Is Brazil to Become the Next Eldorado of Digital Revolution?

By Contributing Reporter

RIO DE JANEIRO, BRAZIL – Top consultants McKinsey and “Brazil at Silicon Valley” have produced a report that aims to shed light on Brazil’s digital development. And the result seems clear to the authors: Brazil has the potential to become the next big thing in the digital revolution.

Mauro Mantica from the famous Bocconi University in Milan is also convinced of the digital potential of Brazil.

He writes, that from many points of view, Brazil seems to be on the verge of becoming the protagonist of a geographical “disruption” in the digital world.

China, USA and India are far ahead, but there is a buzz, a strong growth of digital initiatives and talents in Brazil.

It may seem unlikely that a country with so many economic and social difficulties could be the nursery of many young startups on the frontier of new digital technologies, but it is what is happening and can represent a great opportunity for courageous and far-sighted investors, writes Mauro Mantica.

Place of Opportunity

The great national and international investors are looking at Brazil as a place of opportunity to invest in digital startups.

Japanese Softbank, one of the most innovative telecommunications companies and recently also the main shareholder of Uber, has decided to invest US$5 billion in Latin American startups (more than double the total venture capital currently available in the region).

140 startups are under analysis, 20 of which are already in the due diligence phase.

For Hans Tung, managing partner of GGV Capital, one of the largest investors in the world and with 13 “unicorns” in his assets, Brazil is like China in 2005, which is a huge opportunity.

For him, the current inefficiencies of the Brazilian market are a great opportunity and Brazil has the know-how to find the technological solutions that must necessarily be developed locally.

Even large Brazilian investors, such as the Lehman group, are evaluating digital startup projects.

Brazilian startups that have turned into “unicorns” (private startups with a market value of more than US$1 billion) are growing.

Brazilian unicorns today are:

99: taxi service app, similar to Uber

Nubank: 100% digital bank

PagSeguros: devices for mobile payments

Stone: devices for mobile payments

Ifood: food delivery

Arco Educação: educational technologies

Gympass: app for access to gyms

In 2019 the experts of the sector expect the entry of new “unicorns”. According to a recent study carried out by KPMG and the consulting company Distrito, there are at least ten startups that can become “unicorns” in 2019:

Creditas: finance

Neoway: bigdata

ContaAzul: accounting

Ebanx: payments

Grow: mobility

Resultados Digitais: digital marketing

VivaReal: real estate services

Quinto Andar: real estate services

CargoX: logistics

Loggi: logistics.

Some large Brazilian companies in traditional sectors are heavily investing in software development and new technologies.

For companies in traditional sectors (large-scale distribution, banks, construction, etc.), investing in digital technologies means not being left behind and losing space with innovative startups or more agile competitors.

An example is Magazine Luiza, a clothing distribution company: in 2015 it decided to invest in technology and today it has a team of 850 software developers and a market value of 7.6 billion dollars, a hundred times higher than that from 4 years ago

Brazilian Environment not Very Favorable for Startups

Even the large Brazilian banks, notoriously already very advanced from a technological point of view, are increasingly investing in the development of their own technologies and in the acquisition of promising startups.

On the other hand contrary to what happens in the US and China, the environment in which new Brazilian startups are born and grows is not very favorable: a lot of bureaucracy, a very complicated and expensive tax system and few graduates in the STEM area (Science, technology, engineering, and mathematics). Rampant Corruption and Crime do not help either.

(Source Mauro Mantica, Update Brazil – McKinsey – Brazil at Silicon Valley)