Carlos S. Baradello

Reflecting on the optimal time for foreign start-up’s to come to Silicon Valley

If the world were truly flat, many innovation centers would already be developed around the globe and each one would be distinguished by a unique competitive advantage given its location, industry addressed, type of venture, participants, level of funding available, government incentives, connection to trading partners, market access, etc. However, this Global Valley is still a work in progress. In the meantime, high potential entrepreneurs with fast growing ventures are probably well advised to test their mettle in the “World Olympics of Entrepreneurship” and come to Silicon Valley (SV)[1]. I am reminded of Frank Sinatra’s song, New York, New York, only exchanging SV instead of the Big Apple.

Former USA president John F. Kennedy in his visionary Man-to-the-Moon speech at Rice University Stadium (Houston, September 12, 1962 – (http://www.youtube.com/watch?v=kwFvJog2dMw ), also glorified the idea of striving for seemingly unattainable goals—emphasizing that this was intrinsically valuable, not foolish:

“…But why, some say, the moon? Why choose this as our goal? And they may well ask why climb the highest mountains? Why, 35 years ago, fly the Atlantic?…We choose to go to the moon in this decade… not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win…”

Coming to Silicon Valley is a decision that cannot be taken lightly. This is a great challenge that will require many sacrifices for entrepreneurs (and their families), as they parachute into a foreign territory with different customs.  They  will be pushed to compete and perform at the highest level, in a different language, surrounded by some of the smartest innovators on the planet, and challenged by very sophisticated investors and experienced partners. To commit to Silicon Valley means that the entrepreneur will have to invest months and possibly years, spending tens of thousands of dollars just in living expenses, and for what purpose? This is a question that requires a thorough answer.

Often successful entrepreneurs bring their start-ups to Silicon Valley to benefit from the extraordinary resources of this leading ecosystem.

My personal experiences, and those of my colleagues—suggests that less than 10% of those foreign entrepreneurs arriving here are prepared to perform and take advantage from the Valley resources upon arrival. Over half of the remainder, 90+%, has no business of coming here other than for techno-touristic reasons. The rest have probably arrived prematurely, as they have not yet prepared for this challenge.

But as with any successful journey, it is best if started with the end in mind. So why come to the San Francisco Bay Area? In short, the answer is to play with and learn from the masters. Specifically, the foreign entrepreneurs will benefit because of the opportunity:

• To share experiences, compare and learn from others,
• To practice pitching in a variety of forums and receive feedback,
• To explore potential clients and channel partners,
• To find technology partners and identify the technology trends,
• To learn about different business models and market trends,
• To meet investors: angels and VCs,
• To find mentors and advisors,
• To obtain legal, financial or management guidance,
• To explore partnerships with established or young ventures,
• etc.

Contrary to conventional wisdom, obtaining funding is just one of the (many) reasons to come to the Bay Area and the one least likely to provide positive outcomes. Hence, if this is the primary motive of your visit, it is probable that you will be disappointed. What is really important is the concentration and density of all these actors, who are often only a short drive across town away, or in the same neighborhood, or even the same building! Furthermore, referrals are extraordinarily easy to obtain and most entrepreneurs here will give you thoughtful recommendations based on your venture’s needs. Therefore, all you have to do is ask and explain your needs based on the state-of-development for your venture. In other words, just a different type of pitching focused on networking.

Some of the main reasons why a large number of start-ups are ill advised to come are:

1. The value proposition does not apply outside the home country/region where the entrepreneur lives and/or the local market where the venture was originally conceived (i.e. a unique market friction, regulatory mandate, etc.),
2. The business concept and/or technology are still immature or not proven,
3. The venture has not received funding from local angels/VCs,
4. No demonstrable business traction in the local/regional market,
5. The entrepreneur(s) do not speak English or they are highly uncomfortable outside their own home environment,
6. The entrepreneur is secretive or unable to engage in win/win relationships,
7. Insufficient funds to cover living expenses beyond a couple of weeks,
8. And many others,

For entrepreneurs that are in this category, there is nothing wrong with coming to the Bay Area for techno-touristic reasons. Typically a one/two-week visit, if well planned, can provide a “taste-of-the-valley,” allowing entrepreneurs to attend lectures, networking events, visit some of the co-working spaces, meet with other members of his/her own diaspora, etc. Some organizations and institutions offer a variety of programs of varying lengths, prices and characteristics, similar to the immersion programs I created at the University of San Francisco. An experience of this sort, all costs included, ranges from $3K to $10K US dollars for a 1 to 2 week visit, depending on many factors, in particular whether you decide to rely on an organization to plan your trip for you or make the arrangements yourself. Guess which one I would recommend? As a touristic experience you will be visiting one of the places ranked in the top ten spots in the world and likely will not disappoint you.

Some entrepreneurs rush to come to San Francisco. Even if their young venture presents enormous potential, it is often advised to delay coming to SV until such a time when a number of conditions are met to maximize the venture’s chances of success as well minimize the cost and time invested. Below I have outlined some of the key reasons why many start-ups come here prematurely:

The true benefits/opportunities that result from becoming a part of the SV ecosystem are:

1. Access to the latest innovations and technologies and, more importantly, the talent behind these.
2. Experience in connecting these innovations to markets and customers
3. Being able to explore the “right” business model(s) to maximize the short, medium and long-term value creation of your young venture.
4. Access to funding: Angels and VCs
5. Becoming part of the global conversation by just being here: “…In 2011, nearly two thirds of Silicon Valley professionals with higher education  working in the science and engineering fields were born outside of the United States…” from the 2013 Silicon Valley Index
6. The “address benefit”. While some clients would be concerned with purchasing products or services from a young company located in Lima, Peru; a San Francisco or Palo Alto address can make the difference!
7. And more!…

In any case, before coming to SV, make sure your pitching abilities is world class. Ideally your pitch must be adaptable to a timespan anywhere between 15” (seconds) or as long as 300”, must be customizable to any audience, purpose and context. You must be able to pitch with slides or without, standing or sitting, in quiet conference rooms or in noisy bars. Your ability to synthesize what you do, your track record, your value proposition, your mastery of complexity and why you will succeed with clarity and passion will be the currency for acquiring higher access in the Valley circles. Level of access highly correlates with pitch quality (and of course a compelling value proposition), and as we all know, good first impressions are very helpful. And while you are developing your pitch develop your venture’s one-pager as well. In fact, that one-pager is far more important than your business card, to leave behind at a meeting.

Finally, this blog subject will have three parts instead of the two I initially promised. Stay tuned for the next one, in which I’ll propose a novel structure to make a step towards flattening the global innovation landscape.

Until then – Carlos B.

Reflecting on the new beginning of my professional journey and the role I hope to play.

As it is often the case, where you are heading is more exciting than what you’re leaving behind… As those of you who know me already, I am an optimist who deeply believes that the best is yet to come!

While I enjoyed very much the creative aspects of developing and managing new global immersion programs at the University and providing new experiential learning opportunities to students, my direct contact with them was certainly the most rewarding. Moving forward, I intend to retain the classroom contact, while also focusing on a problem which remains at large unsolved: flattening the global innovation landscape!

Certainly, the world is flatter today than it was a few decades ago. The flattening process has accelerated over the last decade, as more and more people around the world get connected to the internet (in particular over mobile devices – smart phones and more recently tablets). The pace at which people get connected is increasing globally as the acquisition costs of smart devices get cheaper, they become more powerful[1] and network (cloud)-based applications become more valuable[2]. Furthermore, thanks to the ubiquitous WiFi availability, broadband coverage is improving and enabling connectivity at a lower cost or for free.

This irreversible trend is spurring the development of a new global economy for information services and knowledge transactions heretofore unseen between parties on opposite sides of the planet. These transactions do not know of national borders. No visas or passports are required.

An innovation’s value is determined by its disruptive content and timing. We have before us a web based market of buyers and sellers of “intangible” services, which was hard to imagine only one or two decades ago. The drivers of the viral explosion for this new global knowledge economy are:

1.  Mobile Apps
2. Social Media
3. Big & Open Data
4. Sensor & Networks
5. Gamification
6. Cloud
7. Hyper-digitalization of society — individuals, enterprises and governments 

And, these transactions are characterized by:

1. Constantly decreasing the transaction cost
2. Constantly increasing its value added via innovation
3. Flying “on the wire” and if at all possible avoiding physical objects
4. This economy feeds on itself, since new knowledge services are required as new innovative services demand new applications and/or instrumentation.

While this flattening (or democratization) process in the information and knowledge access is taking place and market frictions are reduced; entrepreneurs find multiple ways to capture value from eliminating those frictions and/or create new value. Unfortunately, not everyone shares equally in these benefits. In other words the world is more flat in some places than in others!

Entrepreneurs here in the Valley[3] enjoy the privilege for being part of one of the most developed innovation and entrepreneurial ecosystems on the planet. And yet we do NOT have a monopoly on innovation here. In fact, extraordinary innovations are created all over the world, in particular in emerging regions. Often, in these constrained environments, by necessity, entrepreneurs embrace their lack of resources or the inherent limitations of the local ecosystem incorporating them as part of the design goal of their innovations[4].

After many years of working with entrepreneurs from emerging world regions helping them to scale up their ventures globally, I have learned that every geography from México to the Canary Islands (Spain) to South Africa to Peru, are at a disadvantage when compared with those who are based here in the Bay Area.  Quantifying these differences is the subject of a recent report entitled the Startup Ecosystem Report 2012, published by Telefonica jointly with the Startup Genome Project. This report ranked 20 entrepreneurial ecosystems around the world. In the report, about 75% of these innovation ecosystems were in the developed world while only 25% were in emerging countries: Santiago (Chile), Sao Paolo (Brazil), Bangalore (India), Moscow (Russia) and Singapore. Silicon Valley ranks as undisputed #1; and some of the key reasons are highlighted below: 

While much more could be added to this table and any entry is probably worth a separate blogpost, constructing the same table for any other ecosystem, anywhere in the emerging world, would be a challenge. Regardless of how promising the locale might be, almost every entry would describe enormous challenges that are being worked-out and summarized as “work in progress”. No doubt that over the next decade or two other innovation ecosystems will develop to the point of challenging today’s SV supremacy, and make the global innovation landscape flatter.

In the meantime, it seems unavoidable that many entrepreneurs will bring their ventures here in their quest to globalize. Every day, foreign entrepreneurs bring their early ventures to Silicon Valley in their quest to scale them up globally. Their goal is to leverage the SV ecosystem advantages to catapult their ventures to stratospheric success. However, much work remains to be done to construct these landing platforms. Over the last decade organizations like Endeavor or government sponsored programs such as TechBA (México) performed valuable experiments at both ends of the spectrum. Endeavor, as a non-profit, went for quality, seeking elite entrepreneurs with an initial focus across Latin America[6], while TechBA did focus in quantity to appeal to the wide political support across the Mexican territory.

Foreign entrepreneurs parachuting in Silicon Valley.

Landing here can be a hazardous activity. Proper training and accurate aim are must-have skills! Cognizant of these prevailing trends, I am led to the following conclusion:

Hundreds of ecosystems are sprouting up throughout world, and each one is seeking to create its own color and texture, learning from one other and improving and adapting the Silicon Valley model to local characteristics, norms, codes. Most have wisely given up any effort to replicate Silicon Valley after recognizing that the Valley could not replicate itself even if it wanted, since it is a freak of nature! Without a doubt, though, gears are in motion to create such a “Global Valley” and flatten the global innovation landscape. However, this will take time (probably decades –note that SV construction did not happen overnight).

What is the problem: Start-ups created in emerging countries tend to lack access to proven processes to enable them to increase the probability of scaling-up successfully. During any given time period very few companies are able to succeed in the same fashion as Mercado Libre (Endeavor-backed), which went from Argentina, to a NASDQ IPO in 2008.

What is the opportunity: Create a “landing experience” for entrepreneurs from emerging world regions increasing the odds of their success in the global scaling and in particular in landing here in Silicon Valley. While entrepreneurship at its core is Darwinian and there is NO process that could guarantee the success of everyone. At any given moment there are probably a few start-ups which actually could succeed. Such difference, going from let’s say 1 Mercado Libre to a few (2-4) would make a phenomenal impact in the development of the Buenos Aires innovation ecosystem and spill overs effects felt across Argentina and the Southern Cone.

In my next blogpost, I will address the conceptual construction of the “landing experience” for ambitious entrepreneurs and their global ventures born in emerging countries.

Until then – Carlos B.

Reflecting on our experiential learning from Montevideo, and our 16 day journey across Peru, Chile, Argentina and Uruguay.

After crossing the widest river of the planet or Rio de la Plata, like the porteños like to call it, we arrived by ferry to Uruguay’s capital, Montevideo. A sleepy town if compared with the bustling intensity of Buenos Aires (BA).

From our first meeting we heard similar pronouncements to those of Dr. Domingo Cavallo during our lunch in BA few days before. Several Uruguayans opinion leaders agreed: the best thing that has happened to Uruguay in the last century, is the Kirchner couple (Cristina, the current president and widow of former president Nestor) across the river, since they have tested every possible populist policy and the simple observation of their disastrous consequences, have minimized the chance of repeating the same mistake here. Furthermore, many Argentines corporations and its citizens are moving to Uruguay seeking the stability and predictable rule of law that Argentina has failed to provide.

Uruguay has recovered very well after the financial crises a contagion from Argentina’s in 2002. A decade of robust GDP growth and continuity of purpose in its public policies has fueled growth based in agribusiness, tourism, financial services and more recently since the late 90’s Global Services. They have also diversified their trading partners as China has entered the scene – as one of the top trading partners, in all countries we have visited. The business leaders we met displayed confidence and a positive outlook about the future of their country. From our visits and meetings we were able to identify some key conclusions:

1. 

   Pablo Brenner, General Manager of Globant Uruguay,
   With Carlos Baradello and the MBA students.
   (Montevideo, January 17 2013)

   Uruguay has developed Free Trade Zones as attractive destinations for foreign companies that use Uruguay as a platform country for re-exporting their products or services to other Mercosur or Latin American destinations. We visited Aguada Park and ZonAmerica, both have been very successful and attracted companies as Globant (we visited in BA and Montevideo), Sabre Holdings, TATA Consulting Services, etc. All of them global services providers. There are about 10 of them in Uruguay and they all provide a vast regime of incentives and tax exceptions for foreign firms.

2. Plan Ceibal was an extraordinary visit. Since 2007 the government has embarked in providing one laptop to every student attending public school (K to 9th grade), including vocational and trade schools and of course their teachers. Over 570K laptops have been deployed as well as the communication network. In addition, a vast network of repair and maintenance, phone support, refurbishing, software services and educational support services have been developed. The impact is phenomenal as the computer literacy shooting-up enabling a massive participation in the knowledge economy. We can only guess the extraordinary competitive advantage Uruguayans human capital vis-à-vis other similar countries next decade. Its budget just a 5% of the education budget or about US$50MM per year offer a refreshing experience of impact, massive spills overs and value with a cost of around US$100/student-year, the cost of one textbook in the USA. Actually they have licensed the 90 top textbooks used by the public school system and they are distributed electronically!

3. The challenge of thinking big: Uruguayans are set thinking that “small is beautiful”, justified by their relative smallness compared to the size of their two very large

Visiting Sabre Holdings located in ZONAMERICA
(Montevideo, January 18 2013)

neighbors: Argentina and Brazil. However their country is not that small as its size would seem large when compared to most European nations. While I respect their interest to maintain their quality of life, beach surrounded/sun kissed relaxed lifestyle without the complexities the dynamic global economy brings, they may miss out. Uruguay offers the conditions to innovators and entrepreneurs to grow well beyond their country and the promise to scale-up well beyond their borders. However, an important constraint remains beyond their mindset. They are confronted with a population of 3.3MM and not growing as their fertility rate is one of the lowest of Latin America and their immigration policies are not deliberate and friendly enough to attract human capital from the world, in the quantities to position as a true “boutique power-house” of the south cone.

Reflecting on the last 16 days journey with my MBA students

Visiting places I had many times, seeing and meeting old and new friends with my students enabled to relive an already seen movie with new eyes and listen with new ears a dynamic and always changing reality and uncover surprising and refreshing opportunities. No doubt the world and its 7+B inhabitants need of Latin America now. A region endowed with incredible natural resources and entrepreneurial citizens are key to support a new world which will approach 9B inhabitants in less than 30 years. Clearly in our journey, we have seen that Peru and Chile are taking a formidable competitive posture. Uruguay is set to benefit through the success of the region, in particular its neighbors. The black sheep of the countries visited: Argentina, remains a puzzle and I already reported its contradictions and self-inflicted challenges in prior posts.

As we prepare for this journey the questions posed for this class was “Can Latin America Compete in the Global Services?” The answer is without doubt YES! They have created the macroeconomic conditions to become an attractive destination for foreign investments and attract global firms to their shores. Furthermore, they have invested a “commodities dividends” afforded by high commodity prices in their innovation and entrepreneurial ecosystem taking a solid posture to compete in the knowledge economy. This in turn, is enabling and encouraging local entrepreneurs to create companies and participate in the global services in the most rewarding (highest value added) segment: innovation and knowledge processes outsourcing. However, they are taking one step forward: creating their own stand-alone companies, to max-out the value capture from the value chain. We also recognize that Latin America, has become less competitive in outsourcing commodity services (call centers and telemarketers) and even uncertain in Business Process Outsourcing, due to rising cost afforded by higher living standards.

The net-net of this class has been a transformational experience for all of us and in particular for my students. Suddenly Latin America has become a comfortable destination in their professional careers and personal lives. They have met hundreds of professionals, managers and entrepreneurs in the same age group, they have forged relationships with peers, visited dozens of new ventures, established businesses and governments officials. I have seen their confidence and comfort level grow in dealing with the Latin realities, to venture into the Spanish language and adapt to the local customs with ease.

At one of the last company visited in Montevideo (Sabre Holdings), the young receptionist offered to drink mate when asked what was that thing next to her phone, by one of my students. To his surprise in matter of seconds he was sucking from the silver straw the traditional drink from Argentina, Uruguay, South-Brazil and others in the South Cone. Awkward as he felt drinking from the same straw, and unable to master the conversation protocol that is a required part of this ritual; this missed photo opportunity has become a great metaphor of the transformational experience that everyone in the group of 15 experienced. The willingness to adapt, engage and collaborate, breaking the old North-South paradigm to a give birth new win/win opportunities, forged as peers and grounded in mutual respect.

I am grateful to my students for the opportunity to experience the journey through their eyes, regain my ability to be surprised by the ordinary, enabling me to see many previously unseen opportunities.

Until my next posting on the flattening of global innovation – Carlos B.

Reflecting on our experiential learning  from Buenos Aires

Since this blog post does not intend to convey a horror story, let me spare you the suspense: Argentina is an extraordinary successful country. Over the last six decades it has decided consistently to underdeveloped itself and not only succeeded, but exceeded all expectations! One of the richest countries of the world a century ago and the Latin American leader after the second world war, it has become tired, its middle class eroding, isolated from the global geopolitical scene and surrounded by an infamous short list of friends such as Cuba, Venezuela, and Iran among others. Its enormous natural resources and human capital are squandered in a constant contradiction of its huge potential vs. its sad reality.

Against this backdrop we started our visit to the innovation and entrepreneurial ecosystem (and the global services industry) in the beautiful city of Buenos Aires, where its citizens (the porteños) are finally giving in to the thought and recognize that they are part of the Latin American mosaic and NOT Europeans as they have considered themselves for the prior hundred years.

The government of the Kirchner dynasty, now Cristina the widow of former president Nestor Kirchner, has touched unrepentant two neuralgic points of the Argentines: inflation and the freedom to own dollars.  Both are indicators of the national well being used as a thermometer by most if not all the argentines. They have learned through periods of hyper-inflation that once it approaches to 1% per month it reaches the instability point and the almost certain risk of acceleration out of control. Today running between 2 to 3% a month is obviously noted in the cost of the everyday consumption of its citizens (for the cost of a “ cortado” or a doppio macchiato wet as the Starbucks have relabeled). Unfortunately the national institute of statistics (INDEC) has just reported the official inflation rate for 2012 at 10.8% while most think tanks in the financial sector report the inflation for the same period at 25.6% (and expected to reach over 35% in 2013)

The freedom to purchase at will dollars is a right exercised by a minority of the Argentine citizens, but an indicator used again by most. The average citizen knows the exchange rate, in the face of exchange restriction, create an informal (illegal) market, however the value of the “dollar blue” as the sophisticated argentines call it, is freely reported by the media. This morning newspaper reports “blue” green-bucks with a spread of over 50% above the government controlled official rate (US$1 = 5 Arg pesos), creating a distortion of prices, costs, foreign products availability, import substitutions, etc.

This fiction creates a backdrop for our visit to Buenos Aires as an enigmatic and mysterious soap opera of epic proportions indeed!

How does this affect the entrepreneurial ecosystem? I would say surprisingly very well. I would say that today in Argentina “To be an entrepreneur is the best revenge…” the internet connected to a laptop (or any other mobile device) has flattened the world and democratized access to global markets. As long as the products and services run through the wire there are no customs, no duties, no movement of atoms and its success is only limited by the creativity and innovative capacity of the local entrepreneurs. Against all odds, a few risk capital firms (including ALAYA, the fund I am part of) are providing the growth capital for these entrepreneurs to fund their young ventures. While kind of absurd for Silicon Valley standards, we have been able to identify three compelling reasons to invest today in Argentinean start-ups:

1. Compelling start-ups reducing the great local market frictions and empowering the consumer provide excellent value propositions. Some are copycats adapted to the local conditions, other are unique innovations. Both run over the wire with fast opportunity to scale over other Latin economies, in particular Brazil, Peru, Colombia and Chile. As we experienced in Lima and Santiago, scaling up globally using as the launching pad Silicon Valley is the big dream of most Argentine entrepreneurs.
2. Excellent human capital has been one of the key assets of Argentina. In spite of its decline, access to education is widely available and although its quality is uneven, still there are pockets of excellence. Hence, an Argentine youth unable to emigrate has two choices to find a job with mediocre pay or take the chance and become an entrepreneur. A skill sharpened and almost required to survive the complexity and uncertainty of the daily life in Argentina.
3. Attractive valuations due to Argentina’s financially isolation from the rest of the world. Since the 2002 default, Argentina has been unable to leave behind this issue due to the bond-holders that did not accept the default conditions imposed unilaterally by Argentinean government after the economic implosion of 2001-02. Furthermore, the country risk is larger than most developing countries; it has reduced the FDI to almost zero.

Buenos Aires remains a beautiful city, its citizens are sharp, well prepared and able to think globally. They do not suffer any inferiority complex when confronted with the dramatic challenges their country faces…. They have seen worse and their creativity and entrepreneurship gives them the confidence that they will survive again any future economic/political implosion. In the meantime, the future remains uncertain.

My dear readers, you should decide if it is time to cry or not for Argentina. May be not yet, but let’s wait until their citizens return from the summer holidays, for now many are enjoyng Punta del Este.

Until my next posting from Montevideo and the synthesis of the journey with my MBA students – Carlos B.

Reflecting on our experiential learning from Santiago

What a difference it makes when a country has the consistency of purpose (post Pinochet) over sustained periods of time across multiple presidents and political parties. While enormous challenges remain ahead, Chile, and in particular Santiago, has become a modern and efficiently functioning world capital. Its economy is wide open, and more recently it has positioned itself as the innovation capital and the entrepreneurial hub of Latin America.

When president Piñera took charge as the new president in 2010, an earthquake level 8 shook up southern coast and the tsunami that followed inflicted additional losses, 33 miners were trapped 700 meters under the ground in a copper-gold mine, etc…. the country recovered from these disasters with confidence and joined that same year the OECD – a selected group of developed nations – and launched one of the most talked public policy programs to promote innovation and entrepreneurship in the world: Start-up Chile.

This was not always the case. In the colonial days, Chile was “the poor cousin of the south-west” due to the lack of gold and silver sought by the conquistadores and its geographical isolation. The country is sandwiched between the Andes and the Pacific Ocean, giving the country its unique shape of approx. 3000 miles long and 100 miles wide. After the construction of the Panama Canal, its isolation grew even greater as ships could avoid the southern route by taking instead the new passage across Central America. The experimentation with communism and its military coup that followed (Pinochet — 1973) added more pain to a society already near breakdown. This is to show that a country can turn itself around in a relative short time (a few decades) if there is a consistent effort to increase transparency, enable the market to play by its rule, ease regulation to reduce economic friction and empower all sectors of the society, in particular the marginalized: women and the lower income of society. Much yet remains to be done, but nonetheless and impressive accomplishment!

Julian Ugarte Socialab CEO with Carlos Baradello and his
MBA students during the visit of Socialab (Santiago, Jan 10, 2013)

As I reflect with my students who developed the Santiago agenda, the key take away of our visits are:

1. Development of human capital is high in the Chilean agenda. We learned in Fundación Chile about the human capital needs over the next 5 to 10 years to meet the expansion of all the key sectors of the economy: mining, farm fishing, high-end agribusiness, and global services are dependent on human capital. While Start-up Chile is a step in the right direction, attracting from across the world innovators and entrepreneurs, its spill-over effects will no be enough. Hence an education policy, at all levels, and in particular one targeting the tertiary level has become a pressing need to enable the continued economic growth. The student movement over the last two years was a conversational theme in most of our visits, which highlights the need of wide access to a world-class price/performing education. This challenge remains, staring in the eyes to continue its development.
2. As we studied the innovation and entrepreneurial ecosystem in Santiago, we observed that key organizations are focusing on the creation of social as well as economic value. In other words, stressing the importance of Planet and People as well as Profits (the famous 3 P’s). We were in particularly challenged to think differently as we visited Social Labs the innovation spin-off of Techo. But there was more, we had the opportunity to meet with women entrepreneurs working hard to empower women and close de gap in a society (as most of Latin America), which since colony days has been male dominated. We also met with environmental activists, which offered different perspectives as they presented views to preserve Patagonian wilderness.
3. Chile–California Connection: this partnership dates back from the gold rush and hence linking historically Chile to Northern California since its very early days. As the news of the new wealth found (circa 1848) reached Valparaiso (one of the most important ports of the Pacific Coast at the time) first than most other places, thousands of Chilean miners arrived to the Bay Area. Since then both regions have been connected in multiple ways: business, education, social and cultural. More recently (2004) Chile signed the free trade agreement (the second in the Western Hemisphere following NAFTA) with the USA and in 2008, The Chile-California Strategic Partnership for the XXI Century. Today young Chilean entrepreneurs have embraced this connection to the Bay Area being a destination to grow their start-ups as they seek technology partners, funding or to scale globally their markets.

Our visit to Start-up Chile co-working space in Santiago was an amazing experience. I have experienced many times interdisciplinary global teams working together. What truly impressed us was its size. We spent time meeting dozens of entrepreneurs from all over the globe working, living, studying and playing in Santiago. It was an infectious and contagious experience. Their energy level, entrepreneurial attitude and commitment to make history to be part of one of the most revolutionary experiments in transforming a society was insane. Not to be forgotten is that this transformation requires cash and Chile is hard at work developing a venture capital industry, today already well advanced, as we met partners of Austral Capital and InverSur Capital.

Santiago was an amazing experience and proved that these fast transformations are possible!

Until my next posting from Buenos Aires – Carlos B.

Reflecting on our experiential learning from Lima, Peru.

As I have done for the past five years, every January I embark with about 15 MBA students for a journey across Latin America’s “south cone”. This Year we started in Lima on January 5^th, then we will visit Santiago (Chile), cross the Andes by bus and rest for a day in Mendoza (the wine country of Argentina) to continue to Buenos Aires and finish on January 19^th in Montevideo (Uruguay).  Our main theme is to observe nearshoring of global services as a channel of local frugal innovation and a driver of economic growth.

In this new millennium, two trends seem unstoppable—globalization and the transformative influence of enterprise, and in particular the new young ventures (or start-ups) as the most efficient engine to deliver goods and services in the market economy. Instant communication is one of the key drivers of globalization and this is affecting how work is organized, distributed and performed — globally — in the enterprise.

The advent of the Internet and the low cost of telecommunication services have changed the equation in how and where “screen-based-activities” are performed. In fact, most corporations, under global pressure to remain competitive, constantly seek new mechanisms to increase efficiency and productivity by adopting new technologies and relocating activities such as R&D, engineering, manufacturing, customer services, etc., to regions of the world where they are best positioned to provide the most cost effective element of their value chain. Over the last two decades we have observed acceleration in the migration of these screen-based-activities to Asia and other lower cost world regions.

This Academic Global Immersion (AGI) will explore the opportunity that certain Latin American countries have to position themselves as a near-shore alternative to the traditional offshore destinations such as India, China and other low-cost regions in Eastern Europe and Southeast Asia. The fundamental question addressed will be:  can countries like Argentina, Chile, Peru, and Uruguay compete as providers of offshore (nearshore) services? And if they do, what are the areas and the forms this competitive posture takes?

A key scope of our studies is to identify what enables a country to compete?  Is it simply the price/performance equation of the services offered in term of lower cost, high-grade human capital availability (with the quality and quantity desired) and a business climate that provides the confidence over the planning horizon? We all think there is more in this equation!

Lima from the Inca Empire to the empire of hidden opportunities

As we left Lima after three extraordinary days of visits and meetings, I kept asking what were the three most critical takeaways from our visit. No doubt this is fledging and growing country in size and muscle. We met with former prime minister, and 2011 presidential candidate, Pedro Pablo Kuczynski, Wayra entrepreneurs, animation studies, gaming companies, Lima Valley, and many others. We networked with Peruvian graduate students, as well as other American MBA’s from Johns Hopkins and the University of Baltimore.  The premier Peruvian business school CENTRUM Catolica hosted the event.

Carlos Baradello, his students and local entrepreneurs at Wayra Lima. (Jan 8, 2013)

Reflecting about our takeaways we have identified:

(a)  While most US based firms compete at large on innovation (competing on price is not a good recipe of sustainable success), Peruvian start-ups have two added benefits: (1) as more and more gain access to be part of the emerging middle class, they enroll and enhance the size of the market and (2) to participate of the youth dividend as the fertility rate is much higher than Europe and Asia;

(b)  A pattern that we have observed in at least three visits is that young ventures are limited in their growth by the small size of the talent pool. In all these cases they created a separate business unit in education. This was the case for Aronnax, the animation studio we visited, the gaming company we met, and believe it or not the restaurant we visited (NOT to eat but to learn how creativity, innovation and human centered design plays a role in creating a competitive advantage for Pescados Capitales); and

(c)    We all know empowerment is key for an entrepreneurial society. However, Spanish colonization and its dominance and role in phasing out the Inca empire have not played well for this region in terms of self-esteem as they felt their traditions and culture were inferior of those of the European conquistadores. This has been changing in the last decade(s) as they have regained their pride and confidence of what their culture has to offer to them and the world. We have seen a society bursting with confidence on who they are and where they are going. They shared generously with us their warmth, culture, gastronomy and confidence as the developed world struggles to reassert its sense of purpose and re-invent new formulas beyond their fiscal debt, public refinancing and different types of cliffs. We also learned that Peruvians were scared (and still are to some extent) of becoming entrepreneurs because of the fear that their ideas would be stolen and that failure would leave them stigmatized and limit their abilities to find jobs in their fields.  As we saw with all the young entrepreneurs at Wayra and Lima Valley, this is beginning to change.

This was the first time we visited Lima as part of my class. We took a bit of a risk as we changed the formula that has worked for the prior 5 years. But the risk was very well rewarded as we all learned from the differences in the way business is done in Peru; experienced so many opportunities; made dozens of new friends; and expanded our business horizons well beyond our expectations.

Thank you Peru and each one of you we met in Lima. I am sure we will meet again and our paths will cross in our personal and professional lives many, many times.

Until we meet again or until my next posting from Santiago – Carlos B.

It has been a while, dear reader.  Much to talk about––thousands of miles traveled, crisscrossed Europe and Latin America, many conferences given, innovators met, entrepreneurs grilled, funds raised, new ventures formed.  During this time there has been a recurring theme throughout all of my experiences––the perceived arrogance of entrepreneurs.  Is this a disease, a necessary evil, perhaps a virtue?

First of all, in fairness to my parents during my formative childhood years in Villa Maria, (Cordoba, Argentina), I will say that arrogance, or haughtiness, was not really among our family values, or those of my friends growing up, for that matter.  Perhaps this had something to do with our Mediterranean/Latin culture or maybe our modest incomes.

However, I find myself surprised by the aggressive, sometimes overbearing nature of many Latin American entrepreneurs as they take on their new ventures, nowadays.  Have these entrepreneurs imported family values from other cultures (e.g., the US, where confidence bordering on agressiveness is valued)?  Or have Latin American family values just changed since my childhood over these decades?

While there is no doubt that globalization is having an impact and leading countries like the US are increasingly exporting their values to the rest of the world, I would like to explore this character attribute being ascribed by some Latin entrepreneurs.

“Startup entrepreneurs are ‘arrogant and psychopathic’”

The most valuable asset all entrepreneurs have is time.  All innovations have limited shelf lives and globalization makes this shelf life even shorter, as competitors, imitators and copycats abound.  Within a finite time window, entrepreneurs face an extraordinary challenge: they must refine an innovation, develop a prototype, market-test, persuade investors, gain media exposure, etc.; you end up with an over-stretched individual, who needs to rob time from family affairs, romance and other typical age activities and still retain social graces. Everything has to be managed and fit in the 24-hours day. Not a small task!

Foreign entrepreneurs in a less entrepreneurially friendly environment — such as Sao Paulo, Buenos Aires, or Lima — face an even more daunting task.  It’s no secret that Latin America’s entrepreneurial ecosystems are less developed than Silicon Valley’s, its support infrastructures less efficient, its legal framework less transparent, its political climates less friendly, etc.  The end result is that entrepreneurs in emerging countries end up with higher overhead and more red tape to overcome to bring their ventures to profitability — this makes entrepreneurship riskier, but most importantly, robs them the most scarce resource of all: time.

And since entrepreneurs are global creatures, they feel increasing pressure to ‘keep up with the Joneses’, so to speak, on a global scale.  Skyping, e-mailing or web conferencing, and internet browsing effectively gives them access to global business information from anywhere on the planet.  This means that the entrepreneurially astute of Sao Paulo aren’t just comparing themselves with the best in that geography—they’re measuring themselves up against the most competent entrepreneurs everywhere on the planet.  This creates additional pressure, naturally.

So the issue is limited time, and within that constraint, effectively managing relationships with three key stakeholders: investors, potential new hires (employees), and current and future clients.  These key stakeholders are evaluating risk/benefit concerns as they decide whether to engage with the entrepreneur’s young venture.  It is precisely in this timeframe when short fuses are revealed—as competing pressures can become overwhelming.  And it is probably here when entrepreneurs are cast in a less than favorable light—and are ascribed all sorts of adjectives like arrogant, aloof, and unresponsive if they respond to pressures suboptimally.  Fair or not, the fact is that stakeholders are deciding the risk/benefit equation based on the entrepreneurs’ ability to remain effective and level-headed during these high-pressure (and often emotional) times. During these times, the business relationships with future employees, clients, and investors will be sealed.

Clearly, I cannot change the reality described, as most of us are at times caught off guard by having to make difficult decisions amidst moment-to-moment trade-offs and multiple competing commitments in our daily lives.  However, the successful entrepreneur preempts these high-pressure moments, or, at least, prepares diligently beforehand. Just as an Olympic athlete sweats and trains hard in the months and years leading up to the Olympics, global entrepreneurs leading born global ventures must prepare in a way that is literally unprecedented and totally unheard of in the old economy.  This is what sets global entrepreneurs apart, allowing their heart and mind to shine through their innovative ventures!

A unique manifestation of this preparation is the entrepreneur’s ability to “sell” his/her venture in the now famous (elevator) pitching techniques.  Having coached, taught, listened, critiqued, evaluated, graded, judged hundred of pitches in many innovation and entrepreneurship activities here in the Valley and around the world, I have concluded that striking the right balance between substance and delivery (presentation skills—and the theatrical) is essential.

At its core, an elevator pitch and the business pitch that (hopefully) follows is a time management tool for you and your audience, if these are done properly.  The essence of these pitches is to demonstrate your ability to master the complexity of your business and subsequently present it with simplicity and elegance, so that a college freshman might understand it.  I have always marveled at the elegance and simplicity of Einstein’s mass-energy equivalence, E=mc², or Newton’s hallmark discovery, F=ma — both equations totaling a handful of characters.  In my third-year college physics class, we derived Einstein’s equation and it took dozens of pages of rigorous, laborious mathematics. My classmates and I were floored — attaining simplicity is excruciatingly difficult, but it is, as da Vinci poetically put it, “the ultimate sophistication.”

There’s no doubt that any young venture bringing a new product or service to the marketplace is an arduous task, and in part that complexity is due to the novelty of the innovation and its disruptive nature.  Early stage ventures are challenging because there are so many unknowns most of the time––either due to a lack of experience on the part of the entrepreneur, or just the sheer newness of the market.  All of this is fine and understood.  However, these complexities are no excuse for us not to pursue the crucial intellectual heavy lifting required to contrive a “new order of things” (borrowing from Machiavelli).  If you can pursue this heavy lifting with optimism and courage, you will master a new business and its economic niche.  You will succeed even faster, I might add, if you have the courage to say ‘I don’t know’ when required.

Mastering the complexity of your young venture, and pitching it effectively to the various constituencies will help with your time management and cast you in a better light as a responsive and engaging entrepreneur.

As a promise, dear reader, I will publish soon a technique for how to develop your elevator pitch bearing these concepts in mind.

Until then – Carlos B.