This Wednesday December 12th in the context of a Lima Valley’s event, Gladys Triveño, head of the Ministerio de la Producción (Ministry for Industry) presented the general information and eligibility criteria for the Startup Peru program, a government-funded venture that intends to imitate Startup-Chile program and others that aim to foster the technology ecosystem. Here are some of the disclosed facts.
The program will be officially announced by the end of this year. The ministry will publish the draft for the admission process. The draft will be subject to comments but not changes for two or three weeks. The Ministry expects to then officially launch it and start receiving applications by the end of January 2013.
- A person or a business (that has at least two years of founded). High impact business idea.
- Business plan with strong development for market analysis and validation.
- Eligible participants can be Peruvians or foreigners. In case of a foreign companies, they will be required to open a branch in Peru.
- Bank-backed funds for the 5% of the project’s budget.
Peru is well-known for its entrepreneurship leadership. However, studies such the Global Entrepreneurship Monitor Peru’s report, shows that there’s a large number of self-employed / one-person companies. In fact, around 40% of such companies hardly surpass USD 2000 in monthly sales, as effect they don’t create jobs.
In line with the current government policies, the ministry is looking to support business that generate well paid jobs paying at least 3 times the minimum legal monthly wage (S/. 750 or $ 290). They are also looking to fund companies that have a global vision with high growth potential (sales and particularly exports) and low mortality risk. Bottom line: for Peru’s to continue its economic growth and inclusion there have to be well paid jobs available for anyone with the right skills. “We are looking for new companies that generate well paid jobs instead of funding 30-year old companies that don’t create jobs”, stated the ministry.
There seems to be a lot of emphasis on the high growth potential companies that create well paid jobs.
Market analysis and validation
This is a sort of subjective issue, specially for software startups that aim to create new markets or target niches. In the case of companies targeting existing markets, it makes more sense. However, again, reading between lines, the government’s goal is to support the creation of jobs and this mean avoid mortality risk. So, the program will favor companies that have done their homework on product/service validation.
Despite that, for me and most founders is clear that startup have a different “status” with regards to markets. They need to look for ways to enter markets and compete or create new ones. Startups play with unknown rules and a lot of uncertainty. Plans do exist for established companies that play under known rules.
This could be something new / unusual but let me tell you that is a standard practice in Peruvian government’s procurement. For foreigners the easy and fast route is to open a bank account with the amount required, then ask your bank executive to issue a “Carta Fianza”, which is a bond with a minimum of 3 months. Depending of your bank the process could take from 2 days to 1 week. Also have in mind that because of regulations there’s a period of three months prior for new business to be able to use their account’s funds, issue checks, etc. You can still request the bank to issue a “Carta fianza” with a deposit of the amount plus bank fees (around S/. 120 if the amount is less than S/. 20000 and 0.05% if greater).
- How many founders per-company they’ll require? At least two. They are evaluating if they will allow one-founder companies.
- Do you really need to do market validation? They’ll favor companies that have done their homework. You should estimate: growth rates, target market, etc. Use economics to simulate.
- Which industries or economic sectors will be priority? The program will prefer value generation-based business ideas. Companies can aim to be players on the services or commerce industries.
- I’m a Peruvian and live overseas, am I eligible? Yes, you are eligible. The program is also encouraging mixed Peruvian-foreigners founder teams.
- How much money they’ll fund per startup? The amount is not disclosed yet, but they’ve said that they’ll fund 80% of the cost.
- Will they take equity? No, the program will not take equity or take part of the startup’s governance/decisions.
- Will the program offer office/infrastructure facilities? It’s unknown to date.
- There will be mentoring available? It’s unknown to date.
I’m, as many others, looking forward for this program official launch. In the meantime, based on the already available information you can start to plan and prepare your proposal! Good luck!