Friday, August 5, 2011

Meeting with Diego Remus, Startupi's Editor

I met Diego Remus at his office on Avenida Brigadeira Faria Lima, a street which showcases Brazil's increasing wealth.  The wide boulevard is lined with office towers flashing the setting sun, nouveau riche loft apartments filling the sky, and cranes occupying the remaining empty lots.

Startupi is one of Brazil's leading blogs on technology and startups.   The company is run out of the office of SixPix, a Brazilian content provider.  Their white walls, white furniture and stylish wall graphics were right out an NYC startup headquarters.  I especially enjoyed the graphic at the exit that said "Não Esquecer" (Don't Forget) with pictures of the all the mobile devices a tech startup writer might carry - smartphone, iPod and pen drive.

As we walked down the street to get coffee and food, we chatted about the exciting tech activity in Brazil.   I've included here for you, dear reader, a sampling of his insights

He pointed out that the BucscaPe sale to Naspers in 2009 for >USD$300mm was the major wake up call to the market that there could be big money in Brazilian tech.  Still, he said that while recently there have been lots of investments (see previous post), there haven't (yet) been many Buscape-size exits.  Investors that chase growth - as we used to do at Goldman Sachs - are undoubtedly looking for these types of exits before making a major commitment to the country.

We also spent some time talking about what he called "the Brazilian Dream". He said that the culture historically viewed failure very negatively, so entrepreneurship wasn't always an attractive career path for the country's top performers. He thought this was starting to change with the high levels of young Brazilian connected to web and the success of many online startups. Startupi is also working to better educated entrepreneurs - they recently hosted a speaker from the US to present on how to make the most of the failure of a startup.

Brazil has notoriously rigid labor laws (see Economist article).  Diego highlighted that one of the hurdles facing some startups is that they, well, cut corners when hiring employees.  When the business starts to have success and looks to raise VC money, it is often a struggle - most investors won't touch a company with potential legal liabilities (for good reason).

Lastly, he stressed the importance of early-stage investors (what would be angels or superangels in the US).  He said there are several VC funds looking for opportunities in businesses with $5mm+ in revenue but not enough money available at earlier stages.   It's worth noting that this is starting to change with the help of incubators/accelerators like Endeavor and Aceleradora.

We also talked about the e-commerce sector and the major players in each category of products.  Expect a post on that this weekend.

Special thanks to Diego for his insights.

P.S.  In the worldwide financial dive yesterday when US markets lost ~3%, Brazil lost ~6% - the largest drop by any major global index.  The flight to safety has always negatively affected Brazil. However, a lunch buddy from a few days ago who is at the LatAm hedge fund Explorador told me that valuations have been off the charts and he has used the latest drops to get in previously overpriced stocks he's been watching for months.

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