Despite a miserable macro-economic mix of circumstances, including the worst recession in almost 100 years, the biggest corruption scandal Brazil has ever seen, and calls for President Dilma Rousseff’s impeachment, Brazil’s tech industry is thriving.
Startups are churning out funding announcements as fast as the bad news pours in, with over $150 million in announcements this summer alone, Techcrunch reported.
Venture capitalist Anderson Thees, a founding partner of Redpoint eventures in Sao Paulo, says the e-commerce and web sectors have grown over 20% year-over-year, while Brazil’s GDP has stayed flat, and tech is all but guaranteed to keep growing.
Although only half of Brazil’s population is online, it’s already the fifth largest internet and mobile economy in the world, three of the top five markets for Facebook, Google and Twitter, and one of the fastest-growing smartphone markets globally—with another 100 million people starting to come online.
Last week, while Brazil reeled from Standard & Poor’s surprise decision to junk the country’s debt rating, the country’s top venture capital investors and entrepreneurs gathered in Sao Paulo to celebrate the launch of Cubo, a 50,000 square foot tech hub for startup entrepreneurs.
The not-for-profit venture between Redpoint eventures and banking giant Itau is the most ambitious co-working space aside from New York City’s Civic Hall, and provides office space for 250 entrepreneurs and fifty startups, across five floors of prime commercial real estate in Sao Paulo’s ritzy Vila Olimpia district—plus an auditorium for events, and a rooftop open to the public to encourage use of the space as hub for the tech community.
Funding Deals
There are no exact numbers on the venture capital investment in Brazil this year over last year, in part because Brazilian entrepreneurs (and their investors) are notoriously reticent to disclose investment rounds or dollar amounts. But venture capital investment in Latin America has grown over 800% since 2010, totaling over $650 million.
In Brazil, startups have been announcing at least one funding deal a week in recent months, as local and international venture capitalists have teamed up to invest at least $150 million across mobile, ecommerce, education, banking, shipping, services and security sectors this summer.
“What is a little odd, and very beneficial, is the way that the digital economy is faring through this crisis,” says Thees.
Redpoint eventures has announced six deals in recent months: seed investments in Olist, Escale and Intoo, a $3 million Series A investment with Accion’s Frontier Investments Group and QED Investors in BankFacil, and Series B rounds for digital marketing platform Resultados Digitais and data analytics firm Cortex Intelligence.
Better Opportunities
Thees says the total number of deals the firm is about the same as last year, but that the opportunities are better now that some of the Brazil buzz has died down. “Those guys that were jumping ship from a big company expecting to make a fortune in six months—that’s gone.”
“If crisis remains far too long, it could affect us,” Thees says, “but for right now what we have is a detachment between what we have in the startup ecosystem and the macro-economy. It would be better if we didn’t have it, but we might actually end up moving faster with it. Because when everything is great, people tend not to change behavior. People are more likely to pay attention to efficiency now, and they might be more willing to experiment with new things.”
BankFacil, an online lending platform that helps Brazilians identify and secure lower-interest financing, is one of the startups that is primed to benefit from the downturn by helping Brazilians save up to 70% on loan payments. BankFacil founder and CEO Sergio Furio says Brazilians pay ten to twenty times more interest on debt than American consumers: 120% on consumer loans (versus 11%), 300% for credit cards (versus 14%), and 58% for mortgages (versus 6-7%) and household debt represents about 25% of the Brazil’s entire GDP.
“We’re using technology to create efficiencies in processes that are extremely inefficient,” Furio says.
