EDUARDO BITRAN Academic Adolfo Ibáñez University, president of the Innovation Club
All the presidential candidacies have expressed their commitment to stimulate dynamic entrepreneurship. However, beyond good intentions, it is necessary to define public policies that are coherent with the purpose. Comparative evidence shows that one of the key instruments to strengthen the innovative entrepreneurship ecosystem is the development of a local venture capital industry, especially for the early phases of startups.
This is a significant challenge, even though we have a significant portion of the journey already advanced. One of the main barriers to the development of venture capital are coordination failures. Venture investment vehicles are not created unless there is a relevant flow of tech startups and, in turn, these do not flourish if there is no venture financing. That is why the State assumed a preponderant role in developing a dynamic entrepreneurship ecosystem since the 90s, promoting early-stage venture capital financing like no other emerging country and, at the same time, creating capacities for innovation, entrepreneurship and transfer. technology from the field of Science and Technology. This decades-long effort already shows interesting results in productivity,
It is necessary to continue building on what is advanced and not backtracking in key areas.
Necessary conditions are to strengthen the institutions and reliable legal frameworks for business development, as well as the pro-competition institutional framework and to generate regulations that ensure a level field so as not to restrict the innovation (sometimes disruptive) of technological entrepreneurship. Progress must also be made in strengthening the knowledge and technological innovation infrastructure and its connection with the development of innovative businesses, and at the same time improving the early-stage risk capital financing schemes by CORFO.
Likewise, we must replace the debt financing that currently exists with investment with equity instruments in early-stage venture capital funds. This will create more incentive for managers to take technology risks. For the scaling-up phases, CORFO could become “funds of funds”, thus facilitating the attraction of institutional investors and large wealth. Lastly, the tax benefits of the single fund law (LUF) for private investment funds that are verified to be exclusively oriented to risk capital must be maintained.
Consolidating the dynamic entrepreneurship ecosystem should be a public policy priority for the next government, whatever it may be. It is key to increasing productivity and creating quality jobs, stimulating competition in the markets and democratizing impactful and inclusive entrepreneurship, as well as sophistication of the country’s productive structure.