Where the Money’s Headed: Brazil
It’s hard to miss all the chatter about China. Signs that the country is the next venture capital hotbed seem to emerge on an almost daily basis. But Brazil? It’s certainly one of the big four BRIC nations with emerging economies, but aside from the occasional magazine story, we don’t hear much about entrepreneurs in the South American country.
“We started seeing a tremendous number of deals coming from Brazil,” said Seth Zalkin, a former entrepreneur and the founder of the Astor Group, a mergers and acquisitions consultancy based in New York.
The latest media deep dive on Brazil comes from a Barron’s story that ran recently. Here’s what it said: “With a growing middle class, healthy banking system, stable government, abundant natural resources, and globally focused companies, the world’s seventh-largest economy has become a beacon for foreign capital and the engine of regional growth.”
Indeed, the amount of capital committed in Brazil reached a record of $34 billion in 2009, up from $5.6 billion five years earlier, according to the latest data available from the Brazilian Association of Private Equity and Venture Capital. There were just eight fund managers working in Sao Paulo, Brazil’s largest city, in the mid-1990s. By 2008, that number had grown to 132.
Zalkin rattled off all the venture capitalists he could think of who are doing deals in the country: Benchmark Capital, Flybridge Capital Partners, and Redpoint Ventures, among others. Redpoint and Flybridge recently partnered on an initial funding round into the Brazilian company Shoes4you, which sells shoes through a monthly subscription model, according to TechCrunch.
Europe’s well-publicized financial problems and the continuing economic woes in the United States have all helped push investors toward Brazil, said Zalkin, who was calling from an office he’d opened in Rio de Janeiro to take advantage of the business opportunities, uprooting his entire family in the process. That’s a pretty big move if you’re not sure of the potential.
“In the United States, you’ll often see a lot of snobbery about what we want to invest in—we want to invest in innovative companies, not someone else’s business model,” Zalkin said. “In Brazil, they’re OK with that.”
And, as Zalkin explained, Brazil requires two things: patience and commitment.
