What It’s Like To Be A Startup In Brazil
Brazil is the 5th most populous country in the world with over 200 million inhabitants.
So, what’s the startup scene like in the 7th largest economy in the world?
Over half of Brazil’s 200 million people are on the web and by 2015, 45% of the population were smartphone users. The country also has one of the most active social media audiences in the world, with people spending an added 41% of their time on Facebook compared to their western counterparts. With the internet and mobile penetration on the rise, it is not surprising to see the tech startup scene thrive in Brazil.
The Crisis And Its Silver Lining
In 2012 Forbes coined Brazil “one of the most entrepreneurial countries in the world”. By then, small businesses were accounting for two-thirds of private sector job creation.
And then came the crisis…
Brazil’s recession was largely caused by corruption and fiscal mismanagement and was followed by austerity measures. Despite this, Brazil’s cities consistently made the top 10 list for digital entrepreneurs. In fact, healthcare and education, two of the most troubled public sectors, are not the areas that startup founders focus most on. To add to that, foreign direct investors poured almost $79 billion into the country at the height of its recession in 2016.
Brazil’s Remaining Challenges
Although resources are poured into private businesses, there are still many structural issues in Brazil that can disadvantage startups. The country is notorious for its slow bureaucratic system and it is estimated that it takes around 84 days to create a company. Since the beginning of the crisis taxes have also continued to increase and in 2017 the finance ministry used tax hikes to raise an additional $3.2 billion for the state. The country also has high company tax: when an investor sells his shares, the Brazilian Revenue Authorities take up to one-third of the money in taxes. Lastly, the high-interest rates, which now sit at 14.25%, render entrepreneurship very risky.
The Current Startup Scene
Despite the crisis, Brazil creates a whopping 300,000 companies every year. The startup scene is concentrated in Sao Paulo, the financial capital. Between 2011 and 2016 Brazil’s startups grew 30% per year. Foreign investors are also allowed a permanent residence visa for only $60,000USD. Startups have been described more as mountain goats than unicorns, resilient and reliable. Most of them recover their customer acquisition costs in less than 6 months.
Brazil’s Top Startups
This startup is a product search and price comparison price engine that has expanded from Sao Paolo to operate in 16 Latin American countries.
This online travel agency was founded in 2011 and is now valued at around 2 million.
This real estate startup connects buyers, sellers and renters. So far it has raised 75 million.
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