
Brazil: A look into Latin America’s largest startup ecosystem (2017) - ishikawa
https://techcrunch.com/2017/01/19/brazil-a-look-into-latin-americas-largest-startup-ecosystem/
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diegoholiveira
I'm a Brazilian who use to work at some startups here. I have a strong feeling
that we didn't produce more and better companies because of two things:

1) Public Universities here hates private money and do business, entrepreneur
classes are rare and most of the teachers never did create a company (to teach
here you must be an academic, a successful entrepreneur can't give classes
about it). If you suggest to your teacher to start a business with his Ph.D.
thesis, probably, he will feel offended by your suggestion.

2) Our legislation is bad. I'm mean, very very bad. Open a company in Brazil
is crazy:

\- So many taxes. I'm not talking about the value that you pay here, I'm
talking about an insane amount of taxes. At the federal level, for example,
there're 6 or more different taxes. And if you need to send a package across
states, you need to deal with a lot of bureaucracy to transport it (and more
taxes);

\- Labour protection here is insane too. It's not cheap for small and medium
companies. And there is a thing that makes it even more complicated for
startups: legally, the owner of the company is in charge of the labor debts
even when the company is broken. So, if your company broke, you can't close it
until you pay all the labor debts, and if you don't pay, you can lose your
home or other assets that belong to you, not to your company;

\- Almost everything here is regulated, and our regulations are not easy to
deal with.

~~~
chrisbennet
_”Labour protection here is insane too. It 's not cheap for small and medium
companies. And there is a thing that makes it even more complicated for
startups: legally, the owner of the company is in charge of the labor debts
even when the company is broken. So, if your company broke, you can't close it
until you pay all the labor debts, and if you don't pay, you can lose your
home or other assets that belong to you, not to your company;”_

This is pretty normal, you need to lay off people _before_ you run out of
money to pay them. You don’t gamble with your employees paychecks.

As a business owner, you get the upside if business is going great. The
downside is that you, the owner, only get paid if there is money left over
after you pay your employees.

~~~
diegoholiveira
But I'm not talking about wages. I'm talking about other rigths that an
employee has, for example: if you bankrupt and need to fire you employees,
you'll be forced to pay a fine of 40% of the FGTS (FGTS it's like a saving
account the company is obligated to pay in name of they employees).

~~~
rescbr
Speaking as a fellow Brazilian: so account for it beforehand, in the same way
you should account for 13th salaries and other "hidden" worker rights, which
are liabilities in the accounting sense.

~~~
kikoreis
Yeah, that's how we have always hired, and I don't see a big problem with CLT
(the Brazilian employment law), perhaps with the exception of how vacation
time and union membership is handled.

It's bizarre that the threads on this post seem to straddle "founders are only
in it to make money off the back of their employees" and "worker's rights and
compensation are onerous" simultaneously.

------
cscotti
I used to work at a Robotics startup in Brazil. Talent was top notch - I’d say
as good as any big Bay Area tech company (SWE, Mech & Financial). Founder was
the main investor - he didn’t understand SW, treated SWEs & Mech Engs as if he
was making them a favor for giving them a job and paid below market. At one
point the guy fired the CFO for authorizing buying a cheap Split AC for our
little 10ppl office in the middle of the summer while everyone was sweating
their life’s away (he was off somewhere on vacation on his boat).

But the main takeaway for me was: corruption. The startup was doing something
legitimately exciting and innovative but still the founder thought it was wise
to sneak in a contract with his buddy at the state government’s office (super
shady bidding process) to have them as a first client. Eventually the law
caught up with it and the whole thing became a legal mess. \+ Equipment import
taxes were ridiculous!

Oh yeah, and we had to buy our own coffee!!!!! Sacrilegious!

------
kikoreis
I'm a Brazilian, living in São Paulo state. I've lived here for 35 years, and
before that lived in a number of other countries. In my current role, I do
roughly 50% international travel. There's only one thing I'm certain about
this post: it's that most brazilian commenters here will zero in on everything
that's wrong about Brazil, regardless of the facts. I don't yet have a grand
theory for why this happens, but it usually does. Anyway, on to the topic of
the post.

Brazil has a really great startup scene, and there are many small and new
companies popping up everywhere with interesting ideas. I've had my own
companies participate in acceleration rounds and pitches and have been
positively impressed with the quality of the programs and participants. In the
past five years, funding has become much easier to get access to, and there
are good hubs to exchange ideas and find talent to hire. Lots of interns and
trainees coming out of university are hungry and talented, so there's a real
talent pool to leverage. And the potential customer base for any class of
product is massive.

A lot of the negativity will be around legislation, taxation, etc. From
decades of experience both here and abroad, I can say Brazil doesn't deserve
it -- it's easy and cheap to start a new company, and while taxes aren't
trivial they are for the most part handled entirely by an accountant for a
monthly flat fee. Yes, there are some vexing circumstances -- I've had
companies subject to double taxation due to bureaucracy, and handling the
chain of tax credits for physical goods that cross state boundaries is
annoying. But by and large, for software companies, these are not very
relevant concerns. And even with physical goods, there are lots of companies
doing e-commerce nationwide, so it can't be that bad.

If there is one defining challenge to startups operating in Brazil it is that
B2B deals are very slow to close. In my experience this derives from a
tendency to undervalue services delivered by small companies, which for young
startups is often the meat of a serious B2B contract. You can spend a year
working on a 5-digit deal at risk before seeing the first payment from a
customer. Often you don't have that runway and have to give up, pivot or die.
In comparison, American and European companies tend to be much more agile
about buying services. However, the transition to SaaS has made this problem
tractable and I have seen many startups selling higher-value SaaS
subscriptions successfully.

In summary, if you can manage to ignore the negativity, the country has great
potential, and another round of successful startups should follow the existing
crop the article mentions.

~~~
glibgil
> most brazilian commenters here will zero in on everything that's wrong about
> Brazil, regardless of the facts. I don't yet have a grand theory for why
> this happens, but it usually does

It’s the age of Brazil (governmentally speaking). The current republic is
fairly young and so the popular view is the equivalent of a twenty-year-old
college student that is into libertarianism and thinks that all regulation and
bureaucracy is bad and that the market should decide all things

------
dataker
I'm Brazilian and I tried building a company there after two successful
products both in the EU and US.

Brazil simply doesn't have the culture that's necessary to foster a startup
ecosystem.

Chile is in a much better position to be that sort of local leader, but still
only relatively.

And it's not something you can change by prosecuting corrupt politicians - it
goes all the way back to our colonial heritage, and the crookedness and
"classicism" will always hinder the progress of companies and, more sadly,
great engineers and entrepneurs.

This stereotype that "we're the most creative" is just another self
entitlement like soccer or beautiful women that may build a brand, but
certainly doesn't represent reality or live it up to its expectations.

I've come to realize that a Brazilian in power is often a synonym of extreme
arrogance, shallowness, selfishness and an unbearable classicism that leads to
an unfathomable mistreatment of both customers and employees.

It's unlike any other elites from the western world. It might compare to some
countries in Africa.

If you're an investor thinking about Brazil , either understand and live by
that culture or lose your money. They won't change the habits they gathered
for a lifetime just because you have money or moral authority.

If you're Brazilian and talented, either as an engineer or entrepreneur, get
out. Look for jobs remotely, incorporate a company in another country, find a
market fit in a healthy economy that selects based on the productivity,
efficiency and quality of your work.

Don't gamble your potential, talent and safety for the sake of FOMO on
companies that rich, talentless, spoiled kids built with family money, and
even our own (as taxpayers).

~~~
kikoreis
Since I can't downvote, I just wanted to note I find your comment really
offensive. Is the current zeigeist is to devalue anything remotely Brazilian?
My experience is the absolute opposite of yours. I've built companies here
that worked with very little prior experience. I've worked with lost of
spectacular leaders, made really good money, and seen many things technology
and business-wise improve dramatically over time.

It's hard to have a constructive debate about specifics on this thread because
your post is essentially a list of negative generalities. But to take your
first point, why would you say we don't have a startup ecosystem? I see dozens
of startups around me that are bustling, hiring, taking financing, failing,
pivoting, growing. Just in my small city we have Arquivei & Monitora who are
success stories, and many that have gone through at least one funding round. A
new startup center, ONOVOLAB, was set up here this year. There are other
examples nationwide. Gosh, Google just opened its own accelerator here after
witnessing the success of others' existing programs. It can't be as bleak as
you are painting.

~~~
dataker
Are you a developer?

I'm sure there are exceptions, but the majority of cases always rules.

There's an entire historical background that explains why most "executives"
and founders see programmers, or any employee of any sort, as obedients servs
that must compel and be grateful for their jobs.

That "classism" will always be present and act as the strongest force against
innovation in that country.

Technology is not a factory and, whenever you try to modularize it in such
form, you see mediocre, subpar, results.

There might have some small local companies that are able to challenge the
even worse local oligarchs from past generations, but they will never be able
to compete at a global level, as you'd expect from a real startup ecosystem.

And if they end up facing an international competitor, they might as well be
crushed or acquired by them.

I don't get into a personal attack here, but you may want to experience more
in depth some of these places like SF, Israel, Chile, Paris, Berlin to
understand these profound cultural differences.

~~~
kikoreis
I started my career as a developer, working at Promon on the Tropico R and RA
exchanges, and then shifted completely to Linux and open source development,
which is when I founded my first companies. I don't really do a lot of real
coding any longer, though.

I see the symptoms you describe, of our startups being less globally impactful
[1], as a natural consequence of a smaller, more internally focused [2], and
less mature ecosystem, but I don't see all the dysfunction you allude to. I
have worked with poor leaders and good ones in Brazil and abroad, and I can't
say Brazil tends to any of the extremes of the spectrum. Yeah, there's an
oligarchy that has a strong effect on the ability for an entrepreneur (or
employee) to "make it", but name a country where there isn't one?

I write this mostly for the benefit of this thread, as I don't think you're
really approaching this discussion with useful data or an open mind.

[1] although you have Movile, 99Taxis, iFood to serve as counterpoints to that
generalization

[2] your comment on global reach being an important metric reminded me of
Nubank, and this article from earlier in the year:
[https://epocanegocios.globo.com/Empreendedorismo/noticia/201...](https://epocanegocios.globo.com/Empreendedorismo/noticia/2018/03/startups-
brasileiras-nao-precisam-ser-globais-para-terem-sucesso.html)

------
fb03
Brazil has the potential to be good and make anything bloom, be it startups,
big corp etc. It has a good geographic area, plenty of natural resources
(water, oil) and whatnot.

BUT!

What keeps Brazil from entering the row of 'actually a good place to live'
countries is nothing but the rampant corruption and the sheer amount of
bureaucracy involved in anything regulation or taxes in the country. It's not
a matter of simply high taxes, but mainly a really complex system of hoops one
has to jump to incorporate even a small and simple company. This sucks.

~~~
rbanffy
We also have a very serious issue with electing the wrong people. São Paulo,
the richest state in the country, has been electing the same centre-right
(dressed as centre-left) kleptocrats for about 30 years now, with disastrous
results.

And don't get me started on that "impeachment" shitshow.

------
rodolphoarruda
Maybe the country has the largest ecosystem because there are a lot of people
in there. That doesn't imply in high quality, positive ROIs etc. Lots of
people are just trying.

~~~
rbanffy
The country has some decent universities, some large and rich cities (despite
the country, being, on average, poor) and some entrepreneurial attitude.

The drawback I observed the most is the same @cscotti pointed out: the people
who end up creating companies are not particularly well suited for that. They
want quick money out of outrageous profit margins - they are often already
rich, but think they are entitled to more. It's the Brazilian version of the
robber baron standard, but in a fractal pattern almost down to the bottom.

And, now, there's also the crazy politics (thanks, Obama) with a coup and all
those shenanigans.

~~~
princekolt
Brazil absolutely was a Baron country for most of its life (except they were
more commonly called Colonels or Captains). Starting on the 16th century the
Portuguese kingdom would distribute land for agrarian usage, and the Barons
not only owned the land but its ownership was also hereditary. An intricate
taxation system was developed that stimulated lang aggregation and so not long
after you'd find many of these land owner families owned immense tracts of
land - larger than cities or states, and became very rich.

As centuries passed, this system of power persisted, and there is still very
very old money in Brazil. Many of these families would give tracts of land
away for poor people in exchange of political support, and so they grew into
the national political scene. Numerous past presidents came from these
families (such as Sarney and Collor).

In short: Brazil has a longstanding colonial culture that persists even though
its population might not be aware of it. All its symptoms are still there,
including distrust in political entities, assertion of political power by
intimidation or populism, archaic taxation systems, and a general sense of
powerlessness to change things.

------
yourstruly-br
There is no venture capital here. The biggest funds (Redpoint, etc) here are
in fact "growth" funds, i.e. once you get a revenue about BRL 1,000,000 per
quarter, you will be considered otherwise good luck. Try to build a technology
company here and get the funds and then let me know.

Incubators are in fact cheap outsourced innovation departments of large
companies. Once you get there (which is not difficult), they will steer your
solution to fit the large corporation behind. Largest companies pay lip
service saying they support "innovation" by providing start-up competitions.
In fact, they buy almost none from start-ups. They are in fact searching for
cheap or free technology ideas and services. Absolutely no significant success
has come from corporate incubators in Brazil. You are there as a small piece
on the board.

My advice to start-ups in Brazil? Build as much as you can by bootstrapping
and try to sell as early as possible and avoid any "free" pilots by
corporations trying to use your solution. Charge and charge upfront. I sadly
see too many start-ups providing free services to large companies in exchange
of vague promises. You are just a piece used by employees in these large
companies to promote innovation and cheap solutions.

if large comporations want to support startups they should sign a CONTRACT and
BUY from you. That's it! Anything else is just exploitation of technical
talent and naiveté from your start-up founds.

------
rs86
It's a myth that Brazilians are more creative. Doing business in Brazil is
incredibly difficult - lack of talent, ethics and terrible financial sector.

~~~
lucashn
Lack of competitive pay makes talent leave the country (source: I have many
friends working in startups in USA due to better working conditions).

~~~
rbanffy
Source, yours truly.

But what drove me away was not the money - I make a lot more money now, but in
a much more expensive place. Retirement projections remain firmly planted on
the very same date since I left and aren't going to change much either way
unless some major upheaval happens.

What really drove me out was my lack of faith. Corruption was rampant (it was
always like this, since well before I was born) but it was being investigated,
in some cases more seriously than others, but the local equivalents to the DoJ
and the FBI (I'm doing this for the Americans in the audience, hope it helps),
for the first time since essentially ever, able to work free from executive
interference and, unsurprisingly, uncovered a _lot_ of misdeeds. With that,
the perceived corruption skyrocketed, government popularity sunk, trust in the
government went into a death spiral and the legislative and judiciary decided
it'd be convenient to stage a coup (sorry, "impeachment" is not the right
word) so that someone more malleable would be in power (there was even a phone
recording stating that much).

At that moment I was over for me. I grew up in post-64 coup Brazil and don't
want my daughter to go through the same.

------
lucasfcosta
I must say that even though it might look great for investors and business
owners, software engineers suffer a lot.

In the recent years, the situation in Brazil has only got worse. The BRL is
worth nothing and engineers get a lot less than anywhere here in Europe or the
US.

Life quality is also bad and it's rare to find a good work environment,
especially outside São Paulo.

If I had to go back to Brazil, São Paulo is definitely the only city I would
live in.

