Marcel Vitor Santos
"Per Aspera ad Astra" is a Latin expression usually adopted by those who have an entrepreneurial vein in their souls. It means" through hardships to the stars" and was once used by the likes of Elon Musk and David Bowie in different moments of our civilization. Considering what has been seen in the past months in Brazil, this motto could perfectly represent its prevailing environment of technology and entrepreneurship. The country has been struggling for years with its complex internal socio-political dynamic, and it was recently hit hard by the global pandemic turmoil. Despite it, these adversities have in many ways helped to mold the promising scenario of its startup ecosystem and accelerated a bold digital transformation that is still in its early days.
Brazil has a GDP of US$ 1.8 trillion, a population of 211 million inhabitants, and mobile internet penetration of 68% percent. With plenty of opportunities to be seized, the country has been receiving increased awareness from notable international investors engaged in its tech scene, a route likely to develop even further over the next decade. Roughly estimation points that Venture Capital investments in the country accounted for 0.14% of the GDP in 2019, a very modest number compared to 0.62% in the US or 0.34% in India. This figure should attain more traction over the following years since the new paradigm of low-interest rates made Brazilian investors look for uncorrelated and alternative assets. There are billions of dollars to be unlocked through technology, improving the lives of hundreds of millions.
Consider the fintech market as an illustration. In 2020, it attracted US$ 1.7 billion in investments in 90 deals as opposed to US$ 910 million in 2019. This trend is still getting more powerful this year. During the pandemic, the need to implement government aid and reach the population, for instance, forced the state to speed up its digitization processes. There has been an effort to identify people and bring them into the digital. As a result, in 6 months, Brazil digitized more than 45 million people, distributing billions of dollars in benefits for those in need of it through a governmental-owned mobile application.
This setting opens space for a more meaningful revolution that is coming fast. The Brazilian Central Bank, for example, has lately been very close to alternatives that could innovatively avail its citizens. Alongside industry leaders and other policymakers, they're fostering brand-new solutions in the open banking regulatory framework for the region. This shift of ownership and data from banks to consumers is a precedent that creates a new era of competition between startups and incumbents, reducing information asymmetry and lessening entry barriers in the market.
Healthcare is another sector that has seen a tremendous impact. Today, Brazil is considered the seventh health market worldwide in absolute terms, and its expenditures account for 9% of GDP. The industry moves around US$ 100 billion a year only within its private health care. Following years of impasses between regulators and physicians, patients could finally attend telemedicine consultations in 2020, in the light of COVID-19. This movement can be considered as the first step for new solutions to come, enabling and stimulating more suitable treatments for millions of Brazilians throughout the country.
Zenklub, a preeminent mental health startup, targets a critical issue that has recently become more profound. Brazil is the most anxious country globally - with 9% of its adults having some degree of it - and the fifth most depressive. People acknowledge the topic as taboo, and factors such as focusing on traditional workaholic employee culture exacerbate the circumstance. However, in such a sensitive context, the company grew sixfold last year and brought substantial innovation to the sector, having a unique role in addressing a disorder that affects more than 18 million Brazilians.
The influence of digitlization, not withstanding, is not a phenomenon contained in its emerging private markets. These past months have shown that public markets are also embracing the trend. B3, the leading stock exchange in the country, has seen multiple tech IPOs this year. Companies like Meliuz and Locaweb debuted with grandeur in the Brazilian capital market.
Even more, multiple special purpose acquisition companies (SPACs) are also raising money in Nasdaq to merge with Latin American private growth companies. Alpha Capital, for example, a vehicle that has Innova Capital as one of its sponsors, recently raised US$ 230 million in a fundraising process that ended up being 15x oversubscribed, conferring a proxy of how foreign investors see the potential for tech companies operating in the region. Founded by two Argentinians with deep-rooted connections to Brazil, Alpha intends to invest in a technology-enabled company valued at at least US$ 500 million. It is believed that there are more than 30 candidates for the job, ranging in sectors from e-commerce to telecom. Apart from that, dozens of new aspirants should arise when considering that capital is finally becoming more available for prominent businesses and entrepreneurs.
The future is bright.History persuades us that fundamental changes in history usually happen from uniquely challenging times. Recent years have shown striking signs that Brazilian entrepreneurship is world-class, and both public and private capital markets are increasingly evolving their exposure to technology. Accordingly, the Brazilian startup ecosystem is day by day spreading its message and building its way through hardships to the stars to transform the lives of millions and have a broader impact on society.
