While David Vélez, founder and CEO of Nubank has found fertile ground for entrepreneurship in the world of fintechs in Brazil, Colombian delivery and shopping platforms such as Rappi or Merqueo have also found Brazil to be a promising market to expand their businesses.
Brazil is home to several of the largest unicorns in Latin America, such as Nubank, C6 Bank, Nuvemshop, Wildlife Studios, and Loft, and is one of the most dynamic countries for entrepreneurship on the continent - with the city of São Paulo being one of its main hubs.
The country also leads the ranking of the most active countries in the region for M&As, with 2,222 operations to November of this year (a 51% increase over the period), and with a 145% increase in the amount of capital mobilized, totaling $86.74 billion.
According to Global Entrepreneurship Monitor, the percentage of persons between the ages of 18 and 64 with a startup was 13.4% in Brazil in 2020, one of the largest proportions in Latin America.
The Brazilian entrepreneurial space benefits from an economy that ranks as the twelfth largest in the world, a venture capital investment in 2020 of over $5 billion, and which is expected to double by end-2021, and the fifth largest internet and mobile device penetration in the world.
In addition, “it has structural inefficiencies and stagnant productivity rates that make a lot of room for technological innovation”, Wayra, the business accelerator of Spanish company Telefónica, said in an interview with Bloomberg Línea.
“Brazil receives 68% of all funding in Latin America, and the salaries of the top startups compete strongly with those of large corporations. People have lessened their focus on state-oriented careers and corporate entities to focus on pursuing opportunities in startups. This cultural and financial convergence has allowed Brazil to boast 21 unicorns by the end of 2021″, Wayra says.
The Global Startup Ecosystem Report, by Startup Genome and Global Entrepreneurship, points out that São Paulo is the most vibrant startup space in Latin America, worth about $49 billion.
In addition, the report cites data from consulting firm KPMG to highlight that Brazilian startups achieved a record $2.7 billion in funding in the second quarter of 2021 alone.
The report also states that “the government of São Paulo is working for the state to benefit from this flow of investments, speeding up processes and improving access to the internet. It is now possible to create a company in just five days”.
Also among the pros of starting a business in Brazil’s financial capital, the report highlights that startups in São Paulo “can access a series of public financing programs, such as Desenvolve SP, which offers a series of credit lines with competitive interest rates.
For example, “Banco do Povo Paulista (BPP) is a microcredit program developed by the São Paulo government that offers loans of up to $2,000 to individuals and small businesses at an interest rate of 0.35% per month, and loans of up to $4,900 to cooperatives”.
Camila Salamanca, executive director of the Endeavor entrepreneur network, tells Bloomberg Línea that “definitely the main reason why these companies decide to move into the Brazilian market is the size of the market”, as a country with more than 212 million inhabitants.
“But, in addition, the characteristics of its population, and the fact that this market presents very similar needs to those that entrepreneurs are already meeting in Colombia, make their business in Brazil scalable,” she says.
According to Salamanca, so far nine Endeavor companies out of 55 in Colombia are starting, or already have started, operations in Brazil.
Among the Colombian startups that are to launch in Brazil are Chiper, which will enter the country in the first quarter of 2022, as well as Platzi and Tul, which also plan to land in Brazil next year, while Acsendo, Addi, Merqueo, Mi Águila, Rappi and Robin Food are among those that have already made the move.
As for the difficulties in consolidating a company in Brazil, Salamanca says “there is definitely the language and cultural difference when it comes to doing business”.
“Now, we must also take into consideration that they must enter Brazil with consolidated technological development, because of its attractiveness, there are many competitors from other countries seeking a slice of the cake in their respective markets. So it is not easy to take that step.”
For its part, a Rappi spokesperson tells Bloomberg Línea that “Brazil is a very interesting market for entrepreneurship. The vastness of its territory, infrastructure, number of inhabitants and labor force, make it a country with high potential for entrepreneurship, and no wonder it is the largest destination for foreign investment in Latin America”.
“Without a doubt, the three key points in this market are: working with local talent, understanding and adapting to the needs and particularities of the market, which has unique characteristics, and keeping your eyes open to find opportunities,” the company said by email. But Brazil is not exactly an easy market, as factors such as a high tax burden and bureaucracy are constant. And besides that, in 2020 the country faced business closures that affected around 10 million entrepreneurs, with women being one of the most affected groups.
And a spokesperson for Wayra, an innovation hub that invests and generates business among startups in Latin America, says “Brazil’s good prospects contain facets that entrepreneurs must overcome in their growth trajectory”, among them, “stiff competition, high inflation and low economic growth rates”.