Brazil’s Big Opportunity Attracts Tech Dreamers
Business Management

Brazil’s Big Opportunity Attracts Tech Dreamers

mik-300dpiMiklos Grof laughs when I suggest he is being either very smart or crazy. A Hungarian who spent eight years in the UK, he now lives in Belo Horizonte, Brazil, where he is CEO and co-founder of a startup, Fundacity. The company is intended to open up technology investing for Latin American firms through a cloud portal. His path isn’t perhaps the traditional one for tech entrepreneurs that leads to Silicon Valley or some other hotspot, but it is likely that as the technology startup opportunity globalises there will be more like him that try their luck in relatively untapped geographies.

Grof, 28, graduated in Economics from the University of Nottingham then took a Masters in Finance at the London School of Economics before working in corporate restructuring at PwC.

“I didn’t feel I was realising everything I could do so I started eyeballing the startup space,” he recalls. “I was looking at Tel Aviv, San Francisco, London, Singapore…”

He could, perhaps, have become a business development type but then hundreds of thousands of people were having the idea at the same time. The Startup Chile project to attract entrepreneurs lured him into taking a holiday and then staying on in Santiago.

“It was a bit crazy: I didn’t have an idea for a product and didn’t know the language…”

Within a year he spied the bigger opportunity in Brazil, where he lives now in Belo Horizonte, after having set up Fundacity with his business partner, Diego Izquierdo.

“The opportunity is huge and Brazil has one of the more robust ecosystems,” he says. “I decided that if I had come this far I might as well take the full risk.”

Fundacity has raised $300,000 from a cosmopolitan array of angel investors with links to Hong Kong, Greece, Lithuania and closer to his current home. His team have their personal roots in Brazil, Poland and Chile, while Grof adds Hungary, the UK and 14 years in Austria. But, he says, there are relatively few Europeans on the Brazilian startup scene, hence the question referred to at the top: whether he is being exceptionally clever in making himself a bigger fish in a small pool or just running down a blind alley.

Grof is betting on the former and sees Fundacity as a way to connect Brazil and LatAm’s lively startup scene with people who might never have invested previously.

“Our goal is to make startup investment easy,” he says, and to that extent Fundacity has developed cloud-based portfolio management tools and is working with leading local startup accelerators.

On the day we speak, Fundacity is launching its Fundacity Investment Clubs, hooking up new investors with experienced investors leading the clubs, in much the same model as a horseracing syndicate where investors take shares in a horse that is stabled and trained by experts.

Fundacity particularly likes startups with developed products that are making revenue and have a global outlook and he dreams of making the next Google or Uber. Ultimately, Grof hopes to create a virtuous cycle where Latin American companies make successful exits and that money is ploughed back into the next generation of startups, as happened in Israel in the 1990s.

“There are few angels here because the ecosystem is new but people are excited,” he says. “I watch this telenovela [TV drama series] and even on there, there’s a Steve Jobs-style character. But it’s definitely not awash with cash, so let’s create a structure.”

He says that he likes the life there and Brazil has not only a bigger business opportunity but also a better chance of keeping successful entrepreneurs than Chile.

“Brazilians are very welcoming to foreigners, it’s a rich cultural country and it’s easy to feel at home here. In meetings, people are very open. Chilean people are much more introverted, a bit more shy.”

There are challenges, of course.

“Sao Paulo is very international but the rest of Brazil isn’t like that and finding international talent is difficult. Things are still highly regulated especially in the finance sector and that’s difficult but sometimes people think it’s tougher than it really is. Travel is really expensive here and things might be slower than I’m used to in London but people bring a really open and friendly attitude to innovation.”

In the medium term, Grof wants to scale out across Latin America and then maybe turn to Asia.

“I’d like people to think ‘emerging market plus startup equals Fundacity’,” he says.

He could have gone to Silicon Valley or stayed in London and competed against all the City boys leaving the banks and financial services to launch their own startups, but Brazil is a huge market with a growing middle class with less competition.

“I can develop a huge network across a continent. I don’t think I could have made a dent in San Francisco but here we can make a real mark,” he says.

All over the tech world, people are leaving their comfort zones to seek their fortunes. A decade ago they might have been magnetically attracted to the west coast of the US and today cities like London and Berlin have a pull. But for young, ambitious people like Miklos Gof there are new valleys to conquer and fresh fields to explore.

 

Martin Veitch is Editorial Director at IDG Connect

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Martin Veitch

Martin Veitch is Editorial Consultant for IDG Connect

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Comments

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Robert Shame on August 16 2014

I truly do not see how Fundacity can be successful in Brazil. Ok, maybe more successful than Chile, but that does not say much. The tech industry needs an infrastructure to blossom, which does not really exist in Brazil. Everything in this country is precarious, there is little confidence in the political scenario - I am not talking about hope but reality. Try to find an ODM willing to take a small order of a device that is being researched: no one will take you seriously. Try to find a bunch of hardware developers willing to apply to a start-up: they do not exist. Try to demonstrate private investors that the VC they put will return, despite in a different perspective than the capital market: people are lazily accustomed to receive 20% per year in returns on that market and unwilling to invest on when there is doubt. It is just not part of the culture.

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Miklos Grofon Aug 23 2014 | 16:25

As you say Robert it is a major challenge indeed as the percentage of 'investor' types that think of portfolio diversification etc in LatAm are few. Only 600k Brazilians actually invest in the stock market. This is a result of the huge interest rates that they can earn on bonds. However the bond returns have reduced somewhat from what they were some years back. Still, I can invest tax free in a fixed bond at 11%, indeed thats not bad. However, as any experienced investor will tell you diversification is key. This however requires financial education, which we and all the angel groups are trying to change in Brazil via workshops and courses. The market is for sure on the rise here but it is starting from a much lower point that the valley and thus deal numbers and ticket sizes will be smaller but we have to start somewhere. I can truly tell you that there is a huge opportunity here and in Mexico, which I am currently visiting to assess.

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Pedro Graziano on August 25 2014

I see very clear how Fundacity and others startups can be successful in Belo Horizonte (or anywhere in Brazil) as the previous comments says, Brazil has a lot of issues - infrastructure problems, politics problems, venture capitals problem... But I see them as opportunities that nobody is working on. Brazil is still new at the startup world, but it has a huge market and the Government is working hard to make it happen faster. This is why Miklos and others entrepreneurs who come to Brazil are getting better results than anywhere else. Go ahead man, the future depends on what you are doing now!

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Tommy Larsenon Sep 05 2014 | 11:02

I have been working in US Tech companies since 2008 (Salesforce.com, LinkedIn, Box). Some years ago Brazil was not really on the agenda. Now I hear the CEO's of US Tech mention Brazil as somewhere they need to open offices in early in order to have long term success. I think some US companies are almost considering going to Brazil before Hong Kong and Asia. The Tech scene in Brazil will explode in the next decade. Brazilians love Cloud Technology it seems. I will keep an eye on Fundacity.

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Gladson Russo on September 05 2014

No doubt there are big challenges for startups in Brazil, but I would say Brazil is too big to be ignored. Some facts I have grabbed from a Forbes article: According to comScore (2013), consumers in Brazil spend more than 27 hours per month online on their computers (global average: 24.7 per month). -23.3% of Brazilians use their phones to access the internet. As of mid-2013, Brazil was home to the largest mobile phone market in Latin America. Reuters forecasts that Brazil will become the fifth largest smartphone market in the world by the end of 2013. - 13% of Brazilians use their phones to compare prices while visiting shopping stores in person and 24% of Brazilians surf the web while watching TV (Source: McKinsey Study: Brazil’s e-psyche: Grasping trends in an elusive market). - According to official data from Brazilian association of Startups, there are 2835 startups in Brazil. Sao Paulo, leads with 605 startups, followed by Minas Gerais with 181 and Rio de Janeiro with 125 companies. - The Brazilian internet audience is young on average, with 18% of users age 18-24 and 30% of all users age 25-34. (Source: comScore Media Metrix). - In Brazil, 36% of online time is spent on social media, according to 2013 comScore stats. - Seventy-nine percent of Brazilian Internet users (some 78 million people) are now on social media, according to a newly released report from analysts eMarketer. - Brazil already counts 65 million Facebook users, second only to the U.S. - Latin America’s largest economy is the world’s second-biggest user of Twitter (with 41.2 million tweeters and counting). - Google (YouTube) remains the king of online video in Brazil with an average of 83.8 videos watched per viewer in 2012. VEVO comes second. Brazil is also the largest market outside the U.S. for YouTube. -The number of videos viewed per viewer grew 18% in 2012, which accounts for an average of 129.3 videos/viewer. -24% of Brazilians Respondents Indicate They Share ‘Everything’ or ‘Most Things’ Online. The proportion in Saudia Arabia is 61% and 52% in India. By comparison, in the US the figure is 15%(Source: Ipsos OTX.) - According to a MIT Study, in 2012 at least 50 firms made approximately 80 investments in start-ups in Brazil. R$1,7 billion (about USD 770 million) was the total that Brazilian startups raised last year. - 100 million Brazilians are internet users and 61% of them have bought something online. -62% of Brazilians who bought something online are aged between 15 and 34. - The average amount spent by Brazilians buying electronic items online was R$1263 (about $600) per purchase. According to a study by Nielsen, sponsored by Paypal, 5,3 million Brazilians spent R$2,6 billion (about $1.2 billion) in websites outside of Brazil from May 2012 to May 2013. -The average amount spent in any singular online purchase was R$359,4. The average amount spent by Brazilians buying electronic items online was R$1263 (about $600) per purchase. (Source: e-bit)

no-images

Robert Shame on August 16 2014

I truly do not see how Fundacity can be successful in Brazil. Ok, maybe more successful than Chile, but that does not say much. The tech industry needs an infrastructure to blossom, which does not really exist in Brazil. Everything in this country is precarious, there is little confidence in the political scenario - I am not talking about hope but reality. Try to find an ODM willing to take a small order of a device that is being researched: no one will take you seriously. Try to find a bunch of hardware developers willing to apply to a start-up: they do not exist. Try to demonstrate private investors that the VC they put will return, despite in a different perspective than the capital market: people are lazily accustomed to receive 20% per year in returns on that market and unwilling to invest on when there is doubt. It is just not part of the culture.

no-images

Miklos Grofon Aug 23 2014 | 16:25

As you say Robert it is a major challenge indeed as the percentage of 'investor' types that think of portfolio diversification etc in LatAm are few. Only 600k Brazilians actually invest in the stock market. This is a result of the huge interest rates that they can earn on bonds. However the bond returns have reduced somewhat from what they were some years back. Still, I can invest tax free in a fixed bond at 11%, indeed thats not bad. However, as any experienced investor will tell you diversification is key. This however requires financial education, which we and all the angel groups are trying to change in Brazil via workshops and courses. The market is for sure on the rise here but it is starting from a much lower point that the valley and thus deal numbers and ticket sizes will be smaller but we have to start somewhere. I can truly tell you that there is a huge opportunity here and in Mexico, which I am currently visiting to assess.

no-images

Pedro Graziano on August 25 2014

I see very clear how Fundacity and others startups can be successful in Belo Horizonte (or anywhere in Brazil) as the previous comments says, Brazil has a lot of issues - infrastructure problems, politics problems, venture capitals problem... But I see them as opportunities that nobody is working on. Brazil is still new at the startup world, but it has a huge market and the Government is working hard to make it happen faster. This is why Miklos and others entrepreneurs who come to Brazil are getting better results than anywhere else. Go ahead man, the future depends on what you are doing now!

no-images

Tommy Larsenon Sep 05 2014 | 11:02

I have been working in US Tech companies since 2008 (Salesforce.com, LinkedIn, Box). Some years ago Brazil was not really on the agenda. Now I hear the CEO's of US Tech mention Brazil as somewhere they need to open offices in early in order to have long term success. I think some US companies are almost considering going to Brazil before Hong Kong and Asia. The Tech scene in Brazil will explode in the next decade. Brazilians love Cloud Technology it seems. I will keep an eye on Fundacity.

no-images

Gladson Russo on September 05 2014

No doubt there are big challenges for startups in Brazil, but I would say Brazil is too big to be ignored. Some facts I have grabbed from a Forbes article: According to comScore (2013), consumers in Brazil spend more than 27 hours per month online on their computers (global average: 24.7 per month). -23.3% of Brazilians use their phones to access the internet. As of mid-2013, Brazil was home to the largest mobile phone market in Latin America. Reuters forecasts that Brazil will become the fifth largest smartphone market in the world by the end of 2013. - 13% of Brazilians use their phones to compare prices while visiting shopping stores in person and 24% of Brazilians surf the web while watching TV (Source: McKinsey Study: Brazil’s e-psyche: Grasping trends in an elusive market). - According to official data from Brazilian association of Startups, there are 2835 startups in Brazil. Sao Paulo, leads with 605 startups, followed by Minas Gerais with 181 and Rio de Janeiro with 125 companies. - The Brazilian internet audience is young on average, with 18% of users age 18-24 and 30% of all users age 25-34. (Source: comScore Media Metrix). - In Brazil, 36% of online time is spent on social media, according to 2013 comScore stats. - Seventy-nine percent of Brazilian Internet users (some 78 million people) are now on social media, according to a newly released report from analysts eMarketer. - Brazil already counts 65 million Facebook users, second only to the U.S. - Latin America’s largest economy is the world’s second-biggest user of Twitter (with 41.2 million tweeters and counting). - Google (YouTube) remains the king of online video in Brazil with an average of 83.8 videos watched per viewer in 2012. VEVO comes second. Brazil is also the largest market outside the U.S. for YouTube. -The number of videos viewed per viewer grew 18% in 2012, which accounts for an average of 129.3 videos/viewer. -24% of Brazilians Respondents Indicate They Share ‘Everything’ or ‘Most Things’ Online. The proportion in Saudia Arabia is 61% and 52% in India. By comparison, in the US the figure is 15%(Source: Ipsos OTX.) - According to a MIT Study, in 2012 at least 50 firms made approximately 80 investments in start-ups in Brazil. R$1,7 billion (about USD 770 million) was the total that Brazilian startups raised last year. - 100 million Brazilians are internet users and 61% of them have bought something online. -62% of Brazilians who bought something online are aged between 15 and 34. - The average amount spent by Brazilians buying electronic items online was R$1263 (about $600) per purchase. According to a study by Nielsen, sponsored by Paypal, 5,3 million Brazilians spent R$2,6 billion (about $1.2 billion) in websites outside of Brazil from May 2012 to May 2013. -The average amount spent in any singular online purchase was R$359,4. The average amount spent by Brazilians buying electronic items online was R$1263 (about $600) per purchase. (Source: e-bit)

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