For Tech Entrepreneurs Looking Beyond Silicon Valley, Chile is Ready and Waiting
Chile's February 27 earthquake was so massive that it shifted the earth's axis and shortened the day by 1.26 millionths of a second. The loss of human life and destruction of property lingered on minds across the world, but a decade-long effort to lure innovative technology firms to the South American country was also at stake.
Fortunately for one such firm, Jacksonville, Florida-based Web-development company Hashrocket, employees of their Santiago, Chile, branch managed to escape relatively unscathed. In fact, during one of the many powerful aftershocks, employees in the main Jacksonville office watched in awe on Skype as the ninth floor office in Santiago swayed and shook threateningly.
"When the earthquake hit, it was scary," says Hashrocket CEO Obie Fernandez. "We were worried how the city was going to hold up, especially with the aftershocks. But it actually proved to be a disruption only for the first couple of days. Everything was built sturdily and held up well."
Despite billions of dollars worth of damage in many parts of Chile, people in major population centers like Santiago, which enforces a strict set of modern building codes, fared much like the Hashrocket employees after the quake. Stories like those are fueling the hopes of officials at the center of the tech campaign, which the Chilean Economic Development Agency (CORFO) began in 2000 to invigorate the Chilean economy through foreign technological investment.
"When people think of an earthquake of that magnitude, they think of the devastation in Haiti," says Nicolo Gligo, executive director for the United States of the CORFO. That earthquake, which occurred one month prior to the one in Chile, was about five hundred times less powerful, but resulted in an estimated 230,000 casualties, compared to Chile's 500 casualties.
"In reality, it's like if an earthquake happened in California or Japan," he says. "Because of our seismic geography, we're are prepared to handle these kind of disasters."
At least one major global tech company seems to share that philosophy. McAfee, the world's largest dedicated security technology company, announced on May 5 its plans to open its first facility in Latin America. It's the first major investment since the February earthquake.
While any major investment is welcome, CORFO has also been eyeing smaller companies like Hashrocket. The high overhead and steep competition in traditional technology centers like Silicon Valley is more likely to sway small businesses in particular toward alternative tech hubs. CORFO has attempted to position Chile as a legitimate and attractive prospect for those firms.
"We understand for us that there is an advantage to bring in smaller companies like Hashrocket," Gligo says. "It brings to Chile the experience of entrepreneurship, and it's an important skill set that we need to attract to Chile in order to develop local companies."
While CORFO conducts research and development in collaboration with other organizations to identify a short list of firms that could make strong candidates to set up shop in Chile, Fernandez's decision to open up an office in Chile was actually a result of Ruby on Rails (RoR). Hashrocket is known for its extensive use of the open-source web framework for software code writing, so a member of the online Ruby community who lived in Chile reached out to Fernandez because he was interested in operating RoR in Chile.
"We had an overall desire to set up in South America," Fernandez says. "They're in a similar time zone, which is very important to us due to the amount of collaboration we have going on between our teams. This really got the ball rolling on having an official branch down there."
Fernandez soon discovered that Chile stood out to him among other South American nations. "Chile arguably has the highest standard of living, the greatest political stability, and the best commercial activities," he says. "I'm very familiar with the chaotic business environment that makes much of South America a poor fit for our company culturally. Chile has really stood out as a place where we can grow."
Hashrocket currently has four employees in Santiago, and does about ten percent of their total billing there.
Two of those employees are actually American citizens. Chile has a relatively liberal immigration and visa policy. Gligo says it fits in well with Chile's similarly open economic strategy. Technology companies can also apply for a number of financial incentives to support multiple phases of project development. For example, they can receive up to 40 percent back ($2 million USD total) on their investment in fixed assets like infrastructure and equipment.
The end goal of the program is to end up with considerably more diverse economy in Chile, and to spearhead development in Chile's traditional economic sectors through new technology and innovation.
"Even though Chile is a top competitor in the wine industry, we also believe in attracting foreign investment to Chile that can increase our advantage in that area," Gligo says. "The good thing is it's very easy to do business in Chile. It's a country that people want to live in and work in."