In less than twenty years, Brazil has undergone a development that has taken other countries half a century. Since the millennium, the country has made a broadband connection available to some of its most remote regions, thereby creating a generation of technologically ready citizens. On top of this, the financial crisis has changed the entire ecosystem and offered a lucrative opportunity for local investors.
Every ecosystem is unique. From country to country and city to city. In the same way, each story of their creation is also different. It varies across perspectives. This story about São Paulo’s ecosystem is told through the eyes of a serial entrepreneur who has established a fintech environment, and a Danish electronics engineer, who builds telecommunication towers in the Amazonas.
According to AngelList, the Brazilian ecosystem is by far the largest in all in Latin America, followed by the Mexican. The concentration of startups in the country’s most populous city, São Paulo, speaks for itself. More than 60 percent of the country’s startups call the mega-city home. Other important ecosystems in Brazil are Rio de Janeiro and Belo Horizonte, according to OECD.
It has been predicted that by 2050, the country’s economy will be among the five strongest in the world, which is why there is such a high number of companies and entrepreneurs who come to São Paulo to make long-term investment,s and get a foothold in a market where the opportunities are multiplying.
A financial crisis turned things around
The story of São Paulo’s ecosystem starts in 2010. The number of startups kept rising until 2014. The country’s middle class grew in these years, and Brazil joined India, China, and Russia under the acronym BRIC, used for those countries where the economies were the growing the fastest globally. In turn, a lot of startups directed their solutions towards the growing middle class and chose a B2CB2C (Business-to-Consumer) refererer til handel og forretningsforbindelser mellem virksomheder og individuelle forbrugere, i modsætning til B2B (Business-to-Bu More business model.
But the Brazilian tiger economy had sore paws when the financial and political crisis hit the nation in 2013.
“Before the financial crisis there was a tremendous growth in the consumer market,” says Flavio Pripas, CEOCEO betyder Chief Executive Officer og er den øverste leder i en virksomhed, ansvarlig for den overordnede strategi og ledelse. CEO’en rapporterer normalt ti More of the shared office space CUBO. “A lot of foreign investors started to come to Brazil to invest in Brazilian companies. But a national political and financial crisis in 2014 changed that, and also the investor and startup ecosystem.
“After that, the foreign investors left the country. That meant that a lot of local Brazilian investors started to find opportunities in that market. Meanwhile, customers disappeared and that killed off many of the B2C startups. That made room for some B2BHvad er B2B? B2B står for Business-to-Business og beskriver en type handel, hvor en virksomhed sælger produkter eller tjenester til en anden virksomhed. Dette More companies. Entrepreneurs and startup founders realised there were a lot of good opportunities when it came to making offers to established companies to help them be more efficient and save resources. Between 2010 until 2013 was a massive B2C cycle, but from 2014 onwards it has been B2B.”
CUBO is one of the city’s financial districts, Vila Olimpia, and is home to 56 fintechs. The shared office space is a joint venture between Latin America’s largest banks Itaú, and the American VC, Red Point Ventures.
“If you take a look at the companies in CUBO, 90 percent of them are B2B startups, which says a lot about the impact of the crisis,” says Flavio Pripas. “Big corporations are continually looking for ways to optimise resource use and how to open the door for more startups to find out how they can innovate and remain ahead of the pack.”
“The problem you solve in Denmark is not the same in Brazil”
Technological infrastructure is a prerequisite for an ecosystem to thrive. At the same time, it is paramount for startups to be able to act and rescale. Today the entirety of Brazil is covered in a solid 4G signal, even in the remotest areas of the Amazon rainforest. One of the initiators behind that infrastructure is the Danish electronics engineer, Jesper Rhode Andersen.
He has more than 18 years of experience from working for Ericsson and spent 16 of those in Brazil. Today he works in the Swedish Company, Hyper Island, and in both the Scandinavian and Brazillian ecosystems. He has witnessed many Nordic startups that tried to find happiness in the rapidly growing economy. He has seen both failure and success.
“In Scandinavia, we work with quality products, but it’s not necessarily a good idea to go to Brazil and promote yourself using Scandinavian quality,” says Jesper Rhode Andersen. “People won’t pay for that, and you can forget your business model and the problem you’re solving in Scandinavia. You have to unlearn everything you learnt about your product’s strengths and weaknesses in a western market context. Go down there and be open-minded. The problem you solve in Denmark is not the same in Brazil. In some cases, Brazilians are more receptive towards technological and digital solutions than westerners are.”
In Brazil, there is a software focus. Hardware is exceptionally expensive to import. It is possible to buy a Raspberry Pi but at three times the Danish cost. Electrical components are expensive.
Mobile first
“I came to Brazil in 1999 because the telecom industry opened up over all of Brazil,” says Jesper Rhode Andersen. “Before that, each Brazilian state had their operators. So when I started, there were 22 different operators, and national roaming was the next big thing. Those days, you had American standards which were similar to GSM.
”In Amazonas, Belem and Manaus are the largest cities in the Amazon, with multi-million populations, but there are many more cities with hundreds of thousands of population if you go deeper into the rainforest. We made an experiment with Telefonica in 2009 where we set up a 150-metre high mast in Belterra in the Amazon, where two large rivers met, but otherwise, it was in the middle of nowhere. We put a signal extender on the top so the signal could reach 170 villages, and we installed full capacity. Three weeks passed and, to Telefonica’s surprise, it was completely booked with traffic.”
Before 2009, they travelled to the bigger cities to sell their product. They quickly found out that there was a connection in the cities, and purchased new mobile phones that only worked in the cities. When the coverage was extended to outside the cities, it wasn’t long before everyone in the Amazon had a mobile phone.
Mobile telephony has been an important part of making the Brazilian economy more stable in outlying areas. It has given local business owners the ability to maintain their businesses and relationships with business partners.
It emphasises that in every company today, technology is a prerequisite for running a business. Creating access to an internet connection has therefore been high up on the list of the government’s priorities, which has also meant that the Brazilian population became very focussed on being able to solve problems with their phones from a very early age, and Brazil is now considered a mobile first market.
“If a man got himself a moped and a mobile phone, then he has his own taxi company,” says Jesper Rhode Andersen. You don’t buy a cellphone here because it’s nice to have, but because it is a basic thing for many small shops. Almost all traders have a WhatsApp symbol next to their phone number on the business card, meaning you can use the app for everything and everyone. 3G and 4G are available, and even more reliable than the fixed telephone network.”
