This article is part of a Global Entrepreneurship Week series highlighting how angel investor networks support entrepreneurs to thrive in ecosystems large and small around the world.
International evidence shows that angel investor networks play a key role in the development of the territories where they operate – and in Antofogasta, Chile, we are applying the model to open new opportunities for founders in our natural resources-rich community.
Let’s first evaluate the impact of angel investor networks. These investors add value to the startups in which they invest and are an important source of venture capital. Second, angel investors can play a key role in critical situations of economic and social development, such as the pandemic contingency, when many companies were destroyed and others created. Angel investors can become an important part of this reactivation. Third, angel investment contributes to the development and strengthening of regional entrepreneurship and innovation ecosystems.
Likewise, international empirical evidence has shown that the contribution of angel investor networks to the development of regional ecosystems occurs in four aspects:
- They contribute to knowledge spillovers about entrepreneurship and investment practices to regional incubators and accelerators.
- They increase the attractiveness of the regional ecosystems for startups with the ambition to grow. Therefore, angel investor networks contribute to raising the levels of high-impact entrepreneurial activity.
- They improve the connectivity of the system, because angel investors can create networks in the ecosystem, connecting companies with competitors, customers, suppliers, investors and other ecosystem partners.
- They guide and increase the quality of ventures. A dynamic ecosystem with active and visible angel investors enhances the entrepreneurial culture of the ecosystem, changing social norms and role models and creating a virtuous cycle of entrepreneurial activities.
It is expected that this international evidence of the role of angel investor networks will extend to peripheral regions of developing countries such as Antofagasta, a region located in the north of Chile with more than 600,000 inhabitants, characterized by its natural resource endowment, mainly minerals, such as copper, gold, lithium, silver and others. The region has the main copper deposits in the country and is considered the mining capital of Chile with the country’s highest GDP per capita, exceeding USD 25,000. Mining also represents more than 65% of the Regional Domestic Product. According to the GEM Antofagasta Report, over the last 10 years, the rate of entrepreneurial activity in early stage companies has exceeded 20% and account mostly for ventures with low value added and little innovation. However, in the last three years, this region has been going through a process of transforming its entrepreneurship and innovation ecosystem, due to the emergence of many key actors that have caused the generation of a critical mass of startups that did not exist before. Kalpa, a regional incubator, has been created with the support of the regional government and a private university; Aster, the first accelerator that was born with the support of the regional government, CORFO, and private companies; and at the end of 2022, Lithium Ventures emerges, the Corporate Venture Capital of SQM, a mining company oriented to the exploitation of lithium, and also Atacama Angels (AA), the first angel investor network in northern Chile, with the support of CORFO, a private company and a university.
Atacama Angels responds to the need of the region to create a local financial system where local capital is invested in local startups to prevent the flight of entrepreneurial talent to Santiago, the capital of Chile. This investor network is comprised of 17 members. Thirty-five percent of members are women, something unprecedented in angel networks that are commonly comprised of men. Many members come from the second generation of family businesses with a lot of industry experience but little practical experience in angel investing, and are eager to support startups through their capital, experience and contacts.
For this reason, this network has an international advisor who is a member of the Global Business Angels Network (GBAN) board and has experience in creating angel networks in developing regions such as Michoacam in Mexico and others. His advice in terms of how the network should work and the strategy of investment to follow were key aspects for this group of angels without practical experience. In its first year of operation, Atacama Angels network received more than 70 applications from startups from different sectors and is currently in the due diligence process with four startups, of which it expects to invest in at least two by the end of 2023.
The expectation of what happens internationally with the role of angel investor networks is high, so we hope that Atacama Angels will contribute to the regional development of Antofagasta, diversify its local productive fabric, generate wealth and quality jobs in the region, and contribute to strengthening the entrepreneurship and innovation ecosystem. Currently, there are isolated efforts that, without a doubt, contribute to the development and consolidation of the ecosystem, but it is not enough. It requires the interconnection of efforts: public, private, academic and government actors, all rowing in the same direction to make Antofagasta a hub of entrepreneurship and innovation.