I was fortunate to be able to join a bunch of great people (too many to name) this week on the GeeksOnaPlane trip. We visited Brazil, Chile and Argentina. Our mission was to meet with entrepreneurs, investors and government officials to learn a little bit about their tech startup culture and to share a little of ours.
I feel that I understand what’s going on in Brazil much better than I do Chile, so I am going to just cover Brazil in this post (I was tired after going non-stop for 4 days in Brazil and unfortunately I did not join the group in Argentina so that I could return to the US for a friend’s wedding. Hopefully someone else will write a similar post on Chile and Argentina.)
Here is what I observed:
- the country recently overcame a period of hyper inflation and their currency is now stable
- taxes are high and complex, but also stable
- nobody thinks the govt will lower taxes any time soon to spur more business growth
- they have a rapidly growing middle class (consumers!) = opportunity
- Sao Paulo is the tech & business hub
- Rio de Janeiro wants to be the tech & business hub
- Rio is a beautiful city but businesses moved to Sao Paulo over the past 30 years due to drug related crime
- Rio is aggressively cleaning up it’s image by pushing the drug gangs out, closing and remediating their environmental catastrophe of a landfill (see film “Waste Land”), and building infrastructure to host the upcoming World Cup and 2016 Olympics
Brazil’s Startup Scene
- most startups I met are creating consumer internet businesses that copy successful US business models
- most are first time entrepreneurs, because until recently there wasn’t an appetite for engineers to take risk relative to getting a high paying govt job; this is changing because of the opportunity presented by the growing number of middle class consumers
- Brazilian VCs suck; they make investments to grow established businesses rather than investing in the riskier early stage companies that are innovating
- entrepreneurs are inexperienced and lack guidance when it comes to raising money. VCs rape entrepreneurs by taking huge equity stakes for a small investment (I heard one case of a guy giving up 80% of his company for a couple hundred thousand dollars!)
- entrepreneurs don’t collaborate with each other; again due to lack of experience they don’t understand the value of the feedback they would get from an open culture where ideas and data are shared, rather than being stealthy
- there are very few successful entrepreneurs advising and founding new startups; I think this is because there aren’t many exits and the entrepreneurs that get acquired are staying with their companies long afterward
- big established companies don’t think they can be disrupted by startups. They believe that startups should and will just go after new opportunities rather than reinvent old industries using technology. I guess a big disruption has never happened there before. They’re in for a shocker.
Brazilian consumers have money to spend and their culture is similar to the US. There will be a land grab this decade to bring the types of products and services that we have in the US to Brazil. Local entrepreneurs are racing for it, but could really use our help. They need our experience and our money. I mentioned to the organization that hosted part of our trip,Brazil Innovators, that they need to get an entrepreneur exchange program going. I hope they do. They should recruit Silicon Valley entrepreneurs to come to Brazil for 6 months after they sell their company and before they start their next one, and send some Brazilians to work in Silicon Valley. The knowledge transfer that would occur from such a program would be tremendous and I bet some folks would stay. Startups cofounded by an experienced Silicon Valley entrepreneur plus a local Brazilian entrepreneur would crush it down there right now.