

REGULATORY For foreign investors (no tax on
FRAMEWORK financial operations); Supersimples
Programme (Ministry of Finance)

SEED START-UP GROWTH EXPANSION

Source: Prepared by the authors, based on: OECD (2011), Financing High-Growth Firms: The Role of Angel Investors, OECD, Paris; INNO-Grips (2011),
“Policies in support of high-growth innovative SMEs”, INNO-Grips Policy Brief No. 2, June; LAVCA (2012), 2012 Scorecard: The Private Equity and
Venture Capital Environment in Latin America, among others.
 Seed capital Angel investors/ Venture capital
Chile,2012 Flexible Seed Grant (SSAF) Networks Long-term loans to
(CORFO) investment funds for early
stages and expansion
(CORFO)
FINANCING
Start-up Chile Chile Global Connection
(Innova-Chile-CORFO) (CORFO)

Business incubators Accelerators

(InnovaChile-CORFO) Contact-Chile (Pro-Chile-CORFO)

Business training
Entrepreneur Environment Support
Programme (PAE) (InnovaChile-CORFO)
BUSINESS
SERVICES Technology transfer: Technological Packaging (InnovaChile-
AND CORFO)
ENTREPRENEURIAL University spin-offs: Go To Market (InnovaChile-CORFO);
TRAINING Commercial Exploitation of University; Research (VIU)
(CONICYT)
Corporate spin-offs: Innovation Management programme
(InnovaChile-CORFO)

Legislation: New law (2011) reduces business start-up time from 22 to 7 days, but closing a
business still takes a long time
REGULATORY Fiscal incentives and special taxes
FRAMEWORK More flexible legislation for
company R&D

SEED START-UP GROWTH EXPANSION

Source: Based on official information from Chile and interviews conducted in Chile with experts and policy makers.
 Angel investors/
Colombia,2012 Seed capital Networks
Venture capital Private
Enterprise Fund MIF-IDB equity
Multilateral Investment
(SENA) Investment Fund Bancóldex
Fund of the Inter-
Project Capital
American Development
FINANCING MIF-IDB Bancóldex
Bank (MIF-IDB) Bavaria
project
project

iNNpulsa: Innovative Dynamic Entrepreneurship

Business incubators Accelerators

Incubation Programme (SENA) No information

BUSINESS
Business training
SERVICES
SENA. Example: Bogotá Emprende
AND
ENTREPRENEURIAL
Technology transfer: No information
TRAINING
University spin-offs: No information
Corporate spin-offs: iNNpulsa Entrepreneurship and
Innovation in Large Companies

Legislation: Decree 2555-2010 for setting up funds; Law 1014-2006 for promoting an
entrepreneurial culture; Law 1429-2010 for formally registering a business and hiring staff
REGULATORY
FRAMEWORK Fiscal incentives and special taxes
No information

SEED START-UP GROWTH EXPANSION

Source: Based on: OECD (2011), Financing High-Growth Firms: The Role of Angel Investors, OECD, Paris; INNO-Grips (2011), “Policies in Support of
High-Growth Innovative SMEs”, INNO-Grips Policy Brief, No. 2, June 2011; LAVCA (Latin American Private Equity & Venture Capital Association) (2012),
2012 Scorecard: The Private Equity and Venture Capital Environment in Latin America, LAVCA, New York, among other documents..
Mexico,2012 Seed capital Venture capital
FINNOVA Angel investors/ Enterprise Capital Fund
México Emprende Networks (NAFIN)
AVANCE ntrepreneurs IDB Project Technology Innovation Fund
FINANCING fund (discontinued) Angel Ventures México Innovation Stimuli Programme
Startup Factory (PEI)
Gazelle SME Fund

Business incubators Accelerators

National Business Incubation System TECHBA (Advanced manufacturing,
Network of Technological University ICTs, life sciences)
Incubators
BUSINESS
Business training
SERVICES
AVANCE Business School (discontinued)
AND ADIAT*
ENTREPRENEURIAL FIT Modality c, FINNOVA
TRAINING FUMEC

Technology transfer: FINNOVA

University spin-offs: No information
Corporate spin-offs: No information

Legislation: Major reforms have significantly reduced administrative and regulatory

restrictions on starting and expanding companies in Mexico
REGULATORY
FRAMEWORK Fiscal incentives and special taxes
No information

SEED START-UP GROWTH EXPANSION

Source: Based on LAVCA (2012), 2012 Scorecard: The Private Equity and Venture Capital Environment in Latin America, LAVCA, New York;
OECD (2012), Evaluation of the Mexican Knowledge-based Start-up Sector Diagnosis and Policy Recommendations, OECD, Paris.
 Peru,2012
Seed capital Angel investors/
Venture capital
No support to date Networks
*Trans-Andean Fund Peru
* Peru Capital Network
FINANCING *Enterprise Capital Fund
* Business Angels Club
*Latam Peru Fund
*Wayra Telefónica of Peru

Startup Perú (launched in 2013)

Business incubators
New Business Initiatives (PRODUCE) Accelerators
BUSINESS
Vamos Perú (Ministry of Labour) No direct support
SERVICES
Business Development Centre mechanisms exist
AND
(COFIDE)
ENTREPRENEURIAL
TRAINING
Technology transfer
University spin-offs
Corporate spin-offs
No support available

REGULATORY Fiscal incentives and special taxes

FRAMEWORK Tax incentive available for R&D business
activities (from 2013)

SEED START-UP GROWTH EXPANSION

Source: Based on LAVCA (2012), 2012 Scorecard: The Private Equity and Venture Capital Environment in Latin America, LAVCA, New York;
OECD (2012), Evaluation of the Mexican Knowledge-based Start-up Sector Diagnosis and Policy Recommendations, OECD, Paris.
 Policy Recommendations
Improving strategic planning
Ensuring the availability of a balanced policy mix targeted to the
different development stages of star-ups
Designing and implementing more sophisticated policy tools in line
with the emerging global trends:
Update the legal framework
Identify opportunities to promote business angels investments
Invest in promoting the development of an entrepreneurial culture
Introduce performance-based management in intermediary
agencies like incubators, accelerators
Design more integrated tools that combine finance options with
advisory and entrepreneurial skills development services
Take advantage of emerging private sector open innovation
strategies , corporate venture capital and knowledge-sharing
practices
Evaluate programs and adjusting incentive schemes based on
performances
 Next Steps
• Can we better understand the role of big
companies in enabling the development of
start-up hubs?
• Can we assess the impact of new open
innovation strategies in contributing to
innovation and productivity gains in Latin
America?
• Can we map the profile of “start-uppers” in
Latin America?
annalisa.primi@oecd.org