Note: This is the first post in a four-part series on entrepreneurship in Brazil.
China and India get a lot of attention as growing foreign markets for entrepreneurs these days, but with the seventh-largest economy in the world, Brazil is important too.
When people think of Brazil, images of carnival, soccer and beaches probably come to mind. What people may not know is that innovation and entrepreneurship are growing rapidly in the country. In this series of four blog posts, I will introduce the current entrepreneurship ecosystem in Brazil, as well as some of the entrepreneurs, incubators and investors involved in this energetic and growing environment.
While I could have started this series by focusing on how Canadian startups can conquer this emerging market, it’s important to know your (Brazilian) customers, competitors and potential partners first.
When failing is hard(er)
But first, what about a samba? Samba Ads is a spinoff of the largest software-as-a-service online video platform in the world, Samba Tech, which began in 2004 as a mobile games reseller. Founded in 2012, Samba Ads just raised a $500,000 investment round from Brazilian, American and Israeli funds, and it has already delivered over 100 million video ads for Latin American and global advertisers within the region.
Gustavo Caetano, the CEO of Samba Tech, recently shared his experiences in a Brazilian magazine, saying that the faster you fail, the better it is. Sounds familiar, doesn’t it? But in Brazil, failing is more difficult than in other parts of the world and this difficulty has a name: daunting bureaucracy. It’s as complicated to close a business as it is to start one!
The complexity of Brazil’s regulations, laws and taxes, the challenges of accessing funding, the cost of labour, and the difficulty of hiring and firing are just some of the barriers Brazilians have to face in the world of entrepreneurship. Plus, the country’s protectionist attitude adds even more barriers for international information and communications technology entrepreneurs attracted by a market of 42.2 million online buyers (compared to 242 million in China).
Incentives for innovation
Will the launch of the $78 million Startup Brasil program, which is modeled after the Chilean initiative, help the boiling entrepreneurship ecosystem grow to the next stage? The program’s first round alone will integrate 150 information technology (IT) and services ventures.
Also, small technology companies under certain earning and staffing conditions could become tax-exempt if a recently approved senate bill becomes law. The government, which has been under pressure with nationwide protests over the country’s economic growth, may want to support even more job-creating initiatives. The IT sector is responsible for the largest slice of the job market for degree holders in Brazil with 48,700 jobs created in the last three years.
Growing beyond Rio
Innovation only represents 1.1% of Brazilian gross domestic product, but private incubators and universities have organized their communities and mobilized partners already—and not only in Rio de Janeiro and São Paulo, the two biggest business centres in the country. Cities including Joinville, Belo Horizonte and São José dos Campos are also investing in space and support in technology, aeronautics, health and agriculture.
In the IT, communications and entertainment segment, the startups mainly import foreign business models and adapt them to the Brazilian clients, such as Peixe Urbano, the Brazilian version of Groupon, which won TechCrunch‘s 2011 Crunchies Award for Best International Startup and has 16 million users and 1,000 employees.
Stay tuned for my next blogs in the series!