An entrepreneur’s guide to Brazil’s startup ecosystem
The past two decades have been marked by a period of sharp peaks and troughs for Brazil, the largest country in Latin America.
On one hand, the country has undergone an impressive economic transformation, which led to Forbes in 2012 naming Brazil “one of the most entrepreneurial countries in the world”. In 2000 Brazil’s GDP was ranked around 11th in the world at roughly $655.5 billion, and today it’s in the eighth position at roughly $2.5 trillion.
However in the last five years, Brazil has experienced an economic recession while corruption at the highest levels of business and government has stoked political and social upheaval.
Despite the roadblocks, there is no overlooking the potential the country holds for entrepreneurs. As the largest country in Latin America, startups in Brazil have access to a market with one of the highest levels of mobile saturation, a wide range of investment options from local and international Brazil-centric funds, and support from a government that has made driving business growth one of its key priorities.
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I recently had the opportunity to visit Brazil and put together a guide for entrepreneurs looking to explore the country’s startup scene.
Overview of the nation’s economy
Last October the election of President Jair Bolsonaro, referred to by some as the ‘Trump of the tropics’, signaled potential dark times for international businesses in Brazil.
However, in a recent article it’s argued that Bolsonaro’s election has, in fact, jumpstarted Brazilian financial markets. Investors’ confidence has been buoyed by the president’s promises to deliver hard-line economic reforms, tackle corruption, and reaffirm Brazil’s position as a global powerhouse with his pro-business agenda. This being said, while things might be looking up, there is still a ways to go from the two-year recession in 2015 and 2016, during which time the country’s economy decreased by nearly 7%.
A particularly bleak BBC News report highlighted the fact that during 2017 and 2018, Brazil’s economy grew by only 1.1% a year. Despite optimism early in the year, economists have halved their predictions for economic growth in 2019 to a rate similar to the prior two years. Slower economic growth doesn’t seem to be scaring off foreign investors, with a spike in startup capital investment. SoftBank recently announced plans to launch a $5 billion innovation fund in Latin America, with a good percentage expected to be invested into Brazil.
Over the last few years, the country has shot ahead in Latin America for VC investment, securing 73 percent of venture capital investment dollars across 2017 and the first half of 2018, with total of $1.4 billion.
A TechCrunch article illustrates how Brazil startups have the ability to scale quicker than in other neighboring countries, with startups like Creditas and Loggi raising $100 million+ series D rounds less than 4 years after raising series A funding, and real estate startup LYX, which connects land-owners with builders and buyers, aiming for an IPO this year.
São Paulo
São Paulo, Brazil’s financial and cultural hub, is the first stop for any entrepreneurs looking to Brazil. The sprawling urban behemoth is home to over 12 million people and accounts for more than 30% of the country’s GDP.
An estimated 3 million immigrants from 70 different countries live in the city. As Brazil’s unrivaled powerhouse of innovation, São Paulo is home to the most developed startup ecosystem in the country. Spotify, Airbnb, Google, Netflix, and Amazon are all in business alongside homegrown unicorns like Nubankand Quinto Andar. There’s also ride sharing firm 99, which was acquired last year by Chinese transportation app Didi Chuxing.
Startup organizations such as StartupGrind, SaaStock, and TechStars regularly hold activities in the city. Meetup.com shows hundreds of active tech and developer communities meeting weekly. This month for example, TechStars is running three separate events bringing together startups working in the education, health and AI spaces.
Cubo Itaú, founded by Itaú Unibanco and Redpoint eVentures, also offers a hub that regularly brings entrepreneurs, corporations, investors and universities together to improve cooperation and innovation. TheVentureCity, a growth accelerator aiming to bring equal opportunities to entrepreneurs around the world, also has an office in Sao Paolo that is led by Ricardo Sangion.
Google for Startups, The Founder Institute and Wayra all run programs locally, and other leading organizations include ACE Startups, led by Pedro Waengertner, IBREI, an institute led by Maurício Prazak that looks to support Brazil’s business connections to the international community, and accelerator Startup Farm.
There’s also an abundance of high-quality universities nearby, including USP, UNESP, and Mackenzie. Together they create a steady flow of engineering and technology talent, as do coding bootcamps such as Le Wagon and IronHack. Phil Alves from DevSquad told me that there is an abundance of senior development talent in Brazil compared to the rest of LatAm. And yet, many foreign companies still haven’t tapped into Brazil, in many cases due to the language barrier.
However with such big tech companies based in the city, it’s unsurprising that São Paulo takes much of the investment and talent from other regions too. The city is estimated to bring in more than 60 percent of startup capital nationally and basecamp for more than 2000 startups, including those such as Poppin, the country’s largest dating app.
For the city‘s size and presence, according to Jonathan Moed of Forbes, what’s notable is not only the sheer number of people in cities such as São Paulo and Lima, but the population density relative to the population in the rest of these vast countries, which enables companies to focus their operations on a relatively contained and finite area.
Other regional hubs
Rio de Janeiro, a city best known for its tourism, has undergone a transformation since approximately 2010 when local authorities started looking to get Rio on the map as a startup hub.
In 2012, Rio Negocios, the city’s PR agency, held a conference in London ahead of its Olympic Games with the aim of promoting Rio de Janeiro as “Silicon Beach.” Tech opportunities were showcased ahead of the games to be held four years later on its home turf.
While ‘Silicon Beach’ might be a grand term for the realities of its local ecosystem, the city does have components for a strong startup ecosystem. There is a steady flow of talent, local accelerator programs such as Entropia and government-backed Rio Criativo, and potential investors, thanks in part to Rio de Janeiro being a center for the oil and gas industry and the headquarters of national oil company Petrobras. Regular events like FuckUp Nights, Geeks on Beer, Circuito Startup, and Rio Info also offer a good starting point for entrepreneurs looking to make connections. Large coworking spaces like NEX also hold regular community events too. Three leaders and connectors in the startup community are Camila Farani of G2 Capital and Shark Tank Brazil, and Danilo Neves de Martins and Ricardo Motta.
A second region, Curitiba, which is often overlooked, is a wonder of modern urban planning in the southern state of Paraná. Since the 1970s, Curitiba has earned itself a number of titles including the “green capital”, being perhaps the only city in the world that can boast holding 50 square meters of green space for every resident.
Along with the recognition for its sustainable city planning, Curitiba has earned itself the title of the “most innovative city in the world” thanks to a blooming local tech and innovation scene that has been cultivated by forward-thinking local authorities. Curitiba was one of the first cities to launch bus-based rapid transit, which has since become common in other urban hubs. It was also the first to build electronic libraries known as “lighthouses” in poor neighborhoods, a model that’s been widely replicated.
Recently, the city authorities launched Vale do Pinhão, a program intended to increase access to education and resources to drive business growth and employment in the region. The signing of the 20 Curitiba Innovation Pact last December bound together 17 key enterprises and education and innovation entities with a view to making the Pine Tree Valley a world-renowned tech ecosystem. Global organizations like The Founder Institute, founded by Adeo Ressi and Jonathan Greechen, are active in the area, along with Brazilian accelerator ACE. Both run regular events to bring communities together.
The city also boasts success stories such as LYX, a real estate platform that has helped to construct over 5,000 housing units, Rentcars.com, a company that enables rental transportation, andContabilizei, an online accounting provider. The upcoming LYX IPO is expected to be a win for the city, enabling entrepreneurs to later re-invest resources back into the region.
The city of Belo Horizonte, which has the nickname “San Pedro Valley”, is also an important part of Brazil’s ecosystem due to the city’s startup veteran startup leaders and large student population. With four of the country’s leading universities, the city has an energy of a university town and the size of a larger urban hub.
Although many still leave for São Paulo, the ecosystem has a strong source of leadership, including Samba Tech CEO Gustavo Caetano. The city is also is host to Google’s national R&D office and is home to 16% of the country’s biotechnology companies. In 2012 the local government inaugurated BH-tec, a digital park that caters in part to entrepreneurs.
Conclusion
While Brazil is still recovering from the recession of 2014 and 2015 and corruption, the country’s flourishing tech and innovation scene offers a much-needed beacon of hope.
Investor confidence in Brazil does appear to be improving. One can only hope that the current administrations commitment to invest heavily in STEAM education programs becomes a reality. This would further the pipeline of talent needed by Brazilian startups and technology companies.
There is plenty of uncertainty in Brazil right now, however no lack of opportunity. If the current state of the Brazilian tech ecosystem is an indicator of any kind, Brazil is poised to strengthen its standing as a key player on the global stage.
