Building A Company In Brazil; An American Entrepreneur’s Perspective

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Editor’s note: Guest contributor Lee Jacobs is the founder of language learning startup Colingo.

While I may have pulled several all nighters, and slept under a few desks in my day,  I am still pretty soft compared to your typical Brazilian entrepreneur. In fact, most coddled Silicon Valley entrepreneurs are wimps compared to the Brazilian founders I know.

Brazil is the first market for my start-up, Colingo, a service that helps young professionals learn English as a second language. In the process of doing market research in Brazil,  I’ve gotten to know many Brazilian entrepreneurs, and a few weeks ago I traveled to Brazil for Startup Weekend Sao Paulo  during Global Entrepreneurship Week.

Brazil is Latin America’s largest e-commerce market .and macro-economic conditions have never been better. At $11B, it’s the same size as S. Korea- and it’s growing 25% Y/Y.  Multinational corporations are rushing in to participate in the bonanza. Their timing is ripe: With the 2014 World Cup and  2016 Olympics approaching, the 200M domestic market has a rapidly growing middle class beaming with optimism.

Despite this obvious macro economic opportunity, there isn’t enough focus on Brazilian startups. The climate is nowhere near as favorable as in the Valley.  No word of investors throwing money at rapping founders either.

The bubble here has provided Silicon Valley founders with a wealth of resources to help them execute on their dreams.  Need a lawyer? Great lawyers offer reduced fees.  Need some office space? VCs provide.  Seed capital? No problem.  There are a few investors here.

Brazilian entrepreneurs have produced some great companies such as Apontador, Vostu, Bucaspé, Peixe Urbano, Compra3, Fashion.me,  to name a few.  But it hasn’t come easy. To be a startup entrepreneur in Brazil you need real balls (not just cod balls). Founders not only have to build great companies, which is hard enough, they have to do it in suboptimal conditions.  There is a scarcity of resources at their disposal to help them grow.

For example, Brazilian entrepreneurs have had to help create a local seed stage capital market.   Because of the lack of a robust early financing market, several accomplished  early stage entrepreneurs, with companies that are producing real revenue- something Silicon Valley entrepreneurs perpetually promise is on the horizon (wink, wink)- have had to go one by one knocking on rich peoples’ doors pleading for money.  They have had to convince the country’s  often very traditional elite that there is a huge opportunity in the web/mobile and that they should invest.  As a consequence, all too often, Brazilian entrepreneurs have had to resort to raising small rounds at low valuations and have had to sell their companies before they should have.

Change is Coming

Thankfully the Brazilian startup ecosystem is beginning to transform. Brazilian entrepreneur Bedy Yang, founder of Brazil Innovators, is at the heart of this effort.  For the past two years, Bedy, has organized numerous start-up events, and has worked tirelessly to afford Brazilian entrepreneurs the same opportunities bestowed on their Silicon Valley brethren.  If you are a Brazilian entrepreneur worth anything, you know Bedy.

Bedy emphasizes the huge market opportunity, saying “Everything is converging at once for the Brazilian entrepreneur. There are 76 million domestic Internet users, 210 million mobile phones, and broken business models that are ripe for disruption.” Adding that “We Brazilians, love social media and as early adopters are totally willing to try new things.”

Bedy, who for the past two years has split time between The Bay Area and Brazil, wants to “ Empower the Brazilian entrepreneur with startup know-how by bridging Silicon Valley and Brazil and in the process creating  an environment that will enable Brazilian entrepreneurs to thrive and capture the huge opportunities in front of them.”  The only thing holding Brazilians back, she quips, “is a direct flight from SFO to Sao Paulo” instead of the 16 hour schlep she takes regularly.

Several U.S VCs are starting to take notice of the opportunities in Brazil, and recently Dave Mcclure of 500 Startups has partnered with Bedy, in order to invest in Brazilian startups.  So far 500 Startups has invested in four Brazilian companies Conta Azul, Descomplica, Rota dos Concursos, Viva Real and is looking to aggressively expand that number.  As McClure told the audience at Startup Weekend, “Don’t pitch me, bro – pitch Bedy.”

Entrepreneurs at Heart

I can’t be more excited to build my business in Brazil.  It’s clear that something special is happening down there.  Brazilians are some of the most passionate, optimistic, and energetic people I have ever met. You have to be to party as hard as they do.  Early stage startups run on this type of passion,  and its clear to me that there will be many great startups coming out of Brazil over the next few years.

Over dinner one night in Sao Paulo, several Brazilian entrepreneurs were discussing setting up a company to buy Portugal. They argued that with Brazil’s booming economy and Portugal’s recent debt struggles  (and the fact that many Portuguese were coming to Brazil looking for work, reversing a major historical trend) it was time for Brazil to get a little revenge on their former colonial masters.

Now that would take some real balls.