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Why foreign startups are interested in Brazil?

Posted 2018-08-28

Entrepreneurship has never been so prosperous in Brazil. Many Brazilians have left traditional careers recently to invest in innovative businesses, and are coming up with startups every day.

Brazil is currently one of the countries around the world with the greatest potential for entrepreneurship. Many people who have left or lost their jobs have taken a stake as an entrepreneur – not only in the franchise industry, but also in consulting or even food trucks, that have spread in Brazil in recent years.

Other new entrepreneurs have begun to look at the technology sector. In recent years, there has been a growth in the number of technology startups. The evolution in this sector is mainly due to the development of technologies with cloud computing, which has reduced costs and expanded the data processing and storage capacity of these companies.

According to the Brazilian Association of Startups (ABStartups), which represents the companies of the sector, in 2012, the entity gathered 2,519 startups from all over the country. In 2016, that number jumped to 4,273 companies.

Although it is a timid figure compared to the scenarios in Europe and in the United States, the growing volume of capital available for investment and of qualified professionals willing to bet on startup companies point to a continued growth.

Besides stimulating the economy locally, this arouses the interest of foreign startups who consider investing in Brazil. See below reasons that attract these startups from abroad to Brazil:

Brazil, the largest startups ecosystem in Latin America

In recent years Brazil has faced a very tough economic and political situation, but despite this, the country is still a big bet for new business, especially for startups.

São Paulo

São Paulo is not only the largest city in Brazil, but it is also the fifth largest city in the world and the most populous city in the Southern hemisphere.

São Paulo is the financial center of Brazil; the city alone contributes 50% of the volume to Brazil’s banking sector. The city hosts Tech giants like Uber, Airbnb, and MercadoLivre, which built offices in São Paulo, inspiring the next generation of entrepreneurs.

Startups in São Paulo receive support from many public and privately-funded entrepreneurship initiatives located in the city, including the Google Campus accelerator, Innovatech, SEBRAE, and Startup Farm. Most local and international venture capital firms also have an office in São Paulo, including Monashees, Kaszek Ventures, Valor Capital, Redpoint eVentures, and Canary.VC.

Rio de Janeiro

Rio is Brazil’s second largest city and one of its most popular tourist destinations. Rio de Janeiro is the founding place of the most-downloaded taxi app in the world – EasyTaxi – and of the fintech startup, Zoop, which was recently acquired by Movile.

While it may be harder to access capital in Rio than in São Paulo, several VC firms and government programs have made their way to Brazil’s second largest city.

Belo Horizonte

Belo Horizonte, is the sixth largest city in Brazil and the founding place of several startups. The capital of Minas Gerais estate is a major player in the local startup ecosystem. The Brazilian Startup Association, a lobby group and support community for entrepreneurs with over 4,000 member startups and 38,000 entrepreneurs across the country, was born in Belo Horizonte. This kind of organization characterizes the city as a crucial player in building Brazil’s entrepreneurial culture.

Florianópolis

The state of Santa Catarina, where Florianópolis is located, created a technological association called ACATE in the mid-1980s to consolidate support for tech companies growing in the region. As the ecosystem matures, Florianópolis sees more and more tech startups calling the city home, including ContaAzul (recently raised US$ 30M), Soluz Energia, and Ozon-In.

Another reason that makes Santa Catarina an attractive place for startups are the tax benefits that the state offers for technology companies. Such incentives have made the state stand out as an ecosystem for startups.

Accelerators

Accelerators are companies with programs that help to leverage startups, speeding up the process so that these companies gain market. For such, the accelerators apply methodologies of mentoring, consulting, training and experimental experience, besides providing access to investments and resources.

In return, they usually acquire participation in the companies, that vary from case to case. According to FGV (Getúlio Vargas Foundation), of the estimated 230/250 accelerators in the world, 41 are in Brazil – which represents 16%.

The accelerators have already leveraged more than 1000 startups, contributing with about R$ 51 million in investments. This means that, on average, around R$ 45 thousand to R$ 255 thousand are distributed by company with up to R$ 3 million on a single investment.

Read more in our blog:

Myths and truths about opening a startup in Brazil

Author's post: Europartner Accounting

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