As crisis in Brazil deepens in these last weeks of 2015 with another ratings agency downgrade, our members wonder what are the prospects for 2016. So, we had a conversation with Pedro Sirotsky Melzer, Managing Director of e.Bricks Ventures, a Sao Paulo-based independent offshore VC firm with a focus on early stage internet and mobile technology companies.
BayBrazil: Brazil is in its worst recession since the 1930s. Do you foresee a recovery in 2016?
Pedro: Brazil is definitely in its worst recession since 1930. I believe the natural sequence of events when there’s a brutal credit crisis, is a massive number of less stable companies in need of working capital loans, having a hard time and going bankrupt. Such events tend to happen in the first semester of 2016. I guess we might start to see some recovery signs in 2017 onwards.
BayBrazil: The corruption scandal has implicated politicians as well as businessmen, including prominent banker Andre Esteves, CEO of BTG Pactual. How has it impacted the Brazilian investment community?
Pedro: In my point of view, it is good that corruption scandals have been followed by effective prisons, for the first time. Local investment community is certainly impacted as those scandals cause a credibility crisis. Average Investors are more cautious in making Investments in the Brazilian market until they have a clearer picture of whether we’ve reached the end of bad news cycle or new batches of scandals will come out any time soon.
BayBrazil: How is eBricks Ventures navigating this crisis? Is it an opportunity for founders and investors?
Pedro: Given our investment thesis is based on business models that through technology address inefficiencies in the local economy, we don’t see a slowdown in our portfolio-companies. In fact, taking into consideration only the companies that revenue growth is a relevant metric, we’ll have 110% YoY Growth against a negative growth GDP. We are 100% focused on investing in founders highly capable of executing their plans and attracting best talents to their companies. It is crucial that the companies we invest have the potential to become Industry leaders. Since we are here for the long run, we truly believe that we should be, especially in periods of crisis, extremely active and stimulating our founders to stick to their plans. We see much more mature conversations around business plans, valuations, potential exits and value proposition relevancy. Having said that, Venture Capital asset class, is not 100% immune to a severe economic and political crisis as the one we’re facing. For B2B companies, it is necessary to have an offer that might really transform businesses or we’ll see a strong holdback from companies that are with less appetite for marginal innovation.
BayBrazil: Which are the industry sectors more attractive to eBricks Ventures?
Pedro: We are currently very focused but not limited to Healthcare, Fintech, Education and SMB services in general. We believe those sectors have a solid deal flow, and are in need of real innovation while being enormous markets.
BayBrazil: Tell us about the most promising startups in eBricks Ventures’s portfolio.
Pedro: We are extremely happy with our portfolio construction and each company has its role in our portfolio. We have Infracommerce in a leading position in full-commerce solution for large companies-segment, achieving amazing growth rates. RockContent our content marketing Saas model platform, with an incredible performance in customer acquisition, doubling its average ticket, and a solid churn management. GuiaBolso, a PFM app, is really impacting people’s life and positioning itself in a unquestionable leading position. App Prova an analytics platform for schools is really outperforming its business plan and becoming a real reference in Education sector. We also are thrilled with ERP FLex a middle market ERP with a backend and front integration product that is growing significantly. Prontmed, an Electronic Medical Record platform that is working with the largest Health Operators and is playing a very relevant role in generating sophisticated and structured data to the Healthcare industry. Ingresse an event management platform, that has been delivering outstanding experience for end-users and event producers in the region. SambaAds, MeSalva, ZoeMob and 4Vets are also great promising companies in our portfolio.
BayBrazil: Before venturing into investing you spent 3 years in the Bay Area working as World Wide Revenue Manager at Apple Online Store. How has this experience impacted your life?
Pedro: Working at Apple was an amazing experience. Aside from being a very large but entrepreneurial company there was a couple of learnings: With an incredible cash balance of billions and billions, the leadership of the company takes advantage of such cash convenience and heavily invest in R&D, talent recruitment and retention in periods of economic turmoil, when most companies are totally cost-management driven. Apple doesn’t accept B Players so working at Apple gives you the opportunity to interact and learn with outstanding and diverse people. The obsession for delivering life-changing products that people don’t even know they need, is a lesson that great product wins always.
BayBrazil: There are very talented entrepreneurs in Brazil. Why isn’t the county an innovation leader?
Pedro: Brazil is becoming a great place to start a company and the whole ecosystem is gradually consolidating. With 200M people and too many inefficiencies in every angle we look in every industry and sectors, there are amazing opportunities for innovation. Having said that, we’re still a nascent Venture Capital Investment community thus only now engineers are picking an entrepreneurial career path to deploy their ideas as they see VC players active. I truly believe that in the next 5 years we’ll see great tech companies becoming industry leaders and Brazil will have more and more real innovation. It is important to mention that innovation not necessarily in the technology itself but mainly tech-enabling business models.
BayBrazil: eBricks Ventures has been a Corporate Member of BayBrazil, contributing to the growth of our tech hub and helping us to showcase exciting startups in Silicon Valley. Muito Obrigado!
Pedro: Congratulations BayBrazil for the amazing work! BayBrazil is definitely the bridge of Brazil-Silicon Valley opportunities and will certainly help speed-up the entrepreneurial and venture capital scene in Brazil.