Brazil: A Playground for Investors, Entrepreneurs and Super Gringoes
According to mainstream fear media, Brazil is a hotbed of viruses:
Waterbourne viruses in Guanabara Bay in Rio de Janeiro, where Olympic athletes are expected to compete this summer;
Zika viruses in mosquitoes stinging expectant mothers and causing birth defects in their babies;
A social media viral campaign infecting 3.2 million citizens who flooded the streets of São Paulo in mid-March, demanding the impeachment of President Dilma Rousseff because of her involvement in the “car wash scandal“…
Looks like herpes isn’t the only virus to worry about when visiting Brazil, land of lip-locking hedonists in tiny swimwear!
Brazil – in spite of these ills and the worst recession in history – remains in the top rankings as one of the most entrepreneurial countries in the world: 3rd place, according to Inc Magazine and 4th place, according to Oracle Capital Group. Investors and entrepreneurs, in classic fashion, are seeing the opportunities in the problems, especially those who understand and thrive in the colorful, roller coaster swirls of Latin culture.
Miami, as it turns out, has been a crossroads of these cultures for centuries, but the fun fact is that the native Tainos, who originally inhabited this entire area, migrated from the Amazon Basin of Brazil in 2,000 BC. So if you’re Latin and you’ve always felt a strange attraction to Brazil, now you know why. And with the current recession pushing prices down in all areas, there hasn’t been a better time to invest in the place of your origins.
Derek Gallo, an American investor in PLUG, a co-working space based in São Paulo, Brazil’s financial center, has experienced enough booms and busts over the last 10 years that he is no longer a “beginner,” one of the worst things anyone can be in Brazil, according to singer Antonio Carlos (Tom) Jobin.
Like most gringoes, Gallo was infected by this country’s intoxicating topography and culture from the first minute he stepped off the plane.
“For me and many other people, it’s the animated culture, the liveliness of the people,” Gallo told Startup Angels via Skype. “I fell in love with the country and culture at a young age.”
While earning a B.A. in Economics and Spanish & Latin American studies from Duke University, Gallo studied abroad in Argentina, Chile and Brazil, the last of which he decided to make home.
“From a business perspective, it’s a giant economy. I focused my entire career specifically on Brazil so over time it more and more felt like my business contacts, network and knowledge were focused on Brazil. I could leave at any time, but invested so much time – it has taken so long to figure it all out but I’m getting closer to cracking the nut here to do business. That’s included many failed ventures and mishaps. Business here isn’t always black and white and things take a long time.”
Similar to the stats in the US, about half of the new companies in Brazil fail by second year, which was one of the reasons Gallo teamed up with Wilbert Sanchez and Jorge Pacheco in 2012 to start up Plug, a 30,000 square-foot ecosystem in order to catalyze business innovation. Plug currently hosts more than 30 companies from diverse sectors and is accelerating several enterprises through Acceleration+, its acceleration arm.
“It’s difficult to manage services (internet, office space, etc.) in Brazil, everything is a little bit more complicated here, so the space grew quickly,” said Gallo. “Uber was in Plug for a year when they were first starting up.”
The space has hosted several startup events like Lean Startup Machine, Angels Brazil (which also had an office at Plug) and Fundação Estudar, an NGO that gives scholarships to young, talented people.
Gallo’s interest in Intensify.me came down to recent experience in the fashion industry. “We could add value in this business, he said.
With Meia Bandeirada, it came down to the team. “They seemed to be a group of competent and hard-working young entrepreneurs with some years of solid experience in large companies as IT professionals. And they had a great idea.”
Gallo can generally tell if entrepreneurs will be successful by how they handle Brazilian bureaucracy and the myriad challenges they are bound to face. “They have the kind of spirit that they will always find a way to succeed, whatever it takes.”
This is why Zika isn’t merely another obstacle, but rather, an opportunity.
“I have a friend working on a biopesticide for Zika,” Gallo said. “It won’t get on the market anytime soon, as he is building partnerships with research institutions. But he was working on this even before Zika was in the news.”
Okena.eco.br, a B Corp focusing on recycling water, is “very aggressive, idealistic,” he said, as they tackle water issues, one of Brazil’s biggest challenges.
Rio de Janeiro
Rio de Janeiro
Regardless of great ideas or idealistic missions, at the end of the day, Gallo judges entrepreneurs by a more simple measurement – the kind of hours they keep. “They are at the office early and leave late.”
Chantal James, a Canadian entrepreneur based in Rio de Janeiro, where the pace of life is more relaxed than Brazil’s financial center of São Paulo, couldn’t agree more.
“Brazilians have a different work ethic,” said James, referring to a business partner she recently dropped because he didn’t start his work day until 1 p.m. “He obviously wanted to be richer than he is but didn’t want to change his lifestyle or work harder.”
Like Gallo, James has lived in Brazil more than a decade and has plenty of failure and success stories.
“Brazil can be a great place to start up a business because there are still a lot of areas that are still left to be explored,” she said. “Things that are popular in Europe and North America haven’t started up here.”
She recently started a frozen organic vegan meal delivery service, similar to North American and European companies like Plated, Blue Apron and Hello Fresh. She added that the business was not just about chasing money, but a way to sync her work with her values. “We really wanted to use biodegradable packaging and organic food to function in the capitalist system in a healthy way which is really difficult to do, it’s very challenging.”
But James soon discovered she did not share the same vision as her business partner, who came from Brazil’s well-known upper-middle class.
“They’re not used to what we call ralando, which means ‘working your ass off’ because they’re used to people recommending them for jobs,” James said. “Even if the job doesn’t pay that much it doesn’t really matter because their parents will supplement their income.”
While there are plenty of lazy people all over the world and from every class and culture, including the US and Brazil, there are a few co-working hubs in Rio de Janeiro where the work is indeed getting done.
There are many government programs like Startup Brazil and Technological Parks with support at state or local levels. Sebrae is a government organization at the federal and state level supporting entrepreneurs. Also Senai and Sesi support entrepreneurs.
Templo, located just off the shoulder of the Pontifical Catholic University of Rio de Janeiro, one of Brazil’s top 5 research institutions focusing primarily on the development of science and innovation, is host to 200 residents from 60 businesses including Airbnb (an official sponsor of the Olympics), Sistema B (B Corp) and Clube Organico, which distributes produce from local farmer’s markets.
Ursulla Araujo, one of GOMA’s co-founders, was in the middle of speaking with Startup Angels when the protests broke out.
She said the political unrest is not directly influencing her work in supporting entrepreneurs, “but I would say that as long as it influences our economy we are seeing already our clients reducing their investment in services like ours,” she said. “We are being pushed to rethink our prices once or twice during the negotiation process. And with that the scope of the projects as well as goals, work hours and deliverables.”
From Derek Gallo’s perspective back in São Paulo, these are the conditions that make Brazil perfect for swimming right now.
It’s an opportunistic time,” he said. “The economy is shrinking, in terms of companies being in a more delicate situation. They need capital and are more flexible when it comes to investment terms. You can gain market share, take advantage of opportunities because entrepreneurs are open to conversations.”
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Melanie Feliciano is a freelance writer for Startup Angels. She was publisher/editor of The Angel Journal in Miami between 2006-2007 and a digital nomad living on and off in Brazil between 2011-2014.