CHILE Trends and Developments Contributed by: Francisco Barreda, Barreda Legal Tech
Challenges and Opportunities for CORFO Moving Forward Despite CORFO’s success in the VC ecosystem, several challenges remain. Access to capital at later stages While CORFO has successfully stimulated early- stage investment, attracting private capital for growth-stage startups remains difficult, limiting long-term scalability. As a result, many startups relocate their parent companies abroad (typi - cally Delaware, the Cayman Islands, or “sand- wich” structures) to raise growth capital (Series A and beyond) thus in order to avoid this and enable Chilean companies to attract foreign capital directly within Chile, specific tax incen - tives for foreign funds investing in Chilean start - ups should be established. Several international models could serve as references. This restructuring abroad is often done through “FLIP,” in which the Chilean company becomes a subsidiary of a foreign parent. CORFO, aware of this practice, has allowed funds it finances to invest in such foreign entities, provided the money is later transferred to the Chilean sub- sidiary. Instead of enforcing such limitations, CORFO should focus on attracting more for - eign investors to make advanced-stage invest - ments through Chile. To do this, Chile must offer tax benefits that make such investments more attractive. Additionally, given the limited size of the domes - tic market, it is natural for Chilean companies to seek market expansion. Everyone – CORFO included – should aim to facilitate international expansion while ensuring that the parent com - pany remains in Chile. To achieve this, CORFO, as an ecosystem coordinator, could promote a regulatory agenda that includes tax incentives for foreign VC funds investing in Chile.
• USD878 million invested in startups through the funds. CORFO as a Facilitator of Collaborative Networks Beyond funding, CORFO has played a key role in building collaborative networks among entre - preneurs, investors, and companies in Chile. In 2010, it launched Start-Up Chile, a public accel - erator for both local and foreign startups at vari - ous maturity stages. This is a clear example of how CORFO has facilitated an interconnected ecosystem that benefits both startups and VC funds. Through its acceleration programs, CORFO provides funding and connects startups with mentors, industry experts, and potential investors (eg, through demo days), increasing the long-term success prospects of supported startups. Start-Up Chile’s reported impact includes gen - erating over USD2 billion in sales over a decade. The program has built a community with a port - folio of more than 2,000 startups and entrepre - neurs from over 85 countries. CORFO has collaborated with other initiatives, such as ScaleX (Santiago Stock Exchange). This initiative resulted from a partnership between the Santiago Stock Exchange and CORFO through Start-Up Chile, aiming to create a plat - form where startups can access funding. ScaleX allows select companies to make public offer - ings (subject to specific requirements) exempt from registration with the Financial Market Com - mission (CMF). It facilitates the trading of securi - ties from high-impact, growth-stage companies, broadens local and international funding sources (including qualified investors) and helps position Chile as an investment hub. However, evaluat - ing the initiative’s results is still early, as only six startups have participated so far.
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