Nicolás Santana
Philippi, Prietocarrizosa Ferrero DU & Uría, Santiago
nicolas.santana@ppulegal.com

Sofía Ignacia García
Philippi, Prietocarrizosa Ferrero DU & Uría, Santiago
sofia.garcia@ppulegal.com

Venture capital on the rise

In recent years, private and public organisations in Latin America have taken proactive steps to foster innovation and entrepreneurship, with a growing number of initiatives aimed at cultivating and expanding the venture capital (VC) ecosystem. Among these, Chile has emerged as a standout leader, experiencing significant growth in terms of startups in the country and attracting substantial VC investment.

This growth can be attributed to a combination of strategic initiatives, supportive government policies and proactive collaboration within the financial and regulatory sectors. In the coming months, Chile is preparing for an exciting chapter in its innovation and entrepreneurship trajectory and new measures are expected to support the growth of VC in the country. Looking ahead, Chile continues to refine its strategies to support entrepreneurship and innovation. Ongoing efforts to expand access to financing, streamline regulatory processes and promote cross-border collaborations underscore Chile’s dedication to fostering a dynamic and competitive venture capital ecosystem. By leveraging new initiatives, our country aims to solidify its position as a hub for innovation, attracting talent, capital and strategic partnerships from around the world.

The latest initiatives

A pivotal initiative driving Chile’s success in the VC space is the establishment of the Venture Capital Chile brand by the Chilean governmental organisation, the Production Development Corporation (Corporación de Fomento de la Producción, CORFO). This initiative acts as a focal point for foreign investors and fund managers seeking opportunities in Chilean startups. Backed by government support and a dedicated web platform, Venture Capital Chile serves as an effective gateway, facilitating international interest and investment into Chile’s dynamic startup ecosystem.^[1]

In line with this vision, banks have opened spaces to promote social innovation and have provided financing to startups, allowing them to grow and scale their businesses. This comprehensive approach is driving the entrepreneurial future and strengthening Chile’s economic development. For instance, Banco Estado’s commitment of over MXN 50 billion in startup loans signifies a tangible investment in the future of Chilean entrepreneurship.^[2] This infusion of capital enables startups to scale their operations, develop innovative solutions and contribute to economic growth.

This initiative has a clear objective: to support more than 130 new startups in various innovation sectors. The goal is to multiply investments in the VC ecosystem, by up to five times in a single year. To achieve this, Banco Estado is committed to working closely with accelerators and venture capital funds, streamlining financing processes and promoting a dynamic environment for the growth of startups in Chile.

In addition to financial support, Chile has embarked on a path of regulatory modernisation to foster a conducive environment for venture capital and startup growth. Collaborative efforts between the Santiago Stock Exchange and CORFO have led to the creation of the ScaleX Santiago Venture Exchange, which offers startups a platform to access public capital markets. Furthermore, recent regulatory reforms allowing pension and retirement funds to invest in domestic startups through the ScaleX segment demonstrate a forward-thinking approach to diversifying investment portfolios and supporting early-stage ventures. This decision contributes to the objective of promoting the diversification of the investment portfolios of pension funds, without affecting the normal functioning of the financial system.^[3]

Chile has embraced a broader mission to support not only the local level, but also the regional level in its efforts to promote entrepreneurship. A strategic step to consolidate Latin America’s position in global financial markets is the integration of the Colombian, Chilean and Peruvian stock exchanges into a ‘regional holding company’.^[4] This initiative will provide investors with broader and more diversified access to the market by consolidating the assets and operations into a single entity. The consolidation of these markets into one creates an environment conducive to investment, with lower transaction costs, more efficient risk management and a greater variety of financing options. This development not only strengthens Chile’s position in the domestic market, but also contributes to Latin America’s growth and projection in the global financial landscape.

Aiming to position Chile as an investment hub, ScaleX is taking important steps to encourage investment and growth in the region. In December 2023, regulatory reforms were announced to enable startups based outside of Chile to participate in alternative markets. This update will make it easier for foreign companies to issue securities in Chile and, in the future, access the regional market that will emerge after the integration.

Conclusion

In conclusion, Chile’s proactive measures, including the Venture Capital Chile initiative, support from banking institutions, regulatory reforms and regional integration efforts, have collectively propelled the country’s entrepreneurship and innovation ecosystem onto the global stage. Partnerships between public and private organisations have created a more conducive environment for VC investment, facilitating startups’ access to capital markets and have allowed for greater diversification of investment portfolios, attracting more investors and bolstering Chile’s position in global financial markets. As Chile continues to evolve its strategies to support new enterprises, it remains poised to further solidify its position as a hub for innovation and venture capital in Latin America and beyond.