A country of continental dimensions, for a long time technological production in Brazil was restricted to the state of São Paulo. Now, several cities are vying for the label of the new Silicon Valley.
That decentralization mirrors what has happened in the U.S., as Silicon Valley now shares the status of the country’s technology hub with Miami, while the pandemic has also spurred new technology hubs in Texas, where, in Austin, Tesla now has its headquarters.
In Brazil, attempts to replicate Silicon Valley are even happening in name, from Vale do Pinhão, in Curitiba, to San Pedro Valley, in Minas Gerais. Closed hubs such as Cubo, of Itaú, in São Paulo, and Base 27, in Espírito Santo, also foster Brazilian innovation spaces, together with open hubs such as Porto Digital, in Recife, a technology cluster in the northeast of the country.
According to executives consulted by Bloomberg Línea, the pandemic has benefited this movement toward the decentralization of innovation hubs in major Latin American cities (such as Buenos Aires, Bogotá and Mexico City), as well as the digital transformation of companies, remote work and the expansion of e-commerce, with startups now based in many cities, from Córdoba in Argentina to Medellín in Colombia.
Even so, in Colombia, the capital Bogotá still concentrates most of the startups (62%), and most of the investment (90%), even as Medellín has been promoted as an entrepreneurial city, with the largest business base, but not so much for startups, although it is home to companies such as Pibox.
Guadalajara and Monterrey: Mexico’s ‘Silicon Valleys’
Innovation entrepreneurship has been able to meet the country’s specific challenges and needs, and to offer solutions hand-in-hand with the fast pace of technology that caused the fintech sector to proliferate in the first place, seeking to enhance, automate, and diversify the use of financial services.
During 2021, a boom year for Mexican startups, companies attracted more than $5 billion in private equity investment, according to data from LAVCA, the Latin American Association for Private Equity Investment, and that figure represented a 128% increase over 2020.
As venture capital expands, so do the startups that have begun to be born outside the metropolis of Mexico City, the country’s capital, and where the presence of large corporations is concentrated.
In addition to the capital, there are two key cities that are home to another significant number of startups: Guadalajara, in the western state of Jalisco; and Monterrey, a city located in Nuevo León state, which borders the United States.
The StartupBlink research center’s global map lists 232 startups in Mexico City, compared to 36 in Guadalajara and 46 in Monterrey.
And according to the Finnovista Fintech Radar 2020, Mexico City alone concentrated 70% of the startups in the sector, Monterrey 11% and Guadalajara 7%.
For decades, Guadalajara has been described as the “Mexican Silicon Valley” after having emerged as an important innovation hub, with the configuration of a large IT and digitization cluster.
Guadalajara attracts talent from different parts of Mexico, people who come to develop their own ventures or to join high-profile technology companies such as IBM, which paved the way for those who came after, such as Oracle, Intel and HP, among others.
There are now more than 30 design centers and four technology research centers in Guadalajara, and more than 100,000 people work in the IT sector in the city, which has a population of around seven million.
In 2016, public and private investments created the Ciudad Creativa Digital, a high-tech complex managed by Jalisco state’s Agency for the Development of Creative and Digital Industries, and which symbolizes the city’s leadership in innovation and technology.
In addition to large multinationals, Guadalajara is also home to many local technology entrepreneurs and startups. The city is an ideal place to locate startups in the fintech, social, leisure and e-commerce sectors, according to StartupBlink. Among the startups already installed are Kueski, Yotepresto, Mifiel, Indiefy, Linc, Contxto, EasyLex, Plesk, ReTweeti, digitt and WT.
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The competitor to the northeast is Monterrey, another fast-growing metropolis that accounts for 10% of the country’s GDP, known as the industrial capital of Mexico and home to large corporations such as Cemex and Femsa. Software giant Wipro established its Latin American base in Monterrey 15 years ago, and Softtek and Neoris are also based there.
Monterrey’s proximity to the United States creates a terrain of opportunities for knowledge exchange, and which strengthens the entrepreneurial spirit. Today, major technology companies such as Amazon, Facebook, Microsoft, Apple, and SAP have offices in Monterrey, according to Coderslink, a professional platform that connects Latin American technology experts with teams in the United States.
The city is also home to the Monterrey Digital Hub, which opened its doors in 2018 as the country’s first digital transformation campus, and which brings together companies, entrepreneurs and key digital players to create a community for the transfer of learning, experiences and digital transformation with an open corporate innovation model.
The initiative was promoted by companies such as Alfa, Cemex, Deacero, Femsa, IBM, Neoris, and institutions such as the Autonomous University of Nuevo León, the Tecnológico de Monterrey university, and the University of Monterrey.
In the midst of this technological cluster, ImpactHub, an accelerator focused on social impact for Latin America, as well as the incubator and accelerator Startup Mexico, have set up shop in the city.
“Monterrey is an ideal place to locate startups in education, fintech and social & Lleisure,” says Startupblink.
Startups such as Ruta Directa, Skydropx, pet n’GO, link ERP, Vinco, DIVERZA, Vitau, Blooders and Buho Contable have their headquarteres in Monterrey.
In addition, the city is also home to a Startup Grind Community, a global organization that was born in Silicon Valley in 2010 with the goal of connecting and empowering the entrepreneurial ecosystem through events with key players in the space.
Curitiba: Cradle of Unicorns
Home to three of Brazil’s 28 unicorns (EBANX, Madeira Madeira and Olist), Curitiba also has its innovation hub supported by the city government, called Vale do Pinhão.
Olist’s CEO Tiago Dalvi is one of the entrepreneurs who decided to keep the company’s structure in Curitiba even after scaling the business. He said that the idea was always to keep HQ in the capital city of Paraná because “the infrastructure is very good, it has a high educational level and excellent colleges”.
“We were inspired to move the HQ to São Paulo, but we understood that the network we had in Curitiba would help us recruit the best talent without so much competition in the first three, four years of the business,” he said.
Dalvi says that Brazil is going through a major transformation in the technology sector, and that Brazilian companies with their HQ in Brazil will compete for the best talent on a global scale, regardless of in which city the HQ is located.
“At the same time that we will see many new decentralized hubs like Curitiba, Florianopolis, Belo Horzinte, we will also see greater complexity and competitiveness to build business on a global scale,” he said.
But it is not only the capital cities of Brazil’s states that have seen the creation of successful startups. DB1, a software development company based in Maringá, in the northwestern part of Paraná state, already aims at expanding to the international market, where it saw its revenues grow in 2021.
Rogério Gonçalves de Souza, Innovation Director of DB1 Group, said the idea has always been to keep the headquarters in Maringá, since the founders are from that region. “We have always had the vision of mobilizing regional development. We believe we can build something very big from our city”, he told Bloomberg Línea.
The company has more than 800 employees. Souza says that Maringá has an aspect of a business community that has within its makeup a desire to encourage the development of the region.
“Maringá was born from a cooperative mentality, of solidarity, collaboration, and joining forces for the common good, which comes from the city’s founders. We were not surprised that our city was elected the best city to live in the country based on this vision,” he said.
Souza attributes the arrival of investments, colleges, and accelerators to the dedication of the local entrepreneurs. “We are very happy to be a benchmark company that generates opportunities and enables professional growth in our region”.
The group, through DB1Labs, launches new products created internally with the concept of startups. The company created Koncili, Predize, Tinbot and the marketplace sales platform ANYMARKET.
“There is also the involvement in the ecosystem through accelerators. This is the case of Evoa, Brazil’s first non-profit accelerator, which has DB1′s co-participation,” he said.
Evoa, where Souza acts as a mentor, aims to accelerate early-stage startups. Since 2017, Evoa has accelerated 49 startups, which have jointly already exceeded 820,000 reais ($162,275) in monthly revenues.
Brazilian small-business incubator Sebrae also helps with training and mentoring startups that are in the ideation phase, and DB1 also participates in the Maringá Capital group of angel investors.
“DB1 also relates its permanence in Maringá with the aim of positioning itself and being a reference as an innovation hub in Brazil,” according to Souza.
Recife: A ‘Digital Port’
Recife’s Porto Digital, or ‘Digital Port’, in Brazil’s northeast, emerged in the late 1990s, but was officially established in late 2000 as an initiative of the Federal University of Pernambuco in collaboration with the state government and local entrepreneurs.
The idea was to set up an environment so that those who graduated in technology at the university could work there.
The government decided to make Porto Digital a public policy based in downtown Recife, as Pierre Lucena, president of Porto Digital, explains. In 2000, a law was passed so that technology companies that established themselves in the neighborhood, a historic area of Recife, would have tax breaks.
The government of Pernambuco made an initial contribution of 30 million reais ($5.9 million) to create a social organization, a non-profit and non-governmental entity that would manage public policy. And in 2000, the open hub started operating with two companies. Over time, Porto Digital has grown, and today has more than 350 companies installed.
“It’s different from other innovation hubs, which are usually sheds, or closed places. Here it’s the whole neighborhood,” Lucena says.
The hub has partnerships with universities, in addition to having its own college of technology sciences. Porto Digital also has associations: two incubators and four private startup accelerators.
“We have a lot of instruments to make things happen here. Recife is the Brazilian city with the largest amount of technology today. We have a high quality machine that is the Federal University of Pernambuco,” Lucena says.
He adds that Recife has 600 PhD graduates in computing, of which 500 are from the University of Pernambuco. “Recife is the Brazilian city today with the highest amount of technology per capita in Brazil,” he says.
Approximately 14,000 people work in the tech park, which only operates with software companies.
“Today 100% of the smartphones in Brazil have technology from here in Recife.” Porto Digital companies have clients all over the world, including in Dubai and London.
Still, the companies also want to have bases in São Paulo, where most of the business is done. Recife is betting on product and human capital that is lacking in São Paulo.
Porto Alegre: Summit Host
Porto Alegre is already a well-known technology hub. The former state-owned National Center for Advanced Electronic Technology (CEITEC), which is in line to be liquidated by the federal government, has been producing semiconductors in the city since 2008. Now, the city also wants to be a reference for startups.
The South Summit, a global innovation event, will be held in Brazil for the first time this year, taking place in Porto Alegre on May 4-6, and will bring together 300 international speakers.
According to Thiago Ribeiro, director general of the Brazilian edition of the South Summit, the choice of the state of Rio Grande do Sul as the venue was due to the large volume of startups per capita in the state capital.
For him, large innovation ecosystems are formed by pillars such as a government with focused public policies, universities with quality research and a workforce, technology parks, such as TecnoPuc, in Porto Alegre, as well as the presence of startups, accelerators and unicorns.
Salvador: Local Talent
HRTech Intera was born in Salvador, capital of Bahia state, but, with the pandemic, the company dismantled the office. Before Covid-19, the recruiting company mostly served in-person vacancies in São Paulo, as Pedro Gil, from Intera’s people and culture area, explains.
Gil recalls that, prior to the pandemic, when a vacancy opened up in Fortaleza or Salvador it was much more difficult for a professional from São Paulo to move to the capital of Ceará or Bahia for in-person work, so it was easier to seek talent in the region for that vacancy.
“By the logic of the market and how it operated, we also directed people to São Paulo. But today, when we see the possibility of remote work, the team is not concentrated in any one place, and the tendencies of companies are now like this, to expand to all places,” he said.
Belo Horizonte: Decentralizing
Inter, one of the largest digital banks in the country, has its headquarters in Belo Horizonte, while unicorn Hotmart is also headquartered in the capital of Minas Gerais, in addition to being part of the San Pedro Valley hub, along with Sympla and Méliuz.
For Thiago Veloso, head of marketing at Crawly, a startup from Belo Horizonte, decentralized innovation hubs play a very significant role in the growth of the ecosystem. “These hubs make large companies see startups as technology providers, and not as a bunch of kids who are building apps,” he said.
“These hubs make large companies see startups as technology providers, and not as a bunch of kids who are building apps.”Thiago Veloso, head of marketing at Crawly, a Belo Horizonte-based startup
Decentralized hubs allow startups to have access to companies all over Brazil without the need to be headquartered in any specific city, according to Veloso. He explains that a startup that tries to reach a large company as a client is much more likely to receive a “yes” if it already does business with an innovation hub.
“This has been happening a lot, especially with us,” he said.
Florianópolis: ‘An Example for the Country, and the World’
In the south of the country, Florianópolis is a hub for startups and is also a place where digital nomads choose to work. A coastal city, the capital of Santa Catarina state is home to RD Station, which was bought out by TOTVS for 2 billion reais ($395.1 million) last year.
Bruno Ghisi, founder and CTO of RD Station, says that Florianópolis was always the first option for the startup.
“It was in Florianópolis that we met, graduated and began our professional trajectory and as entrepreneurs. We have always believed in the quality of labor in the region, due to the universities in Florianopolis and the surrounding area,” he said.
Ghisi says that the city has always attracted a lot of people because it manages to mix nature, safety, and infrastructure, which is why it ended up becoming one of the main tech hubs in the country. “Besides, we are only an hour’s flight from São Paulo, making it much easier when it comes to commuting,” he added.
The Federal University of Santa Catarina is strong in computer science, which is focused on B2B SaaS. According to Ghisi, Florianópolis is also a very attractive city to live in, and many people from the technology market began to see the possibility of living on the island without necessarily working for a local company.
“This movement was positive, because a greater concentration of people with experience in technology companies that have gone through different scales accelerates the development of the ecosystem,” he said.
In July 2018, RD opened an office in São Paulo. But with pandemic-driven digitization and the consolidation of remote work, the company decided to leave its physical space in the city. “There was no longer a need to keep the space in São Paulo. Today we have employees living all over Brazil and abroad”.
Until the last decade, business in Florianópolis was very tourism-oriented. The first incubator in Brazil was Celta, created in 1986 by CERTI Foundation, aiming to take advantage of UFSC’s talents, according to Ghisi.
“The recognition of the engineering course at UFSC as one of the best in the country brought people from all over Brazil to the island, and who left with an excellent education, and who wanted to stay in the city, but there were not many options for companies to work for,” he said.
Entrepreneurship was the solution for those who wanted to work with technology in the city, and B2B solutions proved to be the most appropriate bet, according to Ghisi, since there was not a very strong local consumer market. “But there were several initiatives linked to research and innovation, in particular those steered by the CERTI Foundation.”
According to Ghisi, as companies were being created and others arrived on the island to position themselves nationally as leaders, the perception that companies outside the Rio-São Paulo axis would be “smaller” competitors fell apart.
The companies, which were no longer local, started to become attractive to professionals from large centers, multinationals, and investors, the CTO said. “The migration of talent from other cities and even other countries to Florianópolis contributed to the development of local knowledge, and to the international vision in business strategies”.
These companies started to hold events, as is the case of the RD Summit, a reference for those who work with marketing in the country and that annually gathers more than 12,000 people in the city. “This has also made Florianópolis increasingly seen as an important technology center. The combination of all this drew the attention of international funds that invested and continue to invest in local companies that were previously off the radar of large groups”.
Now, a new wave of SaaS startups is spreading throughout the state of Santa Catarina, in cities such as Joinville, Brusque, Blumenau, Lages, and Chapecó.
Ghisi points out that in 2020 the Santa Catarina technology sector had the sixth highest revenue in the country, representing 6.1% of the state’s GDP. “Among all the state capitals in the country, Florianópolis has the highest density of companies per thousand inhabitants”, he said.
Iomani Engelmann is president of the state’s tech association, Associação Catarinense de Tecnologia (ACATE), and which manages initiatives such as the MIDITEC incubator. The incubator for technology-based companies, which is supported by Sebrae/SC, was launched in 1998 and helped develop companies such as RD, Pixeon, Knewin and Arvus (now Hexagon). More than 130 startups have already passed through MIDITEC. According to ACATE’s estimate, those companies invoiced 1.5 billion reais ($296.5 million) and generated 3,000 jobs in 2020.
Engelmann recalls that in 2015, the ACATE Primavera Innovation Center (CIA Primavera) was inaugurated in Florianópolis, where the association’s headquarters are located, in addition to dozens of associated technology companies, such as LinkLab - the entity’s open innovation space - an accelerator, a co-working space, an investment fund, venues for events and an infrastructure of bars, restaurants and support ventures for those who work there.
In 2018, Florianópolis city hall and ACATE created the Florianópolis Innovation Network, which encompasses innovation centers in the capital of Santa Catarina state to stimulate the culture of innovation and entrepreneurship.
ACATE also inaugurated, in partnership with DEATEC, the technology hub of western Santa Catarina, two innovation centers in Chapecó and is present throughout the state of Santa Catarina through 10 such hubs.
“ACATE, which today brings together 1,500 member companies, has launched initiatives that encompass the entire journey of the entrepreneur, from the creation of a startup to more solid companies in the market. In addition, we work to have a state of innovation, not just isolated regions. Thus, Santa Catarina will continue as an example for the country and many regions in the world as a complete and innovative ecosystem”, according to Engelmann
São Paulo: Still Where the Money Is
The biggest problem of decentralized hubs, according to Ribeiro, is access to capital. Although startups have access to funds, the big checks are less directed to cities outside the Rio-São Paulo axis, he says.
“We end up being a victim of our domestic market being quite large. When a startup is born in Israel, if it doesn’t look outside, it has no market. But when we are born in Brazil, this is a little different, it makes us a little closed,” he said.
The Warren brokerage made its first MVP (minimum viable product) in the United States, but decided to start the company in Brazil, in Porto Alegre, precisely to be close to the students of the Federal University of Rio Grande do Sul.
Warren’s CTO, André Gusmão, says that for technology it is not important to have a headquarters in the Rio-São Paulo axis. But for the commercial part, yes. For this reason, the startup has an office in São Paulo, but keeps its headquarters in Porto Alegre.
Now, the startup is expanding to Blumenau, in the interior of Santa Catarina, where it has created a developer training center. The next step will be a technology center in the northeast, said Gusmão, but who did not reveal the state or city.
“We will start a program to train developers in March. Our idea is to reach 250 people working in technology in the Blumenau region,” he said.
This is not the first time that the startup from Rio Grande do Sul is looking for developers in Santa Catarina. Warren has already done this in Joinville and now intends to advance to the northeast of the country to reach more customers.
“We understand that in order to deliver a platform that understands the client’s problems, we need a more diverse team, and we have to be in another region, we can’t be based only in one region of the country.”
Daniel Salazar Castellanos contributed to this report. Translated from the Portuguese by Adam Critchley