Indisputably, entrepreneurship in Costa Rica has been rising previously few years, and there are numerous initiatives which were contributing to it. From marketing strategy competitions to prototyping occasions and from structured entrepreneurship coaching packages like Founder Institute, to the emergence of dozens of incubators it will appear there’s by no means been a greater time to take the leap and begin your individual enterprise.

Native startups at this time want many issues apart from funding, however it’s this sole element that grabs most of their consideration. They apply to incubators as a method to acquire seed capital from the Banking System for Growth (Sistema de Banca para el Desarrollo) or acquire entry to angel funding; they flock in lots to business-plan competitions in hopes of successful the prize of a pair thousand {dollars}; or, if they’re courageous sufficient, they undergo the ordeal of navigating the forms of native banks as a way to get versatile loans or microcredits.

In case you are a possible angel investor, there are numerous alternatives value exploring as a way to fulfill a few of this capital demand, so long as you’re taking some issues and precautions earlier than embarking in your journey. Earlier than you put money into an area startup, be sure to put together to deal with these 4 perks – and quirks – of our entrepreneurial ecosystem:

4 issues to know earlier than investing in a Costa Rica startup

1. Native entrepreneurs nonetheless have a tough time understanding the investor’s perspective

On account of the shortage of enterprise capital markets in Costa Rica and the truth that companies listed below are hardly ever funded by third social gathering funding (versus financial savings, loans, and your uncle Francisco’s cash), many entrepreneurs don’t communicate the identical language as buyers.

There may be nonetheless a notion that frames funding as a “assist” or one thing that they need to get out of fine will. The enthusiastic founder in entrance of you may not assume to debate threat towards return, funding horizon and exit technique, , so that you would possibly must create a standard floor on which to barter. From my expertise, displaying entrepreneurs how different startups overseas bought their funding helps them perceive the tradeoffs related to bringing an investor on board.

2. You would possibly want to take a position extra than simply cash

Though many entrepreneurs will inform you that cash is all they want, be sure to assess the younger firm’s wants completely earlier than taking the checkbook out. The workforce may not have all the talents required to run the corporate, there is likely to be lack of information of the market they’re attempting to serve, or they is likely to be over-optimistic about their money flows.

Both means, you may need to step in and make investments your time, contacts and data to make it take off. Though somebody would possibly argue that’s the job of buyers in all places, that kind of lively involvement is likely to be much more wanted in a rustic like Costa Rica.

3. The pure tendency to over-value the businesses is likely to be extra accentuated right here

Even at very early phases of the mission (typically as early as the concept stage), entrepreneurs could have excessive hopes for his or her firm’s valuations relating to letting fairness go. Maybe extra widespread regionally than in different startup ecosystems, you would possibly discover what we may name the “emotional premium on fairness,” or the surplus in worth that the proprietor expects you to pay to compensate for all these nights he labored so arduous, the time away from his household, and the distinctiveness of his thought.

The reality is that till confirmed on the market available in the market, concepts by themselves are hardly ever value a lot, and certainly 50% of an organization is best than 100% of an thought, however since new entrepreneurs don’t at all times act (strictly) rationally, you would possibly must drive a tough cut price.

4. Competitors is low

On the intense aspect, enterprise capital remains to be in its infancy in Costa Rica, and though there are many folks with cash, there’s not a tradition of investing in startups (most buyers come from inside households). Many native buyers don’t perceive the inherent dangers and rewards of investing in startups and subsequently ask for hefty circumstances, resembling outrageous percentages of fairness that entrepreneurs hardly ever agree with. So when you preserve your head cool and roll with the idiosyncrasies, you would possibly strike your self a great deal.

Costa Rica may not be the Silicon Valley of Latin America (but), however we’re transferring forward. There’s a really educated workforce that’s now discovering incentives and packages to assist them innovate and switch their concepts into viable companies. One piece of the puzzle that also appears to be unresolved is the funding, and that’s the place many angel buyers have a possibility. Is it the fitting alternative for you?

Randall Trejos works as a enterprise developer, serving to startups and medium sized firms develop. He’s the Co-Director of the Founder Institute in Costa Rica. You’ll be able to comply with his weblog La Catapulta or contact him by way of LinkedIn.

This text first appeared in 2015