São Paulo Means Business
4 Ways Brazil’s Largest City is Building Nimble Startup Culture
São Paulo is f*&%#@! huge…
That was the first thing I found out… After booking my Airbnb on the outskirts of the city, I began to realize how enormous this place was, and how much money I would be spending on UBERs during my stay. Along with that observation, I started to noticed a few similarities between this behemoth of a city and New York City. As you walk down Paulista Ave, you will understand what I’m talking about. With vast amounts of commerce, big business and massive institutions, you will break your neck looking up at all of the buildings, and “scenery”…
So, what kind of environment does this create for startups? Huge industry, infatuation with bureaucracy, and this really cool movement of entrepreneurs who work inside corporations that are innovating top down. I met with a ton of leaders in the community who are making these changes to turn corporate dinosaurs into innovating machines. With a population of 200 million (and 20 million in São Paulo) it’s obviously a market worth exploring.
Coming to São Paulo I knew very little about Brazil’s startup scene. I knew about its enormous economy (the largest in all of Latin America with national GDP of ~$2.2 trillion USD), the heavy position it holds in international politics (BRIC), that I needed a Visa to visit as an American citizen (except for this summer due to the olympics), and the bit of Portuguese language I have been picking up over the past few months. Besides that I knew there was an awesome culture behind all of that with its infamous Samba dancing, mouth-watering Churrascos (all you can eat meat…) and my favorite — Caipirinha. There’s much more to this culture, this ecosystem, but right now this was what I would live in. I wanted to get a better glimpse at what was going on with startups here so I met with my colleagues on the ground.
My personal startup guide for the week was a friend named Jean. Throughout the trip he was able to explain this movement to me, walk me around the events where this was palpable, and introduced me to people who were turning the tables. We talked about the community, corporate innovation, accelerators, and startups here in São Paulo. The past few years have been very promising after years of economic decline — but at times we have to take things apart to make something new.
1.) The Community
“Here — the people are our treasure.”
— Fernando Tome: Community organizer, entrepreneur, and startup mentor in São Paulo
One of my first experiences in São Paulo’s startup scene was with the community. I don’t learn about the ecosystem by talking to those at the top. I normally get all my information from those men and women in the trenches. During my adventure I got to meet leaders from Germinadora, an innovative startup hub trying to change the concept of acceleration and incubation, various mentors (many corporate employees) in the ecosystem that spend their free time to support local entrepreneurs, and a ton of events that inspire innovation. My first thought while entering the city was “this place is too big for any startup to find the right help.” I was dead wrong.
One example: It was about 7pm on Tuesday. Jean had already invited me to a thousand and one events, “but this one is different”, he says. I accept and order an UBER. Once I got to the “networking event” I was immediately impressed. There were representatives from Techstars, 500 Startups, Aceleratec (ACE), Google, IBM — you name it — hell, even the Mayor of São Paulo was there…
“What’s this?” I asked Jean
“This event? — it’s different. There’re people from everywhere here.”
“Ah — it’s called SP Stars. It’s ran by the municipality and a groups of startup mentors from São Paulo. They all come to mentor local startups.”
“Really? Is this normal?”
“Man — c’mon. There’s like a thousand events going on here for startups. This is a new thing they started, but you’ll see, there’s an event like this every day of the week….”
I was amazed by the amount of support these startups had. It was essentially speed dating for startups. Mentors would sit at their designated table with a placard showcasing their expertise and company logos; all the meantime, passionate entrepreneurs would take turns shuffling between them. This was huge for local startups, and something inspirational to see for myself. I wanted to know why these corporate employees were giving their free time to help their fellow Paulista. That was what I would soon figure out — they all agree — from executive to developer — they are here to solve problems together.
2.) Corporate Innovation
The government is a big deal here. It also creates a lot of unneeded bureaucracy. For example, if you’re trying to receive international investment….good luck. With the recent economic crisis, heavy taxes, political instability, and bureaucratic business practices, the private sector has become the only hope for local startups.
With a decreasing export economy in Latin America, Brazilians are looking to diversify and create new opportunities to stimulate the economy — and as we know, startups are perfect for that. Various corporations here in Brazil are investing in innovation events, innovative startup companies, and finding new ways to champion these initiatives. It’s basically R&D on steroids. Without touching the government’s budget, various startups are able to increase the country’s job growth, create solutions for an enormous demographic, and scale their businesses internationally to bring wealth back to Brazil.
One of our colleagues, Marcia Giolfieri, is a local entrepreneur and leads various initiatives with IBM Think Lab, AngelHack, and many others to create a culture where access to these resources are a arms length aways.
“Partnerships between large corporations and startups will provide a new environment for proactively spotting new ideas on the edge of a disrupting a new space. Ideas can be protected from the organization while also being supported by it.”
— Marcia Giolfieri: Local Entrepreneur, AngelHack Ambassador, and IBM Think Lab Leader
To see a startup ecosystem working top down instead of starting from the bottom (insert Drake voice) is revolutionary. In a world where corporations rule, it’s nice to see they’re more human than most think and are working to collaborate with the little guys. I personally believe that this partnership will help execute more ideas by opening up more opportunities. Fingers crossed!
3.) Smart Capital & Accelerators
As we find in a lot of startup ecosystems, Accelerators are tools used for churning new businesses that make ripples in a stagnant industries. Here in São Paulo it’s essentially the same as the rest of Latin America — a constant struggle to find more in-country investment from VC’s, the urge to break down the bureaucracies that small businesses face, and the bitter-sweet reality that most venture capitalists will take your talent with them to Silicon Valley in their carry-on luggage. Regardless of that thought, smart capital has been in Brazil since the early ‘90s and has been building on top of itself ever since. With exists such as B2W Digital, Rocket Internet’s Dafiti, Nubank, and the crowd favorite — Easy Taxi — it’s easy to tell that even better days are ahead.
In São Paulo I had the chance to meet with thought leaders in venture capital such as Startup Farm, Aceleratec (ACE), Wayra, Latam Founders, Techstars, and even new concepts such as Germinadora. While discussing the initiatives here in Brazil, it became relevant that the passion for startup culture was here to stay and had a lot of support from the VC community.
What’s so cool about Brazil’s startups that makes people want to invest? Marketplace. With a population of 200 million you have an enormous target market that is highly active on mobile and online. Imagine finding a small solution for an every day problem and having a million people behind it, easy!
“Brazil has a rapidly growing consumption-oriented middle class that now represents over half of the population. Approximately ~88 million users are currently online, and by 2016 broadband and 3G penetration are projected to increase by 32% and 103% respectively. Brazil’s internet users are also highly engaged: despite having only 46% of its’ population online, Brazil ranks number two worldwide in numbers of users of both Facebook and Twitter.”
— HOOLIE TEJWANI, R. BLAIZE WALLACE, NICK HOLDA, AND SEAN BONAWITZ: Venture Beat Brazil
Many firms are putting their hand in the pot and getting involved with investing here in Brazil. While participants include both global-scale VCs making investments out of global funds as well as a handful of U.S. and European VCs who have committed resources and/or dedicated funds on the ground, it’s been obvious that the locals have been busy creating their own ways to instigate change and put smart capital to use. The amount of firms active in Brazil is rapidly evolving with key players such as Redpoint eVentures (130mm fund), Flybridge Capital, Sequoia Capital, and a handful of Brazilian nationals that are here for more than an exit.
At the same time, you can hear echoing throughout the community that it’s simply not enough. What’s next for Brazil in terms of VC? What will this do to such a heavy economy in a globalized world? Nobody is quite sure at this point, but I can imagine it will send ripples through Latin America and give a glimpse of hope to various other emerging economies.
Brazil as a whole is the largest startup ecosystem in Latin America. That’s a fact. To be more specific, São Paulo is hands down the most developed startup hub in this massive country regardless of it’s tough business environment, bureaucratic legal system, and especially difficult expat culture. Outside of all of this mayhem is a beautiful pasture for startups. With thousands of problems to solve, and millions of people to benefit from innovation, it’s a heavily sought marketplace.
We have a ton of startups that vary from industry to industry. The largest, or the unicorns, have made their mark as well. There seem to be a few trends like the epidemic of copy-cat business models that make sense (and money), *cough* Dafiti *cough*, the new banking model by Nubank, or even the cultural approach of competing with ride sharing and utilizing the current system of taxi drivers — Easy Taxi. Although people are waiting for the next unicorn, I think what would be best for the ecosystem to not focus on that one big fish, but rather, an entire ocean of eager startups.
Here we have access to smart capital as we explained, but more important, loads of talent! Engineers are everywhere and they’re the best at what they do. Regardless of taxes and inefficiencies in starting or shutting down a business, the amount of startups that stay in brazil is high. There are huge markets here, lots of issues in the daily lives of millions, where thousands of solutions can be thought up and implemented by highly talented people. If you’re from Brazil, you don’t need to leave. Unfortunately, working here as a foreigner is a challenge. Hell, if I could stay here, I would probably eat at Brazilian steakhouses and drink Cachaça everyday…
We can go into the history of Brazil’s startups, but that’s for another day… We could talk for hours about the dot com boom, first venture capitalists, and the complicated political economies and environment here that have built this culture. From my experience, and looking forward, we are in a very exciting time. Brazil has a lot of hope and passion looking forward, and a ton of people rubbing together their forks and knives…
It’s the responsibility to the culture and infrastructure to keep that momentum going, which I have no doubt about. Seeing how enamored the community is with startups, the amount of support they are receiving from various influencers, corporations, and venture capitalists in the region, it goes to show that they are in this together, and for the long haul.