Elena Pérez tells us why the sun is shining on the incubation landscape of Uruguay

Uruguay is an independent country with 3,286,314 inhabitants, a surface of 176,215 km2 (six times the surface of Belgium) and the country borders Argentina and Brazil. The weather is temperate, with long summers that makes the beaches amongst the most beautiful in Latin America, and the main industry is livestock farming; producing some of the best meat in the world.

Uruguay is a country with a high human development index according to the United Nations, the literacy rate is 98 percent, unemployment is about 6.6 percent, and according to the Institute of Economy and Peace, Uruguay is the safest destination in Latin America.

In 2013, The Economist selected Uruguay as ‘the country of the year’, and some of the reasons are that last year Uruguay approved legal marriage between people of the same sex, approved legal abortion and approved the regulation of the cannabis market. To sum up, Uruguay is a country with optimal conditions for living and for the development of projects based on the generation of knowledge-based, value-added innovation.

From 2000 onwards, a non-stop process began in Uruguay in order to encourage the development of entrepreneurial abilities within society. In 2001 the first two business incubators in Uruguay opened shop, one promoted by the main Technology Park called 'Ingenio', and one promoted by the Faculty of Chemistry called 'Khem'. The first one, was supported by the Technological Laboratory of Uruguay (LATU), and today is the main business incubator in the country.

In 2005, with the new government in Uruguay, a new chapter began in the promotion of the generation of knowledge-based add-on value. The National Council for Innovation and Innovation (CONICYT) was founded that year, and with it, the National Agency for Innovation and Research (ANII). This led to the the efforts to drive innovation policies being coordinated between academia and the private and the public sector. In this scenario ANII has has the responsibility to create and run the main innovation policies of the country.

In 2009, a new business incubator opened this time outside the capital city, in the state of Paysandú (Paysandú Innova) and in 2011 the most recent business incubator opened in the state of Maldonado (Idear).

These initiatives are being powered by academia and the private sector which implemented several instruments to promote entrepreneurship in society, especially amongst college students. Several projects are being implemented by the University of the Republic - Faculty of Economics and Business Administration, Engineering and Social Sciences, currently formed as EMPRENUR, the ORT University of Uruguay (Centre for Innovation and Entrepreneurship), the Catholic University of Uruguay and the University of Montevideo.

Present

Over the last fourteen years, there have been many advances in terms of entrepreneurship and innovation, mainly because of the strong institutional commitment and the collaborative actions between the private sector, academia and the government, all of which has combined to make Uruguay a successful entrepreneurship example in Latin America.

The flexibility of the instruments and their adaptation to the needs of the market are some of the main features of the ecosystem in Uruguay. For this reason, there are multiple methodologies of pre-incubation and incubation for entrepreneurs. The following will serve to give an overview of the organizations and their processes

Stages of awareness and pre-incubation

In 2007, another milestone marking the promotion of entrepreneurship in Uruguay was a programme that coordinated all the institutions that worked with entrepreneurs at all the stages - this was called ‘Red Emprender’. Emprender was supported by the Multilateral Investment Fund of the Inter-American Development Bank (IDB-MIF), the Technological Laboratory of Uruguay (LATU), the National Development Corporation (NDC), the Prosperitas Capital Partners (PCP), the Andean Development Corporation (CAF), and ANII. Nowadays, this network is called the Support Network for Future Entrepreneurs (Rafe). It gathers 47 organizations that work in all the stages of entrepreneurship.

The related activities of these stages are: innovative ideas contest, spaces for networking between national and international entrepreneurs and international organizations, business models competitions, internationalization. One of the highlights of the years is the NOVA Awards that rewards the efforts of these organizations and entrepreneurs in different disciplines.

Added to this there are several youth initiatives through public organizations such as the National Institute for Youth (INJU), and initiatives focused in increasing the presence of women in the productive sector that powers the ecosystem. In some cases, the organizations provide business advice for young entrepreneurs and seed funding of up to USD 5,000 per project.

In this segment, the presence of non-profit organizations such as Endeavor and DESEM must be mentioned as they organize outreach activities, meetings and training workshops for entrepreneurs and encourage entrepreneurship amongst children and adults.

Business incubation

As in the previous stages there are multiple business incubation methods to be found. However, this process extends between eight to 36 months on average, depending on the characteristics of the entrepreneurs and the entrepreneurship. The main services provided at this stage are as follows: business management training, business model advice, business mentoring, commercial intelligence, networks, and in the case of dynamic innovative ventures they also have opportunities to access seed capital. If the entrepreneurs are not native to Uruguay, or Uruguayans who live outside the country and want to return, they could potentially have access to USD 40.000 in non-refundable funds to start their business in Uruguay, plus several support services such as physical space in one of the leading technology parks of Uruguay (LATU), access to the business incubator programme in Ingenio, as well as connections with other international networks - just some of the characteristic features of this instrument.

The main seed capital is provided by ANII, which brings non-refundable capital between USD 25,000 and USD 400,000 depending on the instrument used. For the initiation of a venture, the financial system provides entrepreneurs with flexible loans for a maximum of USD 1,000,000.

The incubators that stand out are Ingenio (technological base), IDEAR, Paysandú Innova and KHEM (multipurpose incubators), Socialab (focusing on social enterprises), and of course concentrating on the biotechnology sector is the incubator of the Pasteur Institute.

Acceleration

Uruguay is a growing market for angels and VC investors, therefore over the last year several groups such as 'Club Angel de Uruguay' and 'NxtpLab' followed the steps of Prosperitas Capital Partners, the first investment fund within the entrepreneur ecosystem in Uruguay.

It is important to state that the proximity to Brazil and Argentina, both giants, gives easy access to those ecosystem and therefore to the resources installed in them. The political and economic stability of Uruguay, the presence of free zones and favourable business environment, facilitates the development of business, investment and the presence of regional funds in our country.

In 2014, we are hopeful that more international risk funds will select Uruguay as their base camp. This presence will also be driven by new international communities that have headquarters in Uruguay, such as Hackers and Founders, the largest community of entrepreneurs in Silicon Valley. Another organization worth mentioning is Endeavor. It has a presence in 18 countries and supports the internationalization of dynamic entrepreneurs. Even though there is a lot to improve upon, it is quite certain that our country has a viable environment for business, and is in an excellent position to create a thriving entrepreneurship support ecosystem and build strong relations with our neighbours and the international community.

Bright prospects

A conversation with Rafael Garcia, the Director of Ingenio Business Incubator who describes its role in Uruguay’s innovation ecosystem

Ingenio is one of the first business incubators in the country and is the main technology incubator today. Rafael García and his team provide consulting on incubation in countries like Panama, El Salvador, Paraguay and Chile. The Ingenio´s incubation method is a model for the countries in the region and enjoys a privileged position in Latin America.

Based on 14 years of experience what are the main differences of this incubator in Latin America?

The incubator began as an innovative experience in the 90s, when the words innovation and entrepreneurship had only just began to ring in Latin America. Thanks to the initiative of the Technological Laboratory of Uruguay (LATU), today constituted as a major Technology Park, in partnership with ORT University in Uruguay, and with the financial support of the Multilateral Investment Fund (MIF) and Infodev, Ingeniois is walking a successful path in helping entrepreneurs in early stages to have international profit ventures. Some features of Ingenio are as follows:

• We work according to standardized international good practice with strong attention on the monitoring processes.

• It has a solid financing, in which the 20 percent comes from funds generated internally.

• Infrastructure and privileged geo-location. It has a building of 1000 square metres located in one of the most important technology parks in Uruguay. This enhances the ecosystem and business networks for incubated entrepreneurs and the incubator itself.

• Ingenio has an international business network that enables business connections all over the world. This network is the result of hard and serious work, allowing companies incubated to improve their work and experience.

These characteristics allow us to organize and evaluate processes to improve activities in a very dynamic fashion. The main services provided by the incubator are, access to financial support, business consulting and mentoring, training in business management and networking. The incubator has many success stories that have benefited from their methodology such as: Tryolabs (with strong presence in Silicon Valley), Kizanaro, Locomotion, Galú and EviMed. These companies underwent the incubation process in Ingenio, and today can be considered success stories in the Uruguayan economy. It would not be inaccurate to say that these companies and others are flying ‘alone’ thanks to the support of our incubator.

In terms of local development, do you visualize business incubators as a valuable tool for this purpose?

Based on Ingenio´s experience and the opportunity to meet other realities in Latin America, I believe that business incubators are an efficient and necessary instrument for the development of territories. Based on this it is certain that nobody gets anywhere alone. If you do not believe this, is because you don´t realize the contributions you have received. The annual budget of the incubator is USD 400,000, and the exports of incubated companies exceed more than three times this amount. Beyond this, the indirect social contributions exceed the annual budget. Therefore at the end of the year the annual balance of having the incubator running is always positive for the country. This creates and strengthens entrepreneurial skills to foster successful business practice and provides a strong cover for the Uruguayan entrepreneur ecosystem.

The contribution of business incubators strengthens the entrepreneurial skills and business opportunities in the economy, and also strengthens the entrepreneurs relationship skills, acceptance, linkage and exchange with people of different nationalities and profiles. Business incubators are not the only tool for development, but it is an indispensable one. Personally, if I thought that I was doing something that wasn’t useful, I wouldn’t do it.

To sum up, how do you see Ingenio in the coming years and what are the challenges ahead for the country in terms of entrepreneurship?

With respect to the business incubator the team works daily to achieve more and better entrepreneurs, and in the coming years I hope to see an improvement in the levels of sustainability and maintain a level of incubated enterprises that reach 30 ventures. Even though we are at very good levels of sustainability, in comparison to other experiences in the region, it would be optimal to achieve 100 percent of internal financing. It is vital to venture into new productive areas and position ourselves in international segments such as Soft Landings. In this sense, Ingenio is already coordinating efforts with biotechnology incubators and we have incubated our first foreign companies. We must continue working in a coordinated manner at the national and international level, generating agreements and exchanges that promote their goals.

Regarding the challenges facing the country, I believe it is necessary to strengthen the tax benefits focussed on dynamic enterprises to promote their creation and retain them in our country. On the other hand, I also believe that it is important to put more emphasis on developing entrepreneurial skills within society and thus further empower the entrepreneurial culture.

 

Rafael Garcia is Director of the main business incubator Uruguay, Ingenio. Since 2008 he has devoted himself to strengthening ties with Ingenio national and international entrepreneurial ecosystems and expand opportunities for incubated entrepreneurs. Rafael studied Chemical Engineering at the University of the Republic, has a Marketing Specialist Degree (received with honours) at the Catholic University, and a Masters in Business Administration from the Universidad ORT Uruguay. He is also a Professor at the University ORT Uruguay. He has over 30 years of experience related to the technology sector, working at places such as as IBM (where he worked as a product manager for six years), Panasonic and Pranasys, among others. He also has an extensive career as a lecturer touring Uruguay, Argentina, Chile, United States and Peru.