Why Brazil is the springboard for Colombian startup entrepreneurs

RIO DE JANEIRO, BRAZIL – While David Vélez found fertile ground for entrepreneurship in the world of technofinance in the Brazilian ecosystem with Nubank, Colombian home delivery platforms such as Rappi and Merqueo have seen a large market to continue expanding their offerings.

Brazil, the origin of several of the largest unicorns in Latin America, such as Nubank, C6 Bank, Nuvemshop, Wildlife Studios, and Loft, has one of the most dynamic entrepreneurship ecosystems in the region, with São Paulo being one of its main scenarios.

The South American giant also leads the ranking of the most active countries in the region in mergers and acquisitions with 2,222 operations so far this year through November (an increase of 51%), and with a 145% increase in the capital mobilized (US$86.749 billion).

According to the Global Entrepreneurship Monitor, the percentage of people between 18 and 64 who own a startup was 13.4% in Brazil in 2020, one of the highest among Latin American countries.

Brazil’s entrepreneurial ecosystem benefits from having an economy that ranks as the 12th largest in the world, a 2020 venture capital investment of more than US$5 billion that should double by 2021, and the fifth economy in the world with the highest penetration of internet and mobile devices.

In addition, “it has structural inefficiencies and stagnant productivity rates that give plenty of room for technological innovation,” Spanish Telefónica’s startup accelerator Wayra explained to a Bloomberg Line query.

“Brazil receives 68% of all funding in Latin America. The salaries of top startups compete strongly with those of large corporations. People have decreased their focus on career paths focused on state and corporate entities to seek opportunities in startups. This cultural and financial convergence has allowed Brazil to have 21 unicorns by the end of 2021,” he says.

The Global Startup Ecosystem Report (GSER), by Startup Genome and Global Entrepreneurship, highlights that São Paulo is the most vibrant ecosystem in Latin America and is worth some US$49 billion.

It also cites figures from consulting firm KPMG to highlight that Brazilian startups raised a record US$2.7 billion in the second quarter of 2021 alone.

In fact, according to the report, “the government of São Paulo is working to ensure that the state,” considered the most prosperous and industrialized in the country, “benefits from this influx of investment by streamlining processes and improving Internet access. It is now possible to create a company in just five days”.

Among the pros, he stresses that startups in the São Paulo capital “can access a series of public financing programs, such as ‘Desenvolve SP’, which offers several lines of credit with competitive interest rates”.

Meanwhile, “Banco do Povo Paulista (BPP) is a microcredit program developed by the São Paulo government that offers loans of up to US$2,000 to individuals and small businesses at an interest rate of 0.35% per month and loans of up to US$4,900 for cooperatives.”

The executive director of Endeavor’s entrepreneurship network, Camila Salamanca, explains to Bloomberg Line that “definitely the main reason for these companies deciding to move into the Brazilian market is the size of the market,” this being a country of more than 212 million inhabitants.

“But beyond that, the characteristics of its population and the fact that this market presents very similar needs to those already being solved by entrepreneurs in Colombia make their businesses scalable in Brazil,” he indicates.

According to Camila Salamanca, nine Endeavor companies out of the 55 of this community in Colombia are starting to or already operating in Brazil.

Among those that will be launched in that market, Chiper stands out, which opens in the first quarter of 2022, as well as Platzi and Tulle in the same year. At the same time, those that already have a presence are Acsendo, Addi, Merqueo, Mi Águila, Rappi, and Robin Food.

On the side of the difficulties for consolidating companies in Brazil, he said that “there are the language and cultural differences when it comes to doing business”.

“Now, we must also take into account that Brazil must be entered already with consolidated technological developments, because of its attractiveness, there are many competitors from other countries looking for a slice of the cake of their respective markets. So it is not easy to take this step”.

Rappi explained to Bloomberg Linea that “Brazil is a very attractive market for entrepreneurship. The greatness in its extension of territory, infrastructure, number of inhabitants, and labor force, make it a country with high potential for entrepreneurship, not for nothing it is the largest destination for foreign investment in Latin America.”

“Undoubtedly, the three key points in this market are: working with local talent, understanding and adjusting to the needs and particularities of this market, which has unique elements, and keeping your eyes open to find winning opportunities,” they said.

Brazil is not easy terrain, as factors such as high taxes and bureaucracy are not alien to this market, which in 2020 faced the closure of the businesses of about ten million entrepreneurs on account of the pandemic; with women being one of the most affected groups and the number of their businesses reduced by 62% between 2019 and 2020, according to the Global Entrepreneurship Monitor.

Wayra indicates that “the good Brazilian panorama contains facets that entrepreneurs must overcome in their growth path”, among them, “the high competition due to the more than 13,000 companies created per year, the high inflation, and low growth rates of the economy”.

With information from Bloomberg

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