There are moments in which events, people and situations seem to conspire to trigger a revolution or, in minor proportions, a “disruption“, understood as a radical change in the way of doing something.
From many points of view, Brazil seems to be on the verge of becoming the protagonist of a geographical “disruption” in the digital world. China, USA and India are far ahead, but there is a buzz, a strong growth of digital initiatives and talents in Brazil. It may seem unlikely that a country with so many economic and social difficulties could be the nursery of many young startups on the frontier of new digital technologies, but it is what is happening and can represent a great opportunity for courageous and far-sighted investors.
What are the signs of this phenomenon?
- The great national and international investors are looking at Brazil as a place of opportunity to invest in digital startups.
The Japanese Softbank, one of the most innovative telecommunications companies and recently also the main shareholder of Uber, has decided to invest 5 billion dollars in Latin American startups (more than double the total venture capital currently available in the region). 140 startups are under analysis, 20 of which are already in the due diligence phase.
For Hans Tung, managing partner of GGV Capital, one of the largest investors in the world and with 13 “unicorns” in his assets, Brazil is like China in 2005, which is a huge opportunity. For him, the current inefficiencies of the Brazilian market are a great opportunity and Brazil has the know-how to find the technological solutions that must necessarily be developed locally.
Even large Brazilian investors, such as the Lehman group, are evaluating digital startup projects.
- Brazilian startups that have turned into “unicorns” (private startups with a market value of more than a billion dollars) are growing and in 2019 there will be new revenue.
Brazilian unicorns today are:
99: taxi service app, similar to Uber
Nubank: 100% digital bank
PagSeguros: devices for mobile payments
Stone: devices for mobile payments
Ifood: food delivery
Arco Educação: educational technologies
Gympass: app for access to gyms
In 2019 the experts of the sector expect the entry of new “unicorns”. According to a recent study carried out by KPMG and the consulting company Distrito, there are at least ten startups that can become “unicorns” in 2019:
Creditas: finance
Neoway: bigdata
ContaAzul: accounting
Ebanx: payments
Grow: mobility
Resultados Digitais: digital marketing
VivaReal: real estate services
Quinto Andar: real estate services
CargoX: logistics
Loggi: logistics.
- Some large Brazilian companies in traditional sectors are heavily investing in software development and new technologies.
For companies in traditional sectors (large-scale distribution, banks, construction, etc.), investing in digital technologies means not being left behind and losing space with innovative startups or more agile competitors.
An example is Magazine Luiza, a clothing distribution company: in 2015 it decided to invest in technology and today it has a team of 850 software developers and a market value of 7.6 billion dollars, a hundred times higher than that from 4 years ago
Even the large Brazilian banks, notoriously already very advanced from a technological point of view, are increasingly investing in the development of their own technologies and in the acquisition of promising startups.
The scenario
Unfortunately, contrary to what happens in the US and China, the environment in which new Brazilian startups are born and grows is not very favorable: a lot of bureaucracy to open (and close) a company, a very complicated and expensive tax system, few graduates in the STEM area (Science, technology, engineering and mathematics), and so on.
On the other hand, those that are problems can become opportunities for new entrepreneurs, just think of the benefits that new logistics solutions can bring to such a large country with a precarious infra-structure. For this reason there is plenty of room for growth for the “agritech” startups, aimed at increasing the productivity of the agricultural and breeding sector.
The same inefficiency of public services is becoming a great opportunity for those who are investing in digital solutions for the public administration.
Another favorable factor is the ease with which Brazilians generally adopt new digital solutions, such as internet banking and e-commerce.
Finally, one of the drivers of digital “disruption” in existence is certainly the resourcefulness and courage of young Brazilian entrepreneurs, easy to perceive by visiting the co-working spaces that are always more widespread in big cities or the seminars, events and conferences on digital and on innovation in general.
To have a more precise idea about this phenomenon, I recommend reading the study “Brazil Digital Report” made by McKinsey and made public during the conference “Brazil at Silicon Valley”, which took place April 8-9 this year at the Stanford University:
https://www.brazilatsiliconvalley.com/brazil-digital-report
This is a very thorough study, divided into 4 major chapters:
– macroeconomics
– digital perspectives
– entrepreneurship ecosystem
– sector deep dives (finance, health, education and government)
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