Rio and Buenos Aires may get much of the attention in South America, but when it comes to easy living, Santiago is hard to beat. The Chilean capital has acquired a new coolness factor, thanks to a cultural metamorphosis brought on by its bicentennial in 2010. Around that time, the city poured millions into the construction of sleek new skyscrapers, thoughtful cultural centers, and sprawling green parks to modernize its downtown district. 

Santiago's startup scene--half-jokingly referred to as Chilecon Valley by global investors--has also gained momentum in the past five years, thanks to Start-Up Chile, a government-backed program launched in 2010. Start-Up Chile offers foreigners $40,000 and a six-month stay, plus free office space and guidance--so long as participants agree to mentor their Chilean peers. The idea, says Torsten Kolind, a Start-Up Chile admissions officer and co-founder and CEO of San Francisco-based YouNoodle, a global network for entrepreneurs, is to import foreign entrepreneurs in the hope that they'll inspire homegrown ones.

So far, it seems to be working: As of June 2014, the program has drawn more than 12,000 applicants from 112 countries and admitted 810 from 65 countries. Out of that pool, 132 companies chose to stay in Chile and have already brought in around $26 million in venture capital--helping South America's Silicon Valley land atop Inc.'s list of the top "Global Cities of the Future."

Of course, not every startup born in Chile wants to grow up there, as the far-flung city does come with its own set of drawbacks. With that in mind, here are some pros and cons to making Santiago your startup's home. 

1. A California Vibe 

The warm days and cool nights will remind you of San Francisco. But the modern infrastructure--road conditions are outstanding by South American standards--will make you feel right at home. "The most significant advantage is that it's a very familiar-seeming place," says Skinner Layne, the founder and chairman of Exosphere, an entrepreneurial community in Santiago. "Chile is probably the most Americanized country in Latin America." The infrastructure is modern, and the metro is clean and efficient. Having lived there since 2008, Layne adds that the culture shock is minimal. 

2. The Price Is Right 

In a South American market like Santiago, your money goes further, says John Njoku, an American whose real estate intelligence startup, Kwelia, participated in Start-Up Chile in 2012. "We always joked that we felt like we were wealthier [than back home]," he says. Not only was housing more affordable than in tech hubs like San Francisco or New York City, the costs of going out and food were also much cheaper. "You can really just not worry about some of the initial capital constraints that come with running a business," he says. Not a small thing when you're just starting up. 

3. Transparent Government 

Not only is Chile's tax system easier to navigate than that of other Latin American countries, says Skinner, its corporate tax rate is the lowest in the Organisation for Economic Co-operation and Development. (Side note: Chile is the only Latin American country in the OECD.) Bureaucracy is "pretty transparent" as well, meaning "there are no bribes to get things done," says Skinner, and policies remain fairly consistent. Though you will have to stand in plenty of lines, something that may strike Americans as absurd and illogical, "you'll have to deal with about 10 percent of the byzantine processes that you will in Argentina and Brazil," Skinner says. Case in point: Small businesses can incorporate in only one day. After a smooth transition to democracy in 1988, the government has also remained "very stable," says Skinner. There is relatively little interference in freedoms of speech and the press, perhaps because Chile has the next-to-lowest corruption rate in Latin America, second only to Uruguay. 

4. A Risk-Averse Culture 

Despite young Chileans embracing the global digital class--and universities churning out bright engineers--there is still an aversion to working at startups, which are perceived as less stable. As a result, talent recruiting can be a long, frustrating process, and entrepreneurs should expect to pay salaries and not rely on equity compensation. "If you're coming here thinking you'll find a loyal, talented programmer who's going to work for equity, that's probably not going to happen in Chile," warns Skinner. However, Diego May, the Argentine co-founder of Junar, an open data platform for businesses, says if you promote yourself well and land funding, you will get attention from good engineers--so long as you can provide a job for at least a year. 

5. Fewer Tech-Focused Funds  

Though May chose to launch Junar in Santiago because of its growing startup ecosystem, landing funding was another issue. "[Your company has] some advantages being born in Chile, but when you want funding from Andreessen Horowitz and so on, you're not a homegrown Silicon Valley company, and changing that is not easy," he says. Despite Junar's having a great team, not everyone on it spoke English, and telling investors the product was based in Chile was not "an easy sell," either. "Growing up is an issue," May says, referring to the challenge of getting past the startup phase. "I would say that's the most important disadvantage." 

Also concerning for entrepreneurs is the scarcity of tech-focused funds (Kolind assures this is changing, however). Whereas Silicon Valley has been at it for at least three decades, the funds in Chile have only been investing for the past five or six years. For startups, this often translates to low valuations--"which has implications when you want to get in the U.S.," May says--and less control in the early stages, a time when entrepreneurs really need it to test their ideas. "The control that venture capitalists want to have in an early-stage round is more of what you'd expect from a private equity or growth round," May says. 

Though he managed to land some funding from super angels in Latin America in 2010, things didn't improve until early 2011, when Austral Capital and angels from Argentina, Costa Rica, and the U.S. invested $1.2 million. "If you compare a startup that started at the same time in Silicon Valley with another in Chile, the Silicon Valley startup will go faster than the one in Chile," May says. "In Silicon Valley, you don't need to educate venture capitalists on conditions and expectations." 

Published on: Feb 24, 2015