The study was based on qualitative interviews to different members of the startup community, including entrepreneurs, mentors, investors, incubators, event organizers and government officials. The resulting report provided a comprehensive view of the state of entrepreneurship in Costa Rica including determinants such as culture, the startup community, the entrepreneur, the startup and funding.

1. 1
Costa Rica
Startup
Ecosystem
Mapping: actors,
connections and
best practices

2. When asked to map the startup ecosystem
in Costa Rica, the first question that came
to mind was, “Why?” There were existing
studies both for the country and for Latin
America, with detailed metrics across
multiple variables, and indexes comparing
Costa Rica to the rest of the world. Was
there a need for anything else?
Sincethen,manyorganizationshavebeentalking
aboutarticulatingtheecosystem’sexisting
initiatives.Itseemedreasonablethat,ifthegoal
wastoconnectactors,itwasimportanttoknow
whotheywere,whattheyweredoing,andwhat
conditionswereeitherhelpingorpreventing
themfromworkingtogether.
Thus, we developed a different type of
mapping, one that was qualitative instead of
quantitative in nature; one without the goal
of measuring the variables of the startup
community, but rather to listen and learn
from its actors; one with a final outcome that
was not a ranking but actionable insights.
This mapping accounts for the human
dimension of starting a business, and the
cultural traits that influence relationship
building, collaboration and risk taking. It
encompasses elements that people might
discuss over a beer, but that rarely find their
way into scientific reports.
On one hand, this study serves as an
actual map—it can help us navigate the
startup ecosystem. It shows us who the
organizations are, what they are doing, and
how they are attempting to contribute to
the startup community. This is then, about
helping entrepreneurs connect and find the
resources they need with less trial and error.
But on the other hand this mapping is also
actionable. Starting your own company,
running an incubator, or investing in a
promising startup isn’t just about connecting;
it’s also about doing. If there are others who
have successfully faced and, in some cases,
resolved these challenges, wouldn’t it be
great if we could learn from them? Because
of that, this map is also about sharing
what has worked for some of the more
experienced members of the community, as
well as what hasn’t, and what they’ve learned
in the process. If we wish to articulate our
efforts, what better place to start than
sharing experiences?
Webetonvisibilityasthewaytofosterthe
articulationeveryoneistalkingabout.Getting
toknowoneanother,sharingourindividual
challenges,sparkingconversationsinthehuman
andculturaldimension—inshort,comingupwith
alternativesolutionscollectivelyandhelping
thosewhoarejustjoiningin.Hopefully,thisisjust
thebeginning.Thiscannotbeanindividualeffort,
butonesharedbytheentirecommunity.Ihope
youwilljoinus.
Prologue
Randall Trejos
Project Director
2 3

3. 4 5
Diego May
Junar
Vinicio Chanto
Slidebean
Fernando Arce
Yo Emprendedor
Mariana Vargas
Arias & Muñoz
Gerardo Villalobos
UNA
Emprendedores
Alejandro Egea
Nacascolo
Holdings
Marcelo Lebendiker
Parquetec
Paula Guevara
Consultoría
creativa
Carolina Flores
AUGE
Sourav Sharma
Startup Grind
Tomás de Camino
Fundacion Costa
Rica para la
Innovacion
Carlos Mora de la Orden
Capitales.com
Sergio Ballester
Indigo Drones
Jose Miguel Zamora
Project Intern
Adrián García
Carao Ventures
Priscilla Moreira
Embajada de
Holanda
Carolina Taborda
Fundacion Costa
Rica para la
Innovacion
David Bullón
MICITT
Eric de la Goublaye
delaGuayaba
Gustavo Madrigal
Morpho
Animation Studio
Luis Alonso Jiménez
AUGE
David Payne
Mentor /
Inversionista
Alejandro Vega
Huli
Angélique Ladureau
McKinsey &
Company
Claudio Pinto
Fairplay Labs
Rosalía Morales
NIC Costa Rica
Mónica Hidalgo
Impactico
Carlos Gallegos
Ernst & Young
Maritza Vargas
UNA
Emprendedores
Alejandro Brenes
Enertiva
Juan José Muñoz
Open Future /
POOM
Gabriela Arguedas
Project Intern
Juan Carlos Martí
CIE TEC
Armando González
Lead University
Randolf Kissling
Mentor /
Inversionista
Federico Zoufaly
Mentor /
Inversionista
Andrei Fuentes
Parso
Paula Díaz P.
Graphic Design
Paul Fervoy
Miweb
Josué Fumero
Ernst & Young
Vanessa Lean
Cuestamoras
Allan Boruchowicz
Carao Ventures
This study is the result of hours of interviews with entrepreneurs,
mentors, incubator directors, investors, government officials and other
actors of the startup ecosystem. Whether through formal interviews
or more casual meetings, their willingness to share their experiences,
perspectives and ideas is what made this study possible. We thank
them, and acknowledge their most valuable contribution.
On behalf of the Startup Costa Rica team, we are very pleased to share
the results of the research and analysis documented in this report. We
are also honored with the support and trust received from the British
Embassy in Costa Rica by giving us the opportunity to generate what
we believe is a fresh, intimate view of the startup ecosystem, and
represents a series of valuable insights and tools for the most important
actor in the startup ecosystem: the entrepreneur.
For a small, young organization like ours, the publication of this report
is a major milestone, but even more important is the experience
we’ve had throughout the past several months conversing with major
organizations and individuals working on entrepreneurship in the
country. There is much to do and many challenges within the startup
ecosystem in Costa Rica, but the openness, genuine interest and
commitment from everyone we worked with gives us hope that we are
heading in the right direction.
Finallywe would like to thank those who first believed in our
organization and joined us on this journey: Paula Guevara, Rafael Cañas
and Edgar Mora. Also, special thanks to Randall Trejos, who lead this
project since the start and remained committed far beyond its initial
scope, making the final product an even more comprehensive and
valuable asset for the Costa Rican startup community.
Acknowledgements
Ignacio Castro
Director Startup Costa Rica

4. 7
Contents
6
- PROLOGUE 3
- ACKNOWLEDGEMENTS 4
- CONTENTS 7
- INTRODUCTION 8
- The purpose of the study
- About this Report
- About the Author
- Startup Costa Rica and its Director
- UK Science and Innovation Fund
- EXECUTIVE SUMMARY 13
- ACTORS OF THE ECOSYSTEM:
WHO’S WHO 14
- FINDINGS
1. COSTA RICAN CULTURE 16
- Low trust leads to low collaboration.
- Low visibility leads to low collective learning.
- The path of stability through employment.
- Position towards mistakes: No one wants to be “that guy”
(or girl).
- A well-educated and trained talent pool.
- Lack of saving and investment culture.
- Strong cultural bias toward socially-minded
businesses.
- Opportunities to develop startup-friendly regulation.
2. THE STARTUP COMMUNITY 26
- The SME – Startup distinction.
- The “who” before the “what”.
- Individual initiatives don’t always fit well together.
- Organizations and their sustainability.
- The critical mass problem.
- Entrepreneurship events and the effects of cross-
pollination.
- Startup Competitions and their role in providing
visibility and access to resources.
- Resource base: Service providers can’t always
adequately serve startups.
- Connectors: Minding the gap between entrepreneurs
and investors.
- The elusive success story: A precedent the
community is waiting for.
- Reinventing the wheel: A lack of connection with
more developed ecosystems.
- An umbrella organization.
3. THE ENTREPRENEUR 44
- The emotional price of becoming an entrepreneur.
- Ideal stage of life to start a company.
- When to leave your day job: The dilemma of the
part-time entrepreneurship.
- On sharing risk and equity: The loner problem.
- Lack of understanding about private investment.
4. THE STARTUP 50
- Step one: Building the team.
- The quest for a business model: How to turn an idea
into a company.
- The need for speed: Organic growth is not for
everyone.
- Early stage funding: Surviving the valley of death.
- Thinking local, postponing global.
5. FUNDING 58
- The available sources of funding.
- The Gap: Seed or early stage funding.
- Friends and family as viable source (depending on the
family).
- Government money.
- A banking sector that is unable to serve startups
- The “average” startup as a private investment
opportunity.
- Scattered angels.
- The critical mass problem and its implication for
investors.
- Investment clubs and acceleration.
- New generations of family businesses may create an
alternative.
- CONCLUSIONS AND THE PATH AHEAD 72
- A systemic issue.
- Culture underlies everything; but culture is built from
personal choices.
- Visibility and knowledge sharing will speed things up
for everyone.
- Entrepreneurs must lead the way.
A bet on a bottom-up approach.
A long-term vision of the ecosystem: the organization’s
challenge.
- FINAL THOUGHTS 76
- BEST PRACTICES 78

5. 8 9
entrepreneurship in Costa Rica. This is
reflected not only in the informal writing
style, but also the content. While many of
the insights discussed may not seem new to
seasoned actors within the ecosystem, they
will likely be new to entrepreneurs, investors,
mentors and other stakeholders not closely
in contact with the startup community. Our
intent is to share what we’ve learned of the
ecosystem’s experiences with as many people
as possible, in the hope that this will foster
more connections and allow newcomers to
more successfully insert themselves in the
community.
Finally, through conversations and the
shared interest of building bridges to assist
collaboration, some of the individuals and
institutions interviewed have stepped
forward to create what could be the
beginning of a common platform to jointly
promote entrepreneurship, share best
practices and articulate what have so far been
isolated efforts. We can only hope that this
initiative will continue to gain traction, until it
becomes a movement. We will do our part to
see that it does.
About this Report
The findings in this report are organized into
five sections, each addressing a different
determinant of the startup ecosystem,
ranging from macro conditions to individual
cases:
1. Costa Rican Culture. This section describes
the cultural and idiosyncratic variables
that participants of the startup community
identify as having had an impact on its
development.
2. The Startup Community. Here, we discuss
the dynamics among different actors of the
startup community. We also refer to the
online mapping at www.emprendimiento.cr
were we provide a comprehensive list of all
participants, their role in the community, their
value proposition, who are they targeting, and
how to contact them.
3. The Entrepreneur. The main actors in
the ecosystem, in this section we analyze
the individual factors that impact an
entrepreneur’s decision to start a company,
and the day-to-day challenges this implies—
from risk profile and stage of life, to the role
of personal networks and business acumen in
the success of the startup.
4. The Startup. Once founded, each company
has its own challenges. In this section, we
discuss the main obstacles young startups
face in the local ecosystem.
5. Funding. Finally, because of the notable
focus that most actors in the ecosystem
give to the subject of funding, in this section
we layout the main sources of funding,
their implications and the impact that
many initiatives have had on the startup
community.
During our discussion of the findings and
challenges in each section, we share best
practices provided by these same actors
during the interviews. These should not
be taken as definitive answers to a given
problem, nor as “recipes for success” but,
rather, as a collection of lessons learned,
examples of practices that have worked in
other ecosystems, and diverse takes on how
to overcome current challenges.
We have also made an effort to provide
as much context as possible, in the form
of external links and references, so that
interested readers can explore a topic in
Introduction
In the last five years, entrepreneurship has
gained significant attention in Costa Rica.
With the creation of numerous incubators,
government sponsored competitions and
increased media coverage, starting a company
now seems a rather viable option for many.
However, as the majority of these initiatives
emerge individually, attention has recently
shifted to how they can begin to connect and
work together.
When we view entrepreneurship as the
result of interactions between many different
actors, rather than an isolated act of a single
entrepreneur, we move the conversation
to one about ecosystems, relationships
and connections. When seeking examples
of cities where startups thrive, it is often
not one single element that contributes to
a company’s creation; it’s a combination of
conditions, actors and the synergies created
by the links between them.
The purpose of the study
The purpose of our study was to map the
various participants of the Costa Rican
startup ecosystem and their respective
capabilities. More importantly, to diagnose
and highlight both the obstacles and
opportunities these actors face in working
together to strengthen the startup
community.
At its core, this study is an attempt to gather,
systematize and openly share the knowledge
and experience of the community’s main
participants. Through interviews with more
than 30 entrepreneurs, investors, incubators
and program directors as well as government
officials, we have gone beyond just mapping—
to generating insights and sharing best
practices.
Many of the ideas expressed in this report
come directly from the actors interviewed,
and may reflect personal opinions that are,
of course, subject to debate. Whenever
authorized by the interviewee, we have
included quotes as a direct reference to their
position. We have also made the best possible
effort to verify, though all available means,
any facts and figures mentioned during the
interviews.
Unlike previous reports, this study does
not aim to measure the Costa Rican
startup ecosystem across variables for the
purpose of benchmarking it against that
of other countries. For such quantitative
and comparative studies, you can refer to
PRODEM’s 2015 Report for Latin America
and GEM’s 2014 Report for Costa Rica. For
the present study, we opted for a qualitative
approach that would allow us to gather and
share insights that do not correspond to
measurable factors.
We also wanted to make this report
accessible for anyone interested in

6. 10 11
greater detail, check official websites from
which the information was taken, or contact
organizations directly.
About the Author
Randall Trejos is an advisor in startup and
small business development, and director
of the Founder Institute in Costa Rica.
He specializes in sales, marketing and
communication, with a strong focus on
behavioral sciences.
He writes about entrepreneurship,
social ventures and angel investment for
organizations like Tico Times, INCAE
Business School and VIVA.
Trejos studied Psychology at Universidad de
Costa Rica, Entrepreneurship in Rotterdam
School of Management and has an MBA from
INCAE Business School.
Startup Costa Rica and its Director
The Startup Costa Rica Foundation is
a nonprofit organization that supports
projects, programs and actions that aim to
strengthen and accelerate the development
of the startup ecosystem in Costa Rica. It also
seeks to collaborate, share experiences and
manage projects in a joint manner with other
organizations and people within the country
and around the world who share their vision.
By collaborating in the launch of the Founder
Institute in Costa Rica, Startup Costa Rica has
also created a space for experienced CEOs
of both small startups and larger companies
to coach and mentor young entrepreneurs
who are just starting their journey, providing
an opportunity for them to give back by
sharing their knowledge and advising the next
generation of business men and women in the
country.
Ignacio Castro, Startup Costa Rica’s founder
and director, is a technology professional
with extensive experience leading distributed
software development teams and delivering
projects to large global clients. He has worked
for such global organizations as Chiquita
Brands, Intel, Houghton Mifflin Harcourt and
NTT Data. Since 2011, he has been involved in
strategy and custom application development
projects for companies such as S&P, Citibank
and Santander Bank.
In 2011, he founded Startup Costa Rica
with the goal of supporting entrepreneurs
from Costa Rica through initiatives to
promote entrepreneurship in the country. He
received an MBA from MIT Sloan School of
Management, and an Industrial Engineering
and Computer Science degree from
Universidad de Costa Rica.
UK Science and Innovation Fund
Finally, this study would not have been
possible without the support of the British
Embassy, through the UK Science and
Innovation Fund. By helping to promote
economic development through innovation
capacity building in Costa Rica, the initiative
is filling an important research need that—
though widely recognized—often lacks the
funding to come to fruition.

7. 12
There are many factors that determine a
startup ecosystem and its ability to foster
entrepreneurship. Many of these are “hard”
factors like the availability of financing,
supporting public policy and technology
infrastructure and adoption. Others are “soft”
variables such as cultural idiosyncrasies and
social capital, which are more difficult to
measure but easily noticeable and widely
reported by members of the community. The
third set of determinants has to do with the
connections and dynamics between members
of the startup ecosystem.
The actors considered to be part of the startup
ecosystem, regardless of their role, include
entrepreneurs, mentors, investors, incubators
and programs, entrepreneurship-related
events, coworking spaces, governments,
universities and firms catering to startups such
as legal, accounting, digital marketing, etc.
When it comes to macro variables such as
public policy, availability of financing and
technology infrastructure, the study found
both challenges and opportunities.
Government involvement in the startup
community has been increasing in the
past years, but with slow visible progress.
Bureaucracy, the lack of distinction between
traditional small businesses and startups,
and the subjection of these to the same
regulations as corporations, are among
entrepreneurs’ common complaints.
Government-sponsored programs like Capital
Semilla have helped close the gap of early
stage/seed investments, however after two
iterations the program was discontinued.
As for private investment, there are still
challenges to investors and entrepreneurs
successfully connecting, due to the tendency
Executive
Summary
13
to do business within close circles, the lack of
knowledge on both sides regarding venture
capital and startup valuation, and the large
supply of investment vehicles traditionally
perceived as safer. Progress has been made
through the organizations and individuals that
serve as trust-based connectors between the
two actors, helping to bridge the current gap.
Technologicalinfrastructureandadoption,along
withahighlyqualifiedtalentpool,areamong
CostaRica’sstartupecosystem’sstrongpoints
identifiedinthestudy.Astrongeducationsystem,
particularlyintechnicalandscientificfieldsis
viewedasthegoldenopportunityforinnovation-
basedstartupsinfieldslikesoftwareandbiotech.
Thetalentpool,however,ishighlyinfluencedby
thewidespreadpresenceofmultinationalsin
thecountry,bothintermsofsettingjobmarket
conditions,aswellasprofessionaltraining
anddevelopment.Thecountry’sculturaland
geographicalproximitytotheUnitedStatesand
thewidespreaduseoftheEnglishlanguagehave
alsobeenidentifiedaspotentialadvantages,
particularlyintermsofconnectingtomore
matureecosystemsinU.S.cities.
When addressing cultural determinants, the
study pointed to the significant effect that
Costa Ricans’ attitude towards trust has on
startup success. From the entrepreneur’s
ability to find co-founders and team
members outside their circles of friends,
to the difficulty of connecting to investors
and mentors, a perceived low trust seems
to be the constant in relationship building.
Ties with people outside the circle of family
and friends were shown to be weak, leading
to unbalanced teams in terms of expertise,
or stark individuality. Members of the
community working in relative disconnection
from one another has caused a low visibility
of successful cases, little sharing of best
practices and repeated efforts to resolve the
same challenges.
Finally, although the above factors are
often cited and considered individually, the
study revealed the importance of analyzing
the effects of the interdependence and
dynamics between actors. The cultural
tendencies regarding relationship building,
collaboration and short-term thinking have
caused what is known as “low network
density,” or few connections between actors.
There are favorable conditions in terms of
entrepreneurial talent, support organizations,
government participation and an evolving
investment landscape that could boost
the ecosystem, but just as long as those
connections are strengthened. The challenge
for the startup community moving forward is
how to increase its network density in order
to foster more collaborative, coordinated
initiatives that take into account the
ecosystem as a whole and focus on long-term
development and sustainability.
Costa Rican Culture

8. 14 15
Actors of the Ecosystem:
Who’s who.
A fundamental part of Mapping the Start-up Ecosystem is identifying the main actors that
in one way or another play a role in it. By visiting www.emprendimiento.cr you will find the
profile of all organizations that support entrepreneurs including:
1. What the organization does and their role in the community
2. The profile of entrepreneur and type of projects or industries they focus on
3.Thespecificprogramstheyofferandwhatentrepreneursmustdototakeadvantageofthem.
4. Their main contact information so you can easily reach them.
entrepreneurs
mentors
coworking
spacesgoverments
universities and
research centers
supporting firms
/ resources
incubators
accelerators
Events and
competitions
investors
To make it easier to find the right organizations, we have arranged them according to the stage of
the startup development their services are directed to, however in many cases organizations will
be found in more than one stage. Also notice that the stages outlined below are merely to provide
a guide; each start-up’s reality is unique and some entrepreneurs might find it difficult to draw the
line between one stage and the next.

9. 16 17
Costa Rican idiosyncrasy was a commonly
occurring theme during many of the
interviews. Cultural traits concerning
collaboration, how mistakes are perceived,
how much people trust one another, and
saving and investing habits, to mention a
few, underlie many of the issues identified as
challenges in the local startup ecosystem.
Low trust leads to low
collaboration
• High and low trust societies
• Idea stealing
• “I can do it myself” mentality
• Low trust among organizations
According to many interviewees, Costa
Ricans tend to be mistrustful of others, which
impacts their ability to collaborate.
The subject of trust in societies has been
amply studied,
1
and shows that social
capital—the ability of its members to trust
one another enough to form organizations
beyond family circles—is a key determinant
in a society’s ability to form large companies
and, at a macro level, prosperity. Latin
American countries, traditionally described
as low trust societies, show a tendency
for weak ties outside the family, strong
individualism, stark hierarchies and family-
run businesses—all characteristics observed
by our interviewees.
The classic example mentioned is the reluctance
of many entrepreneurs to share their ideas
because of the underlying fear that these will be
stolen. This skepticism and assumptions about
other’s trustworthiness create conditions in
which it is difficult for people to join efforts and
work together on a project.
During community events, few entrepreneurs
will openly share details about their ideas,
which limits their opportunity to connect with
others. Those who do talk more openly about
their startups are usually the founders of
more mature companies that have been in the
market for some time. These entrepreneurs,
however, usually present themselves more
as role models than as potential partners for
collaboration.
This lack of trust and collaboration leads
to a “I can do it myself” mentality, which in
turn creates an insurmountable challenge
for entrepreneurs, placing them in a position
where they must handle all areas of the
business—some of which they may be ill
prepared for.
As an alternative, when starting a business,
many entrepreneurs resort to previously
established ties with family members or close
friends as a proxy for trust. This culturally-
rooted practice has implications for the creation
of project teams, as many are based on familiarity,
rather than the talent the project requires (see The
Startup).
The difficulties in collaboration that stem from a
low trust cultural component are also present in the
way that organizations in the ecosystem interact
with one another (see The Startup Community).
Mostorganizations—fromincubatorstoprograms;from
eventstocompetitions—seemtobetryingtoaddressthe
community’sneedsontheirown,oftenrepeatingefforts
alreadypresentintheecosysteminsteadofjoiningforces
tocreategreatervalueforthecommunity.
FINDINGS
Costa Rican
culture.
a.
1
For more on the subject of trust in societies, refer to Trust: The
social virtues and the creation of prosperity by Francis Fukuyama.
Culture

10. 18 19
“The Costa Rican is very humble and
doesn’t like to brag. This is why we
don’t hear about many success cases”. -
Diego May, Junar
Low visibility leads to low
collective learning
• Keeping a low profile
• Invisible precedents
• Collective learning
Another cultural component mentioned
extensively in our interviews is that Costa Ricans
typically do not wish to “put themselves out there”
and become too visible. While some argue that
this is rooted in the characteristic humbleness of
the Tico, others point to the tendency to avoid
criticism and confrontation. What is certain, is that
cases of success or failure are widely unknown,
and widely unreported.
Low visibility has two implications: On one hand,
success stories—the source of inspiration for
young entrepreneurs and validation to incipient
investors—remain unknown to the public and,
therefore, do not fulfill their role of creating
precedents for the startup community. Second,
if failures and their subsequent lessons are
not shared with the rest of the ecosystem, the
opportunity to collectively learn and evolve is
drastically reduced. While in the case of failures,
there is an emotional component to how it is
culturally assumed (see Costa Rican Culture),
even in close circles, conversations about failing
and what was learned are largely absent.
Finally, many entrepreneurs reported that they
did not wish to become too visible because it
could expose them to ill-intentioned criticisms.
Resorting to a low profile may indeed protect
entrepreneurs from harsh critics, but at a very
high price; that of lost opportunities to connect
with fellow entrepreneurs, potential backers,
and service providers.
Culture

11. 20 21
Culture
Position towards mistakes: No one
wants to be “that guy” (or girl)
• The elephant in the room
• The taboo of screwing up
• Learning from the mistakes (of others)
To acknowledge one’s mistakes—and, further,
to learn from them—is one of the most
common pieces of advice that entrepreneurs
receive from mentors and seasoned business
people. It is, however, easier said than done.
Although there is no definite indicator, it
is generally perceived that mistakes and
lessons learned are rarely the subject of talks,
meetups or blog posts in the Costa Rican
startup community.
There are likely multiple reasons for this, from
wanting to remain positive and focus on what’s
working rather than what’s not, to wanting to
save face with the community. The fact is, there
are very few conversations regarding mishaps.
Of course, generally speaking, no one wants to
make a mistake, let alone admit to having made
one; but how the surrounding culture perceives
errors drives entrepreneurs’ behavior in a big
way. In the local startup community, the fact
that it is a subject that most would rather avoid
gives it a sense of taboo.
This behavior also seems to reproduce itself
in organizations that support entrepreneurs.
Metrics regarding successes and failures
are not made public, nor openly discussed.
Internally, each organization analyzes its
results and makes necessary changes. This
discussion, however, rarely involves other
stakeholders. One could argue that the
lessons of each organization is “its own
business,” and that sharing this information
could lead to a competitive disadvantage.
While this is a valid rationale, the tendency
toward individual work rather than open
collaboration is often the precursor for
further fragmentation of the community. Best
practices are not shared, and remain in the
hands of a very small number of constituents,
who can only impact the individual segment
of the community they serve.
The implications for entrepreneurs, as in the
case of low visibility discussed above, are
twofold. On one hand, if the subject of mistakes
is to be avoided or not openly shared, this
means that each startup risks shying away
“One of the main challenges
entrepreneurs face here is that, socially,
the environment doesn’t seem to support
entrepreneurship. When people take the
leap, they don’t always get full support
from their families or partners. In our
case, it has even interfered with our
recruiting efforts. Parents of candidates
have deterred them from joining a small,
unknown company.” - Alejandro Vega, Huli
The path of stability through
employment
• Stable, public-sector jobs
• Entrepreneurship as a career path
• Evangelizing entrepreneurship early on
When asked about the reasons that
more startups aren’t created each year, a
surprisingly high number of respondents
blamed what they believed to be a culturally
rooted tendency of Costa Ricans to seek
stability through employment with the
government or multinational corporations.
Though there is no definitive statistic, it is
estimated that at the end of 2013, the Costa
Rican public sector was employing nearly
300,000 people. Public sector wages are an
averageof150% higher than the private sector,
and it is widely recognized that public sector
workers receive outstanding benefits—factors
that help us understand its attractiveness.
Once in the workforce, the price of walking
away from a secure, well-paying job in favor
of an uncertain venture isn’t just economic,
it’s psychological. Costa Ricans who are
considering a startup may feel that family and
friends—even society as a whole—don’t yet see
entrepreneurship as a desirable career path.
Though this could be perceived as having a
subtle, almost negligible effect, but for some
entrepreneurs it has a very real impact.
To counter these effects, companies like
Huli have taken it upon themselves to create
a more supportive environment at home
by educating the spouses or parents of
employees about what startups are, and the
benefits of working for one.
ThetopicofentrepreneurshipinCostaRicahasonly
recentlybeguntoreachthegeneralpublic.Withthe
creationofincubators,supportprogramsandevents,
mediacoveragehasincreased.Studentsandyoung
professionalsarenowbeginningtoseeastartupasa
viablecareerpath.Thetopicisstillabsentfrommany
universityprograms,however,andentrepreneurship
coursesandseminarshaveonlybeguntopopupin
thelastfourorfiveyears.
When we compare our region to more
developed entrepreneurial ecosystems,
there seems to be a cultural theme where
people bet on an big employer state or
a multinational corporation, instead of
starting your own company or working
for a startup”.
- Allan Boruchowicz, Carao Ventures
“In Costa Rica and most countries in Latin
America, it seems that making mistakes has a
negative connotation, while in other places it is
celebrated; this changes the willingness people
have to take risks and their ability to learn
from failures”. - Diego May, Junar

12. 22 23
from the much needed internal discussion of
what’s not working and how to fix it. On the
other hand, by not sharing it with others, the
community as a whole is deprived of a rich
source of knowledge that could help propel it
forward by ensuring that new entrepreneurs
avoid past entrepreneurs’ mistakes.
A well-educated and trained
talent pool
• Big corporations and skills development
• Developers are the new rock stars
• Talent wars: David and Goliath
For the past two decades, Costa Rica has
been able to attract a growing number of
direct foreign investments, and has convinced
multinational companies like Intel, HP, IBM,
P&G, Amazon, McKinsey, Accenture, VMWare
and others to open or expand their operations
in the country. According to data from CINDE,
by 2013, nearly 87,500 Costa Ricans worked
for 250 multinational companies, many of them
in service industries, representing 5.8% of the
country’s GDP that year. The most commonly
cited reasons for choosing Costa Rica include its
high levels of education, widespread knowledge
of the English language, and cultural and
geographical proximity to the United States.
Without a doubt, world-class companies’
absorption of a large part of the educated
workforce has impacted the country’s labor
market. It has also impacted the startup
community. The recent downsizing of
Intel’s operation in Costa Rica in 2014, for
example, left 1,500 highly trained and skilled
employees facing the choice of either seeking
employment or starting their own company.
Many chose the latter. In this sense, several
interviewees reported that multinational
training programs are raising the skills of the
workforce, and that these skills could later
serve the creation of local companies.
Others, however, do not view the effects
of multinationals as positive for the startup
ecosystem. With vast resources, benefits
and perks, many of these large companies
are talent magnets, leaving local startups in a
tough position to compete for the talent they
need. This also creates distortions in the labor
market, where the demand for profiles such
as developers with a university degree by far
exceeds the supply, raising wages to a level that
no startup could dream of competing with .
2
In response, some local startups like Huli
have adapted their talent attraction strategy
by focusing on professionals who have the
“entrepreneurial spark,” and who favor a more
creative, relaxed and horizontal environment
in which contributions are heard and
bureaucracy is low.
For entrepreneurs, the talent wars between
multinationals and startups means an
increase in the cost of starting a venture.
With a higher cost of opportunity, many find
it harder to turn away a dependable salary for
the relative uncertainty of startup.
Lack of saving and investment
culture
• Saving habits and the cash to get
started
• What people do with excess cash
According to 2014 report from the World
Bank, Costa Rica has one of the lowest rates
of savings (represented as % of GDP) in the
nations for which there is data. Costa Ricans
not only lag behind developed nations in
their savings habits, but also Latin American
countries such as Mexico, Chile, Argentina,
Colombia, Nicaragua, Uruguay and Bolivia.
In very broad terms, if the majority of the
population is unaccustomed to saving,
entrepreneurs are less likely to have startup
capital of their own, and the availability of
“Costa Rica has many
advantages. We are the
perfect laboratory to
generate innovation-based
startups because technical
education is good, adoption
of technology is high and
we are a very horizontal
society. This helps a lot
in developing and testing
business models that you
can later scale”.
- Juan Carlos Martí, CIE TEC
2
During an informal consultation to several software startups, they reported the
rapid expansion of international firms in Costa Rica had raised senior developer
wages ranging from $4,000 to as high as $8,000 per month.
Culture

13. 24 25
“Red tape is one of the main obstacles to start
companies. Just obtaining a patent or health
permit, registering with social security (CCSS) or
opening a bank account requires huge amounts of
effort. This forces many entrepreneurs to remain
informal” - Claudio Pinto, Fairplay Labs
“casual” investors that comprise the friends and
family category will also be low. In more developed
ecosystems, the low capital requirements of very
early stage ventures are usually covered by savings,
either from the founder or his close circle. While
the investment supply is clearly influenced by many
factors other than saving habits (see Funding), these
habits serve as a foundation for many others.
Even among individuals or families with excess
capital that they could potentially invest in a new
company, there is not a widespread culture of
investment. In other countries like the United States,
where there is an active stock market, the general
public is familiar with the concept of investing,
either through passive vehicles such as pension
plans (401K’s) or through more active ones such as
stock trading. In Costa Rica, although it is possible to
invest via the Mercado de Valores, it is not a common
practice among the general public. Individuals with
excess capital usually keep it in very safe instruments
such as bank bonds, or in saving accounts.
Strong cultural bias toward socially-
minded businesses
• The social appeal
• Making money while creating impact
• Organizations with a social focus
Severalintervieweespointedoutthatanunusuallyhigh
numberofinitiativesintheCostaRicanstartupecosystem
favorsocialorenvironmentalcauses.Eventssuchas
Startup Weekend,forexample,usuallygearedtowardthe
youngergenerationsofaspiringentrepreneurs,seemany
projectsthataresocialinnature.
This apparent social/environmental inclination could
favor the development of social entrepreneurship
initiatives and impact investment funds, both of
which are still nascent in the region. According to
organizations that promote the field, one of the
main challenges is to create truly profitable business
models that generate both social and economic
value. Many of these initial projects focus extensively
on their social/environmental impact, while
neglecting revenue or profitability, making them
more similar to NGOs.
Organizations like VIVA focus their knowledge-sharing
platform, workshops and competition (the Stephan
SchmidheinyAwards), on ventures that prove to
have social and environmental impacts. Social Shot
is another initiative that specifically targets social
entrepreneurs, and has been growing in attendance
and reach. This shows the significant interest that local
entrepreneurs have in these types of venture.
Opportunities to develop startup-
friendly regulation
• The ease of doing business in Costa Rica
• The dilemma of informality
A nearly unanimous view from both entrepreneurs
and supporting organizations is the perceived difficulty
to comply with all of the regulations associated with
starting a business, expressing that it is usually a time
consuming endeavor that includes numerous forms,
complicated requirements and long lines.
Despite this perception, Costa Rica has been gaining
ground, according to the Ease of Doing Business
Index, which showed the country in 58th place in its
latest ranking, compared to 79th place the previous
year. Ease of obtaining credit and paying taxes are
identified as the major improvements.
However, aggregate measures such as the ease of doing
business index might not be painting the whole picture,
particularly in the case of startups. As interviewees
reported, the main problems lie in the fact that startups
are expected to comply with the same regulations,
and sometimes even the same fees, as much larger
companies. This causes many startups to work
informally, while trying to become sustainable.
Culture

14. 26 27
27
The Startup
Community.
b.FINDINGS
The Startup Community
The startup community is comprised of
entrepreneurs, mentors, incubators and
programs, entrepreneurship-related events and
competitions, universities and research centers,
accelerators, investors and firms that provide
services to starting companies. Although
individually each actor plays a role, in this
section we focus on systemic issues and how
cultural traits have determined the way these
players interact one another and the challenges
they have had as a community.
The SME – Startup distinction
• How they are different
• Why the difference matters
As the startup community develops, and new
initiatives to help entrepreneurs join in, there is
a rising discussion on what constitutes a startup
and what should be considered a traditional
small or medium sized enterprise, or SME. This
distinction comes in handy for government
programs that try to address the needs of both
types of companies with the same instruments,
or incubators attempting to define their value
proposition and target audiences.
As observed in our interviews, the general
understanding is that SMEs are traditional
businesses such as bakeries, retail shops, artisan
groups, or small restaurants, usually run by
the owners or their families. These businesses
are asset intensive, as they often need to
purchase some sort of equipment, and begin
producing income as soon as they open. Their
growth can vary, but is usually organic, as they
are competing in very crowded industries—
sometimes against very big players. The so-
called subsistence startups, or one-person
businesses, also fall under this category.
The term “startup” is used locally to refer to
innovation-based businesses with the potential
for fast growth and scalability in global markets.
Startups don’t always need a lot of assets, but
instead rely on knowledge and technology.
Their revenue models don’t always generate
income immediately, but network effects,
rapid adoption and global reach can make
their growth exponential. They are often cash
hungry and have longer return horizons on
investments.
While from the broad perspective of
entrepreneurship we consider both startups
and SMEs to be included, it’s clear that the
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15. 28 29
Mentorship opportunities also stem from
personal relationships; however, many
organizations are already doing a decent job
of providing access to these types of people,
making the personal network less relevant
when seeking a mentor. After all, it’s easier for a
person to donate their time to provide feedback
on a new venture than it is to invest $10,000 in
seed capital.
Individual initiatives don’t always
fit well together
• Chiefs of small tribes
• The lack of a collective memory
• Repeated efforts, diluted impact
• The competitive dynamics between
organizations
Thisstudy’smappingeffortrevealednearly50
organizationsorinitiativesthatareparticipating
inCostaRica’sstartupecosysteminonewayor
another(consultthefullmapofactorsatwww.
emprendimiento.cr).Aremarkablecharacteristic,
however,isthedegreetowhichthese
organizationsworkinisolation.Asdiscussedinthe
sectionCostaRicanCulture,theculturally-rooted
tendencytowardlowtrustandlowcollaboration
perceivedaboutentrepreneurscanalsobe
noticedamongprograms,incubators,accelerators
andeventorganizers.
This lack of coordination is clear in the fact
that actors at different stages in the startup
pipeline fail to recognize or address one other’s
criteria for supporting startups. Early stage
incubators and programs that could be feeding
growth stage accelerators or investment clubs
are missing the opportunity to create a smooth
transition for entrepreneurs, partially due to
the fact that they are working independently
from one another. Often, entrepreneurs that
finish early stage programs find themselves in
a sort of “no man’s land,” not being accepted by
later stage organizations, nor finding the right
financial support to continue growing.
Indeed,eachorganizationseemstohavebeen
evolvingandimprovingintheirofferingto
entrepreneursoverthelastfiveyears.However,each
isdoingsothroughitsowninternalprocessesand
experiences.Atroublingimplicationfororganizations
workinginisolationisthatthereisnopossibilityof
benefitingfromtheexperienceofothersinaway
thatallowsthecommunitytolearnfromitscollective
mistakes.Thisunspokenmistrustpreventsmany
entrepreneursfromseekingadviceoraskingfellow
organizationsforhelp,evenincircumstanceswhere
itwouldmakesense.
Another example of the lack of coordinated
efforts is the fact that various events are often
organized on the same day, competing for a
reduced audience and diluting the impact that
each might have on the community as a whole.
Though there may not be much money to be
made in helping emerging entrepreneurs, the
dynamics through which these organizations
relate to one another are those of a highly
competitive business environment. There is
little, if any, sharing of practices, communication
channels or lessons learned. While, in some
cases, organizations do compete for scarce
resources or funding (see Organizations and
their sustainability) it doesn’t seem to be the
only factor in play—since these opportunities
don’t come by often.
If the motivation isn’t financial, then why aren’t
organizations reaching out in search for help or,
at the very least, to coordinate efforts? Thereis
“There’s not a memoir that allows us to
learn from what has worked in the past and
what hasn’t. That’s why we keep making
the same mistakes” - Tomás de Camino, co-founder
of the Foundation Costa Rica for Innovation.
requirements, growth potential and the support
needed are very different, and a clear distinction
should be made in order to better serve each.
Based on our interviews, the local startup
community tends to favor startups or
innovation-based businesses in competitions,
incubation processes and events, and
entrepreneurs are encouraged to think beyond
the notion of SMEs.
For the purposes of this report, the term
“entrepreneur” is used to describe the person
who starts any type of business. While the term
“company” is used in the broad sense, including
both, the term “startup” is used specifically to
describe an innovation-based business.
The “who” before the “what”
• The project or the entrepreneur
• The limitation culture imposes on
imported models
• Vital personal networks
Business in Costa Rica, as in other Latin
American cultures, is based on relationships.
The boundaries between the personal and
the professional realms are often blurry and
in general, there is a concerted effort to get to
know the person you’re conducting business
with. In contrast with cultures that focus on the
project (“the what”), Costa Ricans tend to focus
on the person (“the who).”).
In one interview, the director of a local
incubator shared how he had to modify his
model, which had initially been based on
principleshehadseeninSiliconValley,precisely
becauseofthisdifference.“Theywerebasedon
projects,”heexplained.“Butforthelocalculture,
what’simportantiswho’sbehindtheproject.”Hehad
concludedthat,forthelocalecosystem,thevalue
chaindoesnotstartwiththeproductbut,rather,
withtheperson.Intheresultingmethodology,the
incubatoressentiallytriestounderstand“whothe
jockeyisbeforebettingonthehorse.”
In this context, personal networks—or access
to the right people with relative ease—becomes
crucial to make things happen. In the case of
the Costa Rican startup ecosystem, where
organizations are still developing and figuring
out how to connect and work together, our
research says that who you know plays a bigger
role in a startup’s success than what you know.
In the face of the country’s virtually non-
existent venture capital industry and scattered
angel investors who work individually (see
Funding), personal networks make the
difference between entrepreneurs who get
several rounds of funding and those who are
unable to raise enough seed money to get
started. When institutions do not yet act as
matchmakers between potential investors
and entrepreneurs, personal, trust-based
relationships fill in as a catalyst for funding.
Of the nine entrepreneurs interviewed, eight
had received funding. Of these, six had accessed
it through personal connections. This shows
that, at the earliest stages, when risk and
uncertainty are highest, a contact list of people
who trust you is the most viable alternative.
“I see good individual efforts but they are
not very collaborative. Each one seems
to prefer to be the chief of a very small
tribe”.- Carlos Mora de la Orden, Capitales.com
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16. 30 31
entrepreneurs interviewed reported having gone
through three or more incubation processes when
starting their companies, partly because of the
lack of clarity regarding how each could help—so
they just applied to find out. While, arguably, each
experience yields lessons, the years spent learning
how to start a business may be getting in the way
of these entrepreneurs actually starting one.
Organizations and their
sustainability
• The funding of an incubator in the absence
of seed capital
• Government support
• Links with academia and larger organizations
• Short-term thinking: survival mode
Perhaps the most pressing challenge facing
supporting organizations such as incubators,
accelerators, programs and events, is the need
to become financially sustainable. Because early
stage investment is not yet a common source
of funding (see The Gap: Seed or early stage
funding), incubators have been unable to rely on
a model commonly used in other ecosystems, in
which the organization invests in the entrepreneur
and gets a return once the startup is funded.
Charging entrepreneurs for their services has not
been a widely used practice, mostly because it is
assumed that entrepreneurs won’t have enough
resources coming out of the gate to pay for the
support they need. Some organizations, however,
such as the Founder Institute, operate under the
premise that if entrepreneurs are unable to pay a
small fee for a startup launch program, they won’t
likelybeabletoincorporatetheirbusinessandface
the expenses associated with founding a company.
(For costs associated with every available program,
see the mapping at www.emprendimiento.cr ).
UnlikeotherLatinAmericancountriessuchasChile,
governmentfundinghasneverbeenaconstant
sourceoffundingfororganizationsinCostaRica.The
onlyrecentexceptionbeingaperiodbetween2013
and2014,duringwhichtheprogramCapitalSemilla
oftheBancadeDesarrolloinitiativecreatedasource
ofrevenueforincubators,whichhelpedsomeof
themintheirinitialyears.Undertheprogram,each
incubatorwouldnominatestartupstobefundedfor
amountsupto$100,000.Ifselected,theorganization
wouldbeabletokeepasmallpercentageofthe
funds,openinguparevenuestreamformanystarting
incubators.However,theprogramwashaltedafter
twoiterations (see Government money),leaving
manyorganizationswithoutasignificantsource
ofincome.Thishasforcedmanytoreinventtheir
businessmodelandexplorenewwaystofinance
themselves.
Incubatorsstemmingfrompublicuniversitiesoften
receivetheirsupportintheformofstaff,facilities
and,insomecases,seedmoneyforincubated
startups.However,thistypeofassistanceislimited,
whichdrivesthemtofindself-sustainingmodels
thatprovidefinancialindependence.Whilethe
servicesofsomeincubatorsremainfreetothe
entrepreneur,asinthecaseofUNAEmprendedores,
otherinstitutionslikeUCR’s AUGEhavebegun
toexperimentwithatier-pricingmodelinwhich
studentsarecharged(ifanything)lessthanworking
professionalswhocanaffordtopayfortheservices.
In a scenario where incubators and early
stage programs remain reluctant to charge
entrepreneurs, government or institutional
economic assistance continues to be scarce and
seed investment can’t provide a return, their
economic sustainability is fragile. This forces them
to operate in an extremely lean manner, with small
staffs and limited resources.
This situation also leads to short-term thinking in
terms of their relationships with other actors of
the ecosystem and, to some extent, to view these
actors as competition for the limited resources
available. As an example, one interviewee stated
that she had contacted an organization to express
interest in merging their individual projects to
create a joint one. The subject of funding was the
first to come up, and when she told the contact
that she had secured some funds, he quickly
steered the conversation towards his organization
selling its services to hers. Sensing more interest
in the short-term gain of accessing funds than in
Many are trying to do the same
thing and we are not linking
our initiatives together. In our
case, for example, we prefer to
concentrate on generating more
deal flow, our most important role
in the ecosystem, rather than try
to build an investment network.”
Luis Alonso Jiménez, Auge
littleconsensusontheanswertothisquestion.
Somepointtoego-drivenpersonalitiesthat
wanttobeinthespotlightwhiletheytriumph
overothers.Otherintervieweessuggest
it’smerelythateachorganizationbelieves
toostronglyinitsown“secretrecipe,”and
thereforeisn’tinterestedinlisteningtoor
sharingitsformulaforsuccesswithothers.
The undifferentiated and, in some cases,
extensive supply of options within the
startup ecosystem causes confusion among
aspiring entrepreneurs, who have difficulty
understanding what each organization aims
to do, and how they can help. Many of the
“Incubators or accelerators should be more open: if there’s a
workshop or course, entrepreneurs from other organizations
should be invited too. Allowing others to see how they do
things and share those practices helps everybody because you
incorporate different points of view.”
- Juan José Muñoz, Open Future / POOM
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17. 32 33
Intervieweesfounditextremelyhardtoestimate
thisnumber;however,itwaswidelyconcededthatit
couldn’tbemorethan500.Evenifthisistheamount
ofstartupslaunchedlastyear,itwouldputCosta
Rica’sstartupdensityataround10.4.
It is then possible to argue that, although some
of the perceived lack of quality of Costa Rican
startups might be due to inexperience, it’s clear
that there are not enough initiatives—both in
absolute terms due to the size of the market, and
(particularly) in terms of startup density. Simply
put, very few startups are launched each year.
A low volume of projects has many implications.
First, although all programs and incubators
have selection processes, the lack of volume in
applications could, in some cases, force the bar
down. This drives the organization to devote
already scarce resources to startups that might not
be ready, or might not result in anything scalable.
This, in turn, keeps them from striking the success
that drives credibility and gains them further
support. Second, the low volume of startups means
a low demand for service providers who could
eventually support young companies, making a
resource base difficult to develop. In more mature
ecosystems, the resource base that serves startups
has surged from the aggregated demand that
comes with scale.
Few organizations are in a position to address the
so-called critical mass problem, since it’s necessary
to start early on—as early as school. Developing
an entrepreneurial mindset from an early age is
what organizations like the Ministry of Science,
Technology and Telecommunications (MICITT)
are trying to do by working with young people to
encourage them to consider entrepreneurship
as a viable professional option. These efforts are
obviously long term, but are indispensable for
feeding the top of the funnel.
“Because most organizations depend on the
same limited pool government grants to survive,
they spend more time trying to secure those
funds for themselves than working to prove that
they can really provide value to the startups in
the ecosystem and prove their reasons to exist.
Therefore, sustainability of most actors is very
fragile, anyone can disappear at any moment”.
- Allan Boruchowicz, Carao Ventures
true collaboration, the idea was abandoned
and both went their separate ways. Examples
like this one show that the pressing economic
challenges might be tied to the factors inhibiting
long-term, sustained collaboration within the
startup community.
The critical mass problem
• Small markets and economies of scale
• A matter of numbers
• On startup density
• The problem with low volumes
• How to feed the top of the pipeline
Costa Rica is a fairly small market. With just 4.8
million inhabitants, reaching economies of scale
is a challenge for any industry. According to
our research, the development of the country’s
innovation and startup creation capacity is
largely influenced by scale.
Entrepreneurs, policy makers and directors
of incubators agree that, generally speaking,
projects don’t seem to be at the desired
level of quality. A common theme during the
interviews was that “there aren’t enough
good projects.” This could be a quality issue, in
which inexperienced entrepreneurs are still
learning and figuring out how to create good
scalable startups. Or, it could simply be, as many
interviewees suggested, a matter of numbers.
Statistically, there simply may not be enough
startups to produce a super star.
Justasareference,thestartupdensity(the
numberofstartupsper100,000people)in
theUnitedStatesreached130.6,accordingto
the2015 Kauffman Index ofStartupActivity.
Whilenooneistrackingnational-levelstatistics
forCostaRica,agoodindicatorofthenumber
ofstartupscreatedistheaggregatenumber
ofprojectsthatgothroughavailablesupport
programs,incubatorsandaccelerationprocesses.
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18. 34 35
werealsomentionedasshortcomingsofmany
events.Inmostcases,thereisaguestspeaker,
usuallyanentrepreneur,whoshareshisorher
storywiththeaudience.Openmicsafterwards
veryseldomattractparticipants,soattendants
endupplayingapassiveroleandbeingonlymildly
engaged.Arguably,thisimpactsretention—the
prerequisiteforcommunitydevelopment.One
possiblesolutionposedbytheintervieweeswas
todesigntheeventsinawaythatislessfocused
onlisteningtooneperson,andmoreaboutsharing
experiencesinahorizontalformat.Muchlike
workshops,eventscanencourageparticipantsto
bepartoftheexperience,ensuringthattheyare
participant,ratherthanspeaker,focused.
Startup Competitions and their
role in providing visibility and
access to resources
• A showcase for startups
• An inefficient source of funding
• Validation and credibility
In the same way that events have been sprouting
up in recent years, startup competitions have
also increased in number. Of the six competitions
identified in the current mapping, five had their
first edition in the past two years alone.
Accordingtoourinterviewees,competitions
currentlyserveseveralpurposes.First,they
helpcreateawarenessaboutentrepreneurship
amongthegeneralpublic,whichpushestheentire
ecosystemforwardbyengagingmorepeoplein
thesubject.Bymakingstartupsvisible,aspiring
entrepreneurscanfindinspiration,rolemodelsor,
simply,thevalidationthatstartingabusinessisa
viableoption.Thisvisibilityalsohelpsengageother
stakeholderswhoareusuallynotinvolvedinthe
ecosystem,suchasprivatecompanies,whichare
takingnotesandfindingwaystoeithercontribute
totheecosystemthroughsponsorshipsorto
incorporateinnovationandentrepreneurshipinto
theirownprograms.
Thesecondpurposeisthatofbecomingaproxyfor
resources.Manyoftheentrepreneursinterviewed
wereluredtoparticipateinseveralcompetitions
bythepossibilityofwinningthefirstprice,usuallya
modestamountthatcouldbeusedasseedmoney.
Butcompetitionsareaninefficientfundingsource,
astheprizesofferedbylocalorganizationsare
typicallynotmorethanafewthousanddollars,
andthosewithaninternationalreachandlarger
prizesusuallyrequireseveralqualifyingrounds
andregionalcompetitionsbeforetheawardis
granted—aprocessthatcouldstretchinmonths
andtakeawaylotsoftimeandfocus.
However,competitionscouldserveanotherpurpose,
whichistoprovidevalidationandgaincredibility.
Winningacompetition,evenifnomonetaryprize
isinvolved,canhelpentrepreneursbuildtheircase
infrontofinvestors,acceleratorsororganizations
abroad.Inaddition,themediaexposurecanputthem
inthemapforconsumersandpotentialpartners.
One of the pioneers in competitions in the Costa
Rican ecosystem is Yo Emprendedor. Since its
beginnings in 2008, it has reportedly analyzed
1,400 business opportunities and trained up to
950 entrepreneurs.
Coworking spaces
• Permanent cross-pollination
• A new concept in Costa Rica
• The sustainability challenge
Justaseventsservethepurposeofcreatingconnections
betweenpeoplefromdifferentbackgroundsandskill
sets(seeEntrepreneurshipeventsandtheeffectsof
cross-pollination)coworkingspacesprovidethesame
opportunityinamorecontinualmanner.Whereasevents
comeandgo,andareusuallycenteredaroundaspecific
topic,thesecollaborativespacescreateapermanent
environmentforentrepreneurstomeetandshareideas.
Though still scarce in Costa Rica, organizations
like Impactico are betting on the effects of
collaborative spaces in bringing actors of
the ecosystem closer together and creating
“We need a critical mass of innovative
startups to spark things up. However, it is
not only a matter of encouraging people to
take the leap and become an entrepreneur,
it is also about pointing them to the right
resources and guiding them in the process”
- David Bullón, Director of Innovation MICITT
Entrepreneurship events and the
effects of cross-pollination
• More events, more discussion about
entrepreneurship
• Same old group of buddies
• The value of consistency
• Engagement and participation as a path
to retention
Every startup ecosystem event fulfills the very
specific and important role of cross-pollination:
bringing different people together around their
interest in entrepreneurship. The rationale is
that people with different profiles—designers,
business administrators, engineers, developers
and others—rarely have common spaces where
they can meet and share ideas. These events
create opportunities to find inspiration and
meet people to collaborate with.
EventsintheCostaRicanecosystemvaryinfocus
andformat.Asentrepreneurshipbecomesmore
mainstreaminthecountry,however,theyhave
undoubtedlybeengrowinginnumber,aswellas
inaudiencereached.Nineeventswerelaunched
inthelasttwoyearsalone,withexpectationsof
becomingperiodical.(foracompletelist,seethe
mapwithallactorsatwww.emprendimiento.cr).
Despitethegreatthingsthateventsaccomplish
bybringingtheentrepreneurialagendatothe
public,manyintervieweesagreedthatthese
effortsshowalackofdiversity.Perhapsduetothe
combinationoflowcriticalmassandtheisolation
anddisconnectionunderwhichmostorganizers
operate,manyenduphostingthesamegroupof
people.Whilethiscouldbeservingtostrengthen
thegroup’scommitmentandidentity,itimpacts
diversity.Aswithotherfactors,theaffiliation
criteriaforjoiningeventsseemstorevolvearound
familiarityandfriendship,morethanthepurpose
ofmeetingnewpeople.
There are, however, other perspectives on the
impact that events are having on the ecosystem.
For another interviewee, the value should not
necessarily be measured by the number or
type of attendants, but in terms of continuity
and consistency. In this sense, initiatives that
have been around the longest, such as First
Tuesday, have carved out a space precisely
because of their continuity, and their underlying
community, the meetup channel #chepetec, is
one of the largest in the country.
An initiative launched in 2015, called Story
Tellers, bets on a format that invites all kinds
of professionals—from entrepreneurs to
chefs, from corporate employees to actors—to
share their stories and inspire others. With
storytelling at its core, the program not only
seeks to entertain and connect people, but also
to spread the entrepreneurial mindset.
Alackofstructureandalowlevelofparticipation
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19. 36 37
transparently, the transactional nature of the
approach reduces the possibility of building
a trust-based relationship. Entrepreneurs,
sometimes fearing that a more experienced
business person will take advantage of them, pass
on the offer, resulting in both parties missing out
on the opportunity to work together.
Resource base: Service providers
can’t always adequately serve
startups
• The different needs of startups
• Pro-bono and the exchange of services
• Equity-based compensation
• The problem services paid by government
funds
A significant determinant for how hard it is
for entrepreneurs to launch a business is the
resource base they have access to. Every startup
needs legal, accounting, graphic design, web
development, banking, payment processing, social
media management and other services. However,
these young companies often can’t access
these services if the providers don’t adapt their
offerings to startups specific needs.
In Costa Rica, incorporating a new business
can cost entrepreneurs anywhere from $500
to $1,500, depending on the firm they hire.
Intellectual property advisory, one of the most
relevant services when developing a new
product or technology, can cost thousands of
dollars. While there are currently no legal firms
specializing in startups, there are examples of
firms that have begun to serve this segment
by tailoring their offerings, making them more
accessible to entrepreneurs. Arias & Muñoz,
for example, has partnered with local research
centers and incubators to provide intellectual
property advisory to startups. Sfera legal has
partnered with programs such as the Founder
Institute to provide participants with cost-
effective legal assistance.
In the case of services such as graphic design, web
development, social media and communication,
there are many options for entrepreneurs,
since in these fields it’s common to find young
professionals who not only better understand
the startup reality, but in some cases are
entrepreneurs themselves. It is common to
see pro-bono work or the exchange of services
with little or no money involved. In addition, an
abundant talent pool makes it fairly easy to find
professionals willing to donate their time to be
part of a startup, or to freelance for a small fee.
Payment processing, banking and other financial
services are probably the least in touch with the
needs of a startup. Numerous requisites, time
consuming processes and, most of all, difficulties
in processing online payments, have driven local
entrepreneurs toward global solutions such as
Stripe and PayPal.
In an effort to make costly services more
accessible to entrepreneurs, some firms have
explored models seen in other ecosystems, in
which the company works for equity participation
rather than upfront compensation. This has had
synergies. Coworking spaces aim to resolve
two important needs of entrepreneurs and
independent professionals: first, that of
having an office-like space in which to work
and meet clients without the overhead of
actually leasing a place and paying utilities;
and second, to connect with the community,
meet other like-minded people, and be part
of events and other activities. This second
aspect of the value of coworking spaces
is often overlooked, and there have been
precedents of organizations that default
to desk rental simply because they do not
provide their customers enough connections
to the startup community and, thus, fail to
become a relevant space in the ecosystem.
While in other cities around the world
coworking spaces have been present for
over a decade, the concept is fairly new for
Costa Rica, which gives pioneers the task
of educating potential customers on the
advantages of the model. Like any other
industry, this requires resources, whether
in terms of time or marketing budgets. This
is hard enough for any entrepreneur, but
even more so for a coworking space founder
facing high investments in fixed assets such
as furniture and equipment to run the place.
This leads to similar sustainability challenges
as those faced by incubators. In the case
of coworking spaces, there is no issue with
charging customers for their services, but
there might be still less demand than that
required to sustain an asset-intensive and
capital-consuming business. Diversifying
beyond space rental is a strategy that other
coworking spaces have tried, particularly
in Latin America, where the environment
is similar to that of Costa Rica. Offering
workshops targeting private companies,
seminars, and services required by
startups such as accounting, social media
management and others, have been common
revenue streams to supplement the model.
Mentors and their supporting
role
• Mentors as connectors
• Giving first
A vital part of every startup ecosystem,
mentors are traditionally experienced
entrepreneurs who openly share their
lessons and contacts and with less
experienced ones, usually for the sole
interest of helping out.
Mentors, however, can be hard to come
by for an entrepreneur who is just getting
started and has not yet developed
connections within the community. In
Costa Rica, not all programs or incubators
incorporate the participation of mentors,
so proactivity and growing your personal
network is step one in finding a good mentor.
One program that focuses strongly on
connecting entrepreneurs with mentors
is the Founder Institute. Its local network
is comprised of 40+ mentors that donate
their time to listen and provide feedback to
the entrepreneurs who join their program.
Often, these connections generate further
value in the form of continued mentorship,
the acquisition of new customers and, in
some cases, joint ventures.
Although the interviewees reported that
most mentors assume the role selflessly, in
the spirit of helping entrepreneurs, there
are cases where prospective mentors
approach startups with the promise of
investing or looking to get a good deal on
the young company’s equity. While this
is not necessarily a problem if handled
“Our resource base for startups is still weak. We
lack companies willing to work under conditions
that are aligned with the startups’ needs and
development stage, such as lower entry prices,
equity or stock options deals, etc. Accessible
tools and software are not widely known”. -
Allan Boruchowicz, Carao Ventures
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20. 38 39
mixed results, the main challenge being the
reluctance of local entrepreneurs to concede
equity, even at stages when the business is not
yet in place (see On sharing risk and equity…).
Other strategies include partnering with
assistance programs or grants, in which the
company providing the service is paid by a
third party, usually a government institution.
The main criticism for this model is that it
creates incentives for professionals to go after
the funds, rather than focusing on creating
value for the young company. According
to one interviewee, this breeds all sorts of
opportunistic “experts” in entrepreneurship,
innovation and business development, which
end up hurting the startup community by
focusing on the short-term gains.
Connectors: Minding the gap
between entrepreneurs and
investors
• Unfamiliar territory for both
• The function of matching expectations
• Trust by proxy
Almost unanimously, the interviewees agreed
that venture capital for startups is still in its
early stages in Costa Rica. Though there are
enough wealthy individuals and families with
the potential to become investors, the deals,
especially at an early stage, aren’t happening
(see Scattered angels). As reported by the
interviewees, most prospective investors
come from family businesses and traditional
industries, and are not very familiar with
the valuation methods, accustomed equity
demands and investment horizons associated
with startups.
Entrepreneurs still have little understanding of
the dynamics of investing and what investors
are looking for (see Lack of understanding
about private investment). Although best
practices from foreign ecosystems are widely
available online, few entrepreneurs take the
time to learn how to handle a round of angel or
seed investments, or even define their funding
strategy. The few that do, have the task of
sharing what they’ve learned with potential
investors, as it is still uncharted territory.
To bridge the gap of unmet expectations and
the lack of investment knowledge, some actors
in the local ecosystem have begun to fulfill
an intermediation role, seeking to educate
both sides in order to match investors and
entrepreneurs. Investment clubs tied with
accelerators are the clearest example of
such organizations, though individuals with
connections on both sides of the investment
market also perform this role.
Successfully gathering a group of investors
around a club, while also supporting startups
that are prospects for funding, accelerators
such as Carao Ventures have been among the
first in the ecosystem to help overcome the
local gap between investors and entrepreneurs.
Thisroleisparticularlyimportantduringthis
earlystageofthedevelopmentofventurecapital,
whenbothinvestorsandentrepreneurscan
benefitfromabetterunderstandingofhowthe
processworksandwhatthebestpracticesare.
Trustinthisintermediationisoftenthegluethat
holdseverythingtogether,asbothsidesseethe
connectorassomeonewhoislookingoutfor
themandadvocatingfortheirbestinterests.
An important caveat is that, though we call
this process intermediation, it doesn’t follow
a strictly transactional logic and, although
individual connectors in some instances do
benefit financially from their role, most often
opportunities to connect parties are more
circumstantial and relationship based than a
deliberate attempt to profit.
“Locally, processing payments
is too complicated and there are
only a handful of options. We
had to incorporate the company
in the United States so we could
process payments using Stripe.
That means we eventually have to
report income in the US and pay
taxes on it”
- Vinicio Chanto, Slidebean
“We are lacking more
connectors, people that can
bring together investors
and entrepreneurs”
- Juan Carlos Martí, CIE TEC
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21. 40 41
Reinventing the wheel: A lack of
connection with more developed
ecosystems
• The bridges to U.S. ecosystems
• Craft solutions
• The few that have been out
• The knowledge transfer function
Asdiscussedabove,actorsinthestartup
ecosystem—bothentrepreneursandsupporting
organizations—seemtobeoperatinginindividually,
withlittleopportunitytolearnfromoneanother’s
bestpracticesandexperiences.Thisalsoseemsto
applyatamacrolevel,inwhichlocalactors(witha
fewexceptions)don’tconsiderexperiencesfrom
otherecosystemsasasourceofknowledge.
Opportunities to connect to more mature
ecosystems can be driven by the same factors
that attract many multinationals to Costa Rica,
including its cultural and geographical proximity
to the United States, the prevalence of English
and the high adoption of technology. These can
serve as bridges to ecosystems in the U.S. cities
Ofcourse,everyecosystemdevelopsunderits
owndeterminantsandconditions,andculture
playsasignificantroleinhowstakeholders
interact.However,thereismuchtobe
learnedfromtheexperiencesofotherstartup
communitiesaroundtheworld,eveniftheydon’t
sharethesamecharacteristicsonthesurface.
These“bestpractices”cansaveentrepreneursand
organizationssignificanttimeandresourcesby
helpingthemfigurethingsoutmorequickly.
Accordingtoonelocalentrepreneurwe
interviewed,thevalueoflearningfromthe
experienceofotherswasoneofthemost
importantlessonsacquiredinthefouryears
sincelaunchinghisstartup.“We’vemadealot
ofmistakesalongtheway.Ifpeoplewithmore
experiencehadshowedustheropes,wewouldn’t
havereceivedsomanypunches.Thatwouldhave
savedusalotofresources,particularlytime.”Now,
hemakesahabitofconnectingwithotherstartups
locallyandabroadtoconstantlyseekfeedback,
shareexperiencesandlearnfromthem.
In spite of this, so far there are examples of
startups like Slidebean, Junar and Leaf that
have successfully connected to accelerators or
investment in US and UK startup ecosystems. In
the case of Slidebean, the team has participated
in Startup Chile, Dreamit Ventures in New York
City and 500 Startups in Silicon Valley and
the experience, according to Vinicio Chanto,
allowed them to find their path to growth:
The elusive success story: A
precedent the community is
waiting for
• In search for the Costa Rican Waze
• Startup purists and the success stories of
the 90’s
• The Keylor Navas effect
• A home run for investors
Theelusivesuccessstorythatcouldprovide
inspirationforentrepreneursandearnstartups
credibilityamonginvestorsis,accordingtomany
interviewees,yettocome.Whetherthisisdue
tothehistoricallylowprofileofmanysuccessful
entrepreneurs,thelimitedmediacoveragethe
topichasreceived,orthelackofconcretesuccess
stories,thetruthisthatthecommunityisunable
toidentifyaCostaRicanequivalentofUber,Waze
orSpotifyasanexampleoflocalstartuppedigree.
TherehaveindeedbeensuccessfulCostaRican
startupsinrecentdecades,butthelowvisibility
discussedabovehaskeptthesecaseslargely
unknowntothegeneralpublic.Somearguethat,
whileentrepreneursfrompreviousgenerations
didsuccessfullycreate,growandselltheir
companies,theyweren’tnecessarily“startups”
inthestrictsenseoftheword.Oneinterviewee
describedacrucialdistinctionbetweensoftware
companiesthatperformoutsourcedworkfor
developedmarkets,andstartups,whichdevelop
theirownproducts.Whiletheformerisessentially
aserviceprovidedatalowercost,thelattergains
itscompetitiveadvantagefrominnovationand
actuallyresolvingaproblem.Ifyouagreewiththis
distinction,thenyoulikelyfeelthatno“superstar”
startupshaveemergedfromthelocalecosystem.
However,severalfoundersoflocalcompanies
haveundoubtedlymademillionsuponexit.In
anycase,neitherstartupsnormoretraditional
companieshavebeenvisibleenoughtobecome
thesuccessstoryeveryoneaspiresto.
Forentrepreneurs,theprecedentofastartup
thatmadeitbigisn’tjustasourceofinspiration.
Equallyimportantitisthevalidationthat
entrepreneurship,hardasitcanbe,doespayoff.
Thisisparticularlysignificantintheearlystages
ofecosystemdevelopment,whenstartingone’s
owncompanyisn’tacareerpaththatmany
youngadultsconsider.JustasKeylorNavas
demonstratedthataCostaRicancanplayamong
thebestintheworld,manythinkarunaway
successstoryfromourstartupecosystemis
what’sneededtoboostthecountry’snext
generationofinnovatorsandentrepreneurs.
For investors, a success story—particularly
if it was funded locally—would be proof
that investing in startups pays off. The high
valuations, extended investment horizons and
level of risk involved in early stage ventures
could be balanced by that one example of an
investment that provided outrageous returns. A
common saying in the venture capital industry
is that out of every ten startups an investor
chooses, six will likely lose money, three will
more or less break even, and one will make up
for all the losses. It’s one thing, however, to be
familiar with the saying, and entirely another to
have seen that one “home run” or, better yet, to
know the fellow investor that helped hit it.
“Many efforts to support entrepreneurs
are ‘craft’ solutions. We’re attempting to
solve local problems that organizations
in other ecosystems abroad have
already solved successfully.” - Josué Fumero
“Because there are no success cases, there is no
credibility among investors. And if there are,
they are unknown. Parties involved in private
transactions don’t have any incentive in having
the deal be known, so in the end nobody finds out.”
- Paul Fervoy, Miweb
“Participating in world class
programs is very tough
because they challenge at a
whole different level. While
in Costa Rica you might
be celebrated for a small
achievement, over there,
you are one of the little ones.
But it is this toughness that
allowed us to grow 25X after
one of the programs.”
- Vinicio Chanto, Slidebean
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22. 42 43
Somebelievethattheseconnectionswith
morematureecosystemsarethekeytospeed
thedevelopmentofthelocalone.Whilesome
incubatorslikeCIE-TEChavebetonlearning
fromforeignecosystemstoreinventthewaythey
supportentrepreneurslocally,themaindriverof
thisknowledgetransferiswithoutadoubtthe
entrepreneursthemselves.Byfocusingnotonly
onhelpingthemtoresolvingtheirchallenges,but
alsosharinglessonslearned,theseambassadors
couldserveastheconnectorsthelocalecosystem
needs.
An umbrella organization
• A united front for lobbying
• A more powerful platform
The disconnection between the actors
within the ecosystem and their narrow
focus on their specific role, limits their ability
to see the bigger picture and consider the
needs of the community as a whole. During
policy discussions, for example, individual
members represent the needs of their own
organizations, rather than acting as a united
front. As one government official put it, as long
as the community lacks representation as a
community, its advocacy and lobbying capacity
is virtually nonexistent. Here, disconnection is
truly hurting the ecosystem. Being unable to
solve the organizational challenge of uniting
behind a common agenda, the members of the
ecosystem limit their influence on public policy.
Twointervieweespointedouttheneedforsome
typeofumbrellaorganization,underwhich
stakeholderscoulddiscusstheneedsoftheentire
community,defineaunifiedagenda,andadvocate
fortheirinterestsfromamorepowerfulplatform.
Thisassociation(orfederation)couldprovide
thepoliticalparticipationcurrentlyheldbysome
chambers,andfinallyallowentrepreneursto
influencepublicpolicyinameaningfulwayforthe
startupcommunity.
“Little by little we have to
connect the few startups that
we have with more mature
ecosystems so that they can
better solve their challenges.
Ideally these entrepreneurs
will be actively involved with
the local startup community
so they can share some of
the best practices they find
abroad”. - David Bullón, Director
of Innovation MICITT
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23. 44 45
Ideal stage of life to start a
company
• Launching during your 20’s
• The opportunity cost of the 30’s
• The advantages of mid-life
entrepreneurship
We interviewed entrepreneurs from different
age groups—from 20-somethings to those well
into their 50’s, and the stage of life had clearly
been a key determinant in the decision to start
their own company.
For young entrepreneurs fresh out of college
(or even still studying) the decision to launch
a business was not a particularly difficult
one. Most of the cases reported were still
economically dependent on their parents,
and had few responsibilities, making the risk
of failing a less costly one. The majority of
these ventures begin with little or no money,
and the entrepreneur’s lack of experience is
often made up for by the support obtained
from organizations such as incubators or early
stage programs, , and a lack of experience
was somehow compensated by support
from organizations that typically serve
entrepreneurs who are under 30 years old3.
Though unmeasured in Costa Rica, worldwide
studies have shown the failure rate among
young entrepreneurs is commonly higher than
for their older counterparts.
For those over 30, facing the risks associated
with starting one’s own business is more
difficult, as economic needs grow with personal
decisions such as marriage, buying a home
or having children. These entrepreneurs
also reported that the cost of opportunity
was higher. In oth gh salary and the comfort
it afforded. They also, however, identified
many advantages to having started the
entrepreneurial journey later on in life. Work
experience and contacts within the industry,
for example, increased the chances of success.
Financially, via savings or access to credit, they
were also less dependent than their younger
counterparts on external funding.
Finally, for those entrepreneurs over 45,
economic stabilityhad allowed them to better
manage risk. Here again, experience and contacts
also seem to have improved their chances of
success. Within this age bracket, however,
most interviewees reported that theywere not
“first-timers,” so, while theymight have started
a companyin their late 40’s or 50’s, theyweren’t
coming from a situation of regular employment.
These trends are, of course, not unique to the
local startup ecosystem. The same tendencies
can be observed in cities around the world.
What is particular to this ecosystem, however,
is how the risk of starting a business is handled
in the various stages of life, in light of the
cultural traits described in the section “Costa
Rica and its Culture.” For instance, the decision
to start a company is tougher for entrepreneurs
who would be walking away from a secure,
well-paying job, particularly when coupled with
The emotional price of becoming an
entrepreneur
• The lonely path
• Being the goalkeeper
Choosing to start a company is, without a doubt,
a life changing decision. Leaving the comfort of
a stable salary, risking your savings and asking
others to join you in the adventure without any
guarantee that things will work out, can have an
emotional downside. Unlike a demanding job, as
an entrepreneur, you are ultimately responsible for
the wellbeing of the company and its team, and that
can be difficult to handle.
As discussed in the section Costa Rican Culture,
the local society is still relatively unfamiliar with
entrepreneurship as a career choice, and close
networks such as family and friends don’t always
understand or support the entrepreneur. This can
make a startup venture feel like a very lonely path.
All of the interviewees agreed that, although exciting,
leading a companytakes a toll on other areas of
their lives. Long hours make it difficult to find time
for family, friends or other activities. For three of
the entrepreneurs interviewed, having a supportive
familyor spouse makes all the difference, and they
suggested that negotiating beforehand with loved
ones that will be affected bythe choice of starting a
companyshould be a top priority.
The entrepreneur.
c.FINDINGS When I was an employee there
was also lots of work but it wasn’t
equally stressful because now I’m the
goalkeeper. With a startup there’s stress
when things are going badly but there’s
also stress when you are growing,
there’s always stress! What helps me
is talk to other entrepreneurs to let off
some steam” - Alejandro Brenes, Enertiva
Entrepreneur
3 This may have more to do with the fact that most incubators are linked to universities, rather than an explicit
intention to support young entrepreneurs.

24. 46 47
extremely slow progress, or simply never
getting off the ground because their founders
keep waiting for them to grow before quitting
their dayjob.This chicken or the egg problem
leaves manyentrepreneurs with the challenge
of balancing their short-term income needs with
the time their startup requires.At this juncture,
manyentrepreneurs point to angel investment
as a workaround.As Eric de la Goublaye of the
companydeLaGuayaba explained, “I can’t focus
100% on the startup, because I keep having to
offer services to make some moneyon the side.
If I had some funding, I wouldn’t have to juggle so
manythings to earn an income.”
An alternative to this resistance to commit full-
time to the startup, otherentrepreneurs advocate
for the “part-time as a bridge” strategy.The
founding team of Slidebean reported that they
followed this formula in the earlystages of their
venture, when moneywas tight and theyhad
notyet raised capital. Bytaking on consultancy
projects, theywere able to ease the pressure of
the startup producing sufficient income for them
to live on.
Anotherpracticementionedinreferencetothe
dilemmaofwhetherornottoleaveyourdayjob,
isasortof“pre-launchacquisition,”inwhichthe
entrepreneurasksalargecompanytostakethe
projectanddevelopitinhouse,removingany
riskforthefounderbutcompletelylimitingthe
upsidebyturningovercontrol.Inafewexamples
provided,theentrepreneurseffectivelybecame
thecompany’semployee,andthestartupideaa
productwithinit.Thistacticallowstheentrepreneur
toworkonwhateverheorshelikeswithoutever
takingarisk.Manyargue,however,thatitonly
createsvaluefortheacquiringcompany.
On sharing risk and equity: The
loner problem
• The missing co-founder
• The erosion of good will
Our research indicates that, paradoxically,
despite what could be perceived as a healthy
dose of risk aversion, when it comes to opening
up a company to external shareholders, local
entrepreneurs have a bias towards keeping it to
themselves. This decision could be influenced
by various conditions, and may not be simply a
matter of preference.
Bringing people onboard, whether as co-founders
or investors, is clearlya decision in which trust
plays an important role. Outlined in the section
on Costa Rican Culture, low trust leads to low
collaboration; the cultural tendencytowards
skepticism and distrust gets in the wayof
collaborating with potential co-founders and
striking deals with potential partners.
The investors interviewed reported having met
with entrepreneurs who were unwilling to share
details about their projects and had givenvague
responses to questions.This, of course, results
in the investors lacking sufficient information to
make investment decisions. More importantly,
it stifles the relationship.According to our
interviewees, a defensive attitude resulting from
mistrust or framing the encounter as purely
transactional renders most of these attempts
unsuccessful.
Several entrepreneurs, on the other hand,
explained that the main reason why potential
investment meetings go awry is because
of investors’ outrageous equity demands
(see Scattered angels). As with any new,
the social implications they could face in the form of
skeptical spouses or family members.
When to leave your day job: The dilemma
of the part-time entrepreneurship
• Seeing if it works before jumping in
• Part-time as a bridge
• The corporate safety net
Closely related to the perceived cultural tendency to
favor stability through employment (see The path of
stability through employment), several interviewees
referred to what they felt was a general attitude of
local entrepreneurs towards risk. Although it is outside
the scope of this study to determine whether the
risk profile of Costa Ricans is significantly different
from that of other nationalities, many members of
the community pointed out that very seldom do
entrepreneurs in incubators and early stage programs
devote to their ventures full time.
An example of this dynamic is provided by the Costa
Rica chapter of the Founder Institute. This program
pushes candidates to take the leap from employee to
entrepreneur through intense weekly assignments,
and by requiring them to incorporate their companies
in order to graduate. Faced with the long hours that
conflict with their jobs, up to 80% of participants drop
out and suspend their startup project.
This logic of “see if it works before jumping in” seems
to be applied by many entrepreneurs. The problem,
as the director of a local incubator pointed out, is
that it typically won’t work—unless you jump in with
sufficient commitment and dedicate enough hours to
make it happen. As a result, many ventures are making
“We still have many weekend entrepreneurs,
unwilling to leave their daytime job. Fear of
failure is a big part of it. People want to jump
in once they feel is somewhat sure the startup
is going to work” - Juan Carlos Martí, CIE TEC
Entrepreneur
50’s20’s AGE
+ Responsabilites
(family)
+ Financial
independence
(Savings or credit)
+ Experience
+ Contacts
+ Cost of
Opportunity
+ Support from
organizations
+ Economic Support
from family
+ Energy
+ Freedom to
experiment

25. 48 49
unregulated market, there are indeed wealthy
individuals who have the resources, but may
not have the venture capital experience or
familiarity with startup valuation methods to
come up with realistic equity demands. In one
case reported, in exchange for an early stage
investment of $50,000 in a software startup,
the investor demanded 70% of the company.
Unfortunately, offers like this are not rare
among individual investors outside of clubs or
accelerators. The short-term consequences,
of course, are the lost deals. In the long term,
though, the erosion of good will among
entrepreneurs who feel taken advantage of
breeds additional distrust toward investors.
Perhaps because of the combined result of a
cultural bias toward low trust, an unregulated
angel investment playing field, and bad
practices among a few investors, not many
entrepreneurs are choosing to share the
risk and the equity of their companies. This
makes growth organic and slow, and it makes
it harder for these entrepreneurs to abandon
primary income sources in order to fully devote
themselves to their startups.
Lack of understanding about
private investment
• Angel investment 101
• Educating investors
• How to approach investors
Most participants in the community would
agree that there are few known examples of
startups that have received private investment,
and the low visibility of such examples makes
it even harder for newcomers to understand
what works, what doesn’t, or even what the
basics of venture capital are.
While few local resources are available, there
are many online references of best practices
from other ecosystems, such as the Founder
Institute’s Startup Resource Vault and
Steve Blank’s Startup Tools. It is the general
perception of incubators, accelerators and—
particularly—investors, that local entrepreneurs
aren’t doing the homework of learning how
venture capital works, what a particular
investor might expect, and how to value a
company in its early stages. Coupled with some
investors’ rather limited knowledge of the same
topics, it is difficult for both parties to find
common ground (see Scattered angels).
One strategy employed by local startups
that have been successful at raising early
stage capital is to educate themselves so
that they can better share industry practices
with potential investors who might not be
familiar with them. While not every investor
is comfortable being “schooled” by a young
entrepreneur, in cases when the founder has
solid credentials or is referred by a trusted
source, this approach can considerably increase
the chances of reaching an agreement.
A final recommendation is that entrepreneurs
reach out to the country’s (albeit few)
investment clubs and accelerators in search
of best practices and how to get started
when looking for capital. Carao Ventures, for
example, shares best practices on how to
approach investors.
“Many entrepreneurs are looking for funding, but
aren’t yet ready for it. This causes a lot of noise
in the ecosystem and makes it more difficult for
everyone else, because it lowers entrepreneurs’
credibility in front of investors.”
- Eric de la Goublaye, De la Guayaba
“When we started to seek funding, the first
thing we did when approaching investors was
to explain how startups work and how they
are valued. In order to do this, we first had to
educate ourselves.” - Alejandro Vega, Huli
Entrepreneur

26. 50 51
the story of a startup that had traditionally
shown difficulties convincing its managers
(friends and family) to demand accountability
of one another or their teams. While the
company’s culture was as expected—
extremely positive, since everyone got
along—this same feel-good environment had
prevented management from confronting
employees when performance was low.
As one foreign investor observed, the
challenge of finding the right team isn’t just a
function of the founder’s inclination towards
family and friends. After having mentored
several entrepreneurs, this investor realized
that even when founders recognize the
need to fill the gaps in their team, it’s
difficult to locate them, as local networks
are still forming. “Say you need a good
business development guy. Where do you
look? LinkedIn?” Large corporations often
dominate regular job sites and, although
working for a startup is becoming more
appealing, a large majority of job seekers
are drawn to safe, stable positions with
multinationals or the government.
One possible solution to the challenge of
finding the right talent within the flexible
conditions required by a startup is to foster
more connections within the existing
participants of the ecosystem, beyond
monthly events. Currently, there seems to
be little interaction between members of
different organizations, which has limited the
possibility of both knowledge sharing and
service exchange. Creating common spaces
for entrepreneurs and freelancers to meet
on a regular basis—whether via physical
coworking spaces or online platforms—could
generate enough scale to facilitate more
effective match making.
Building networks (or further connecting
existing ones) so that people can share
ideas, locate potential partners and hire the
talent they need is viewed as a logical step
in the development of a startup ecosystem.
Again, visibility of one another’s abilities,
services and lessons learned, along with best
practices, is the key to collective learning
and the creation of value for the entire
community.
The quest for a business model:
How to turn an idea into a
company
• The idea that doesn’t sell
• Overlooking the business component of
the business
• Incubator support as a start
• Profitable social ventures
Ideas by themselves are of little value. They
only become valuable when paired with a
way of monetizing them by bringing them
to the market. This process is arguably the
largest challenge faced by local startups,
according to our interviewees.
In early stage programs or during the first
phases of incubation processes, many young
entrepreneurs enthusiastically pursue a great
idea with little regard for market demand,
competition, production costs and scalability.
Once a company is founded, chances are
that a co-founder or a team of staff will
join the entrepreneur. At this moment, the
startup begins to have unique challenges of
its own—from securing the required talent to
finding its path to its first sales and growth.
In this section, we will cover what our
research revealed regarding the difficulties
and opportunities faced by these young
companies.
Step one: Building the team
• A top reason for startup failure
• Two engineers, no business person
• The upside of friendship in company
culture
• The no-accountability trap
• Creating shared spaces to meet talent
“Building the team” is frequently mentioned
as one of the most important steps of
starting a company. In fact, it is considered
the top reason for startup failure, after a
lack of market need and running out of
cash. According to many of the interviewed
members of the startup community,
entrepreneurs often overlook this
component.
In relationship building, trust is king. As
previously discussed (see Low trust leads
to low collaboration), however, it seems to
be a scarce resource in the local ecosystem.
Entrepreneurs usually turn to friends or
family when looking for co-founders and
employees. This isn’t necessarily unique of
the local community, as it is seen in many
other examples around the world. What
might be distinctive in low-trust societies,
though, is the over reliance on this pool as a
source for partners and employees.
This has many pros and cons that impact
the dynamics of the company. The first
implication is that the teams are often
small—one or two friends; rarely more than
three. Second, they usually come from
similar knowledge backgrounds, as close
relationships often begin in environments
such as university or work. Combined, these
characteristics often result in unbalanced
teams that don’t cover the basics in terms
of talent requirements; there might be two
technical people and no business person, or
two science majors and no one who knows
about sales and marketing.
As a positively viewed implication, the
camaraderie that comes with friendship
makes it easy (and fun) for these co-founders
to work together, and the mutual trust
facilitates shared responsibilities and splitting
the equity. Two entrepreneurs reported that
the fact that their co-founder was a close
friend had allowed them to stick together
through the tough first months.
However, despite this positive atmosphere,
teaming up with family and friends can
create challenges in terms of the definition of
roles and accountability, as the dynamics of
personal relationships trump the professional
ones. As an example, one interviewee shared
The startup.
d.FINDINGS
“Startup teams are usually three buddies
from the same field. Usually they don’t
involve people from other disciplines, such as
business.” - Claudio Pinto, Fairplay Labs
STARTUPS