Soccer Thrives in Brazil, But Can Startups?
In the run-up to Thursday’s opening match of World Cup 2014, host country Brazil, the alleged spiritual home of football, has seemed to be a nation in various kinds of turmoil.
The tournament’s final will be played at the magnificent Estádio do Maracanã in Rio, where Brazil’s team was stunningly defeated in the championship in 1950, the last time the world’s biggest sporting event was held on Brazilian soil. It was a setback that continues to obsess the country.
But it’s not simply the fans who want a shot at redemption; the government is also depending on Brazil to win it this time. World Cup winning teams are very good for economies and very good for politicians.
Brazil’s economic rise has recently stalled and it could do with a kickstart. As a member of the BRICS association of five major emerging national economies along with Russia, India, China and South Africa, Brazil’s rise seemed unstoppable until recently.
The population is angry about the economic slowdown in Brazil. Last June when Brazil held the Confederations Cup (a mini-World Cup also held every four years), a small protest in São Paulo broke out concerning a 10 cent rise in bus fares. It crystallized via social media and became a national riot. More recently, just four days before the city hosts the tournament’s opening match, teargas and fires blaze in São Paulo’s streets as subway workers look for a 12% wage hike.
A lot of this rage centered on the money that Brazil had spent on the World Cup, which at last count was a staggering $13 billion. Compare that to the $1 billion South Africa spent on World Cup 2010.
So, the world’s eyes will be on Rio and with the Olympics coming up two years later, this attention will continue until the summer of 2016 and beyond. Brazil is well-known as a place to party, but is it a place where good businesses can thrive? Recent worker deaths at stadium construction sites, huge overspending for the World Cup and a culture of corruption would suggest it may be a challenge.
Mixed conditions, but bright spots
While airports and other infrastructure have fallen short of expectations, there are other more optimistic trends. In São Paulo, 120 public spaces, including parks, squares and public transit stations all have free Wi-Fi covering 6.7 million square meters more than 4,000 square miles. In Rio itself, City Hall recently sponsored its first hackathon, opening up public data to Rio developers who are trying to use apps to improve the city’s infrastructure.
So, what is the culture of its startup community? Is Brazil a place where startups can flourish? Does the ecosystem have the depth to rival regional tech hubs such as Bogota, Colombia or will it languish behind?
While the statue of Christ the Redeemer is the definitive image of the Rio, the city’s startup scene is more difficult to define. According to the Brazilian Startup Association, it’s the state of São Paulo that is the main hub of a thriving startup scene in Brazil with 652 officially registered ventures. Meanwhile, Rio has only 176.
Dafiti, an e-commerce fashion and lifestyle startup in São Paulo, has already raised almost $250 million in funding. Another in that city, IFood, is an app-based food delivery platform. Rio itself has Hotel Urbano, an $85 million-backed portal that provides information on tourist destinations in Brazil and across Latin America.
Entrepreneur Angelica Mari founded Gift Brazil, a website promoting and selling local craft to a global audience out of Serra Negra, a small town 150 kilometers away from São Paulo city.
“We are using proven tools such as WordPress, Etsy and Facebook to bridge traditional culture and the digital economy,” she says.
“Artisans can reach markets that were previously impossible to reach and buyers can find items that would only have been found by exploring the country in person.”
Mari represents a change in Brazilian culture according to the Global Entrepreneurship Monitor. Out of the 123 million Brazilian adults aged between 18 and 64, more than 36 million are now running or developing their own venture.
Despite the boom in startup ventures, Brazil been slow to embrace entrepreneurship — traditional government jobs still the most attractive career option. Out of a population of 194 million, 9.4 million Brazilians work in the public sector.
The federal government is trying to boost the country’s startup culture through Start-Up Brazil, a program offering up to $100,000 in support of entrepreneurs. And now, as the World Cup and Olympic Games draw the global eye to Rio, the city is beginning to take on São Paulo for national prominence.
State body Rio Negócios, similar to the British government’s UK Trade and Investment business development agency, is heavily focused on developing local startups and creating a center of digital excellence.
Some Rio startups are beginning to find some leverage. Easy Aula is an online marketplace for offline classes of various subjects. Aentropico is a predictive analytics platform that combines improved user experience with applied statistics to bring useful algorithms to non-tech users. Cabe na Mala is a crowd-based logistics platform that connects people who want products from abroad and travelers who can bring them in exchange for money.
Then there are the larger companies that are always needed to support a cluster. Cisco Systems has plans for a $500 million innovation center and Microsoft is building a $100 million technology center, both of which will act as incubators for Rio startups. Other tech behemoths in the city include Siemens, operating out of General Electric’s Federal University $500 million technology park. IBM also supports the city’s startup scene.
“Rio has become one of the world’s smartest cities by infusing intelligence into its city systems and urban infrastructures,” says Sergio Borger from IBM Research, Brazil.
“It uses analytics to draw insight from a vast urban network of sensors, digital devices and cameras to provide real-time and predictive data about weather, traffic, transportation, power failures and other challenges,” he says.
“The advance of a new generation of technologies based on the cloud, analytics, social media and mobile, mixed with Rio’s leadership in the area of smarter cities, is creating a new innovation ecosystem and a raft of opportunities for entrepreneurs,” says Borger.
A lot of red tape
While Rio may be a smart city, bureaucracy still makes things tough for aspiring entrepreneurs. The World Bank ranks Brazil 120th out of 183 countries for ease of starting a business. For foreign companies, the process requires a Brazilian resident on the ground and a lawyer or accountant to guide companies through the quagmire of tax legislation.
But Rio’s future after the soccer and Olympic caravans have left is undoubtedly in the mobile industry as the smartphone market explodes across the country. BuzzCity, a global mobile advertising network, offers brand owners and agencies access to a global network of publishers and highlights Brazil as a huge market.
“Brazil continues to be a major hotspot for our advertisers as more consumers adopt mobile,” says Hisham Isa, CMO BuzzCity. “The potential is enormous but, as in many other markets, this needs more local content particularly off-deck content.“
As the eyes of the world turn to Rio, the potential for startups is loud and clear, but things in Rio and Brazil need to start moving a little quicker if it is to prosper against local rivals such as Bogota or even Santiago, Chile.
The whole country is praying for a Brazilian World Cup Final victory at the Estádio do Maracanã in July and Brazilian startups as well as the country’s politicians will be entreating more than others. The country’s future may well depend on it.