On Aug 21st, BayBrazil chatted with Andy Tsao, Managing Director of Silicon Valley Bank, who had just returned from London.
BayBrazil: During the Olympic Games you participated in the Rio Conferences at Casa Brasil in London. How is the climate for business in Rio?
Andy: There was a lot of excitement in London during the start of the Olympic games. The atmosphere was really electric, and you could feel that excitement extending to the Rio Negocios team and other Brazilians at the Casa Brazil (or sometimes known as the Somerset House J) on the Strand. As we all know, London has passed the Olympic torch to Rio, and based on what we saw of the Brazilian performances at the closing ceremonies, I can’t wait four years to see what should be a spectacular Olympic games! In meeting with UK VCs and entrepreneurs, my impression was that there was less awareness of what was happening in the Brazil market than here in the Bay Area. However I was surprised to learn today that the UK was just behind the US in FDI as measured by projects. It would appear that at a broader level, there is already a lot of trade between Brazil and the UK.
Rio is certainly doing a lot to promote itself as an innovation hub, not only in Brazil but for the entire region. There is a lot of investment in infrastructure going on, and many of the global technology corporates have set up presence there. Rio also has several excellent universities that also contribute entrepreneurs, technical talent and innovation. While Sao Paolo is another obvious choice for companies to consider doing business in, I do appreciate the help that the Rio Negocios team can provide for international companies to navigate some of the complexities of setting up in Brazil. Finally there are many exciting technology companies coming out of Rio, such as Peixe Urbano, Grupo Xango and Hotel Urbano (both Marco DeMello and Joao Mendes Rangel participated in the Casa Brazil technology meetings), and with accelerators such as 21212, there are many reasons to think Rio is a hotbed for entrepreneurs.
BayBrazil: Which opportunities do you see in Rio de Janeiro for Californian companies?
Rio has a lot of infrastructure to build out for the 2014 Football World Cup and 2016 Olympic games. There will be plenty of technology required as part of that spend. In addition, Rio is home to Petrobras, Brazil’s largest energy company. There is a lot going on with technology required to tap into the large gas fields off the coast of Brazil. Of course Rio might also be a good home for Californian entrepreneurs who want to setup a start up that is focused on selling into the growing Brazilian market. As an example, Grupo Xango is made up of a founding team that includes Marco DeMello, who is a returning Carioca after an impressive career in the Bay Area which included working for large corporate and a few successful startups, along with two other Americans, who chose to set up across the street from Copacabana Beach, because that’s where they saw the best opportunity to launch a startup.
BayBrazil: You’ve taken several trips to Brazil over the last two years. What can you tell us about the startup ecosystem in the country?
Andy: It is really thriving in Brazil. There is a lot of international capital pouring into Brazil, and you can see this with the recent announcements of Sequoia opening an office, the new Redpoint eVentures fund, and the growing number of international funds that are regularly making investments in Brazil. This combined with the indigenous VC community, firms such as Monashees, there is a growing amount of capital available for entrepreneurs, as well as growing sophistication of best practices from the US and other international markets. Finally Brazilians have an increasingly entrepreneurial culture. A recent surveys that Rio Negocios have done suggest that nearly 2/3s of university students are interested in starting their own business. Mash that up with returnees like Marco DeMello, it makes for a very dynamic and exciting market.
BayBrazil: Various Silicon Valley firms have recently allocated funds to invest in Brazil. Will this trend continue?
Andy: I do think this will continue for the near term, in fact I’m aware of a number of US firms that will likely expand their activity or put offices on the ground in Brazil. That being said there is probably an optimal balance between available capital and good entrepreneurs, and we could get to a tipping point in the rush of international money trying to find its way into Brazil. We’ve seen this happen in other emerging markets, which can sometimes leads to bubbles.
BayBrazil: What are the most promising entrepreneurship clusters in the world right now?
Andy: The rules of venture capital and entrepreneurship are being rewritten today due to the globalization of the industry (see Thomas Friedman’s The World is Flat). Technology has leveled the playing field and no longer is it assumed that the best ideas, entrepreneurs and businesses will come out of the Bay Area. VCs have woken up to this reality, and where they once would not invest in a company beyond a half hour drive from their offices, the elite VC firms are rushing to every corner of the globe. Outside of Brazil, the rest of the BRICs all factor. New emerging clusters can be found in Turkey and SE Asia. Chile is doing some interesting thing with Startup Chile to build up a cluster, and we should not overlook some of the exciting things happening in Manhattan, London, Tel Aviv and Berlin.