The Startup From Ipanema
With the FIFA World Cup just months away and the Olympic Games following in two years’ time, the international spotlight is on Brazil like never before. And for those of us who have championed Brazil’s technology industry for many years, it’s exciting to see that entrepreneurs and investors alike are starting to look at Brazil and Latin America in a new light.
Our technology industry is seeing something of a resurgence, with almost 3,000 startups active across the country. But if you’re looking to invest in Brazil, you need to know more than just the top lines. Brazil is huge, complex and bursting with opportunities for those who know how to take them.
Being Brazilian, and having worked here for more than 20 years helping companies such as Nextel, Openwave and Skype to scale in Latin America, and now helping Atomico’s portfolio companies to do the same, I’ve often felt like something of a concierge for my country. So, in that spirit, here are four things to bear in mind when you invest here:
Not “mobile-first” but “mobile above everything”
Many companies now talk about mobile-first. But when it comes to Brazil, I’d go as far as to say mobile is everything. The expensive infrastructure needed for broadband in the home is a long way from reaching Brazil’s large rural areas, fueling the explosion in 3G mobile access.
The analysts at MediaCells predict that there will be around 100 million smartphone users in Brazil by January 2015, with 47 million handsets due to be sold this year alone. This means more users than in traditional mobile-heavy markets like Japan, the U.K. and South Korea.
We saw recently how Movile is betting on this growth in the smartphone market, and companies like Restorando, in which Atomico is an investor, are seeing enormous mobile activity. Today, 40 percent of their transactions come through mobile. On busy days, such as Valentine’s Day, this can be as high as 60 percent. They tell me that they see their future as “mobile above everything,” and I see the same for all of Brazil.
E-commerce will continue to disrupt every sector in Brazil — even the most traditional.
The growth of e-commerce has been one of the biggest factors in the Brazilian success story, fueled by our growing middle class. Around 50 million people in the country have now made an online purchase — and at just 23 percent of the population, this shows the great potential for growth.
The amazing part of this is that it shows no signs of abating. In 2013, the e-commerce market increased by 29 percent to $13 billion, and is forecast to become the world’s fourth-largest by 2016.
One of the reasons is that large parts of Brazil are poorly served by brick-and-mortar retail outlets, so e-commerce entrepreneurs are filling the gap. In most cases, this isn’t about creating new and complex categories, but about providing consumers with the products they need reliably and efficiently.
I’ve seen it firsthand with the amazing success of Bebestore and Connect Parts, companies selling baby supplies and car parts, respectively, and which Atomico has invested in and is helping to scale. Bebestore alone is growing at more than 130 percent year on year, and shows no signs of slowing down.
To succeed in Brazil, understand the “Brazilian way of business.”
The celebrated Brazilian musician Tom Jobim once said: “Brazil is not for beginners.” This is as true for entrepreneurs as it is for anyone else.
So, what does it mean for doing business here?
First, be flexible, adapt to the environment and understand that it’s not always advisable to “get to the point.” Passion, commitment, optimism and persistence are some of the things that you should pack in your luggage before heading to Brazil, but rigidity is not.
Second, as important as a great business is the need to be ready to improvise when new opportunities appear. The explosion of the Brazilian middle class, the rapid growth in the Northeast market, and the new technology centers popping up around universities across the country, all came about very quickly. The successful entrepreneur in Brazil needs to be able to recognize and respond to the next major developments just as fast.
It’s a great time to be in Brazil.
At Atomico, we believe passionately that great companies can now come from anywhere. And it looks like investors increasingly think that’s true for Brazil.
A recent report by the Latin American Private Equity and Venture Capital Association revealed that private equity and venture capital investments in Brazil totaled U.S. $6.04 billion last year. We have also continued to lead the region in investment with 68 percent of the dollar volume coming to Brazil.
Brazil has historically faced crises with courage and creativity. It’s not a land for those who are seeking to exit in a short term, but it is certainly very fertile earth for investors and entrepreneurs who want to build great companies in an emerging market. Not for beginners, but a land for winners.
Carlos Pires is managing director for Atomico’s Value Creation team in Brazil, where he leads the company’s work in helping portfolio companies to scale and expand into and across Latin America.