Because of a slowing economy, Brazil may no longer be the darling of international investors and media, but one American is hedging his bets on the Brazilian market. Benjamin White, one of the co-founders of Brazil-focused startup accelerator 21212, moved from New York to Rio in part because of his belief in the vast potential of Brazil's digital space. He's combining New York know-how and pragmatism with Rio ingenuity and creativity to build some of the most innovative startups in Brazil.
How it All Began
White previously worked as vice president of digital media at MTV and as chief creative officer at Sling Media in New York, as well as an angel investor. But after marrying his Brazilian wife in 2009 and spending six months traveling around Brazil, he began to set his sights on the South American country. At the time, "things were really shaping up in Brazil," White said. He had an epiphany that he wanted to do something in the digital space but was uneasy about investing his own money, so he spent a year building his network in Brazil and meeting companies. "I kept getting more and more convinced that the opportunity was massive," White explained.
So he and his Brazilian partners decided to start an accelerator, which has similar goals to that of an angel investor. White and his partners saw a need to bridge Brazil's experience gap, especially when it came to building digital businesses. White noted that Brazil hasn't had a long tradition of entrepreneurship, but has seen a "meteoric rise" in digital penetration. He sees Brazil's opportunities in the digital space as an "invitability story." With only 40 percent of the population online but as the number 2 country in Facebook and Twitter and exponential growth in e-commerce, "the opportunities in the digital space are inevitable."
The Rio-New York Connection
White hoped to build a bridge between Brazil and the United States through the company, both literally and figuratively. He hails from New York, and his partners from Rio, and they opened offices in both cities. They named the company after the phone codes of Rio (21) and New York (212). White believes 21212 has a distinct advantage over other similar companies operating in Brazil because of the U.S. connection. Since the United States is in a leadership position in tech and internet development, White said, it's helpful to not only source mentors and best practices from successful U.S. companies, but it's also easier to launch Brazilian companies in the U.S. (Plus, White pointed out, New York beats Silicon Valley when it comes to doing business with Brazil, given fewer time zones and flight times separating the two.) While 21212's vision is to build companies in Brazil, for Brazil, it also aims to help Brazilian companies expand to the U.S. market. Queremos, an innovative crowdfunding music platform in 21212's second class, is now setting up shop in New York, and launched as WeDemand! for the U.S. market.
Many of 21212's companies have found something unique about the Brazilian market and built incredible web-based solutions. Pagpop, for example, is an e-payment online platform started by a dentist who was only able to accept cash and checks from patients, given the difficulty in acquiring a credit-card processing machine. (Until a few years ago, White said, there was a duopoly for these machines, but now that's changing because of legislation to open up the space.) ResolveAí is a mobile app that allows users to order cabs and track their location. "Now you can actually see if the cab is really 5 minutes away," explained White, "which is a huge confidence-builder." The company has expanded from Rio to 23 other cities throughout Brazil. ZeroPaper is a cloud-based accounting solution for small businesses, created after entrepreneurs discovered that many small business owners in Brazil either still use pen and paper for their accounts, or use Excel spreadsheets or paid desktop programs. The program is online-based, free, and easy to use. BidCorp is another example of a web-based solution for businesses. This site works as a marketplace for surplus assets from large construction companies who have trouble managing equipment. Bidcorp resells everything from heavy machinery to office equipment, helping companies become more efficient and manage their inventory. "Nobody's doing what they're doing," said White.
As of December 2012, 21212's companies had raised R$5.5 million, which has increased since. The accelerator recently accepted its third class, and now has 27 companies.
Streamlining the Startup Process
21212 is using New York pragmatism and a no-nonsense approach to building startups, in what White calls an ecosystem-building mode. "Our number one basic thesis is that there's an abundance of opportunity in Brazil and a dearth of resources," White explained. So 21212 is working to take advantage of mentors and lessons from abroad from people who built similar businesses to apply them in Brazil.
One thing the company is doing is systematize the process of starting business."There are all sorts of barriers to doing business in Brazil that you have to figure out how to overcome in order to seize the opportunities," White said. "Setting up a company in Brazil is notoriously difficult," he noted, "and is a huge obstacle for startups." It can take months. So 21212 sought to become as efficient as possible, with one Brazilian and one American lawyer on staff doing the exact same paperwork for all of the startups. The system is now so efficient that the company is able to do it faster than almost everyone they know. From an investor's perspective, White says, "I want my founding teams working on their product and their business, not at the cartório for three weeks straight."
Visas are another obstacle, since there's a lot of interest from foreigners who want to work in Brazil but it's difficult to get visas for them to work with startups. From the policy side, "The jury is still out if there's the political will to do what's best for the country," White explained. "For me, it's clear you have to open up and bring talent in."
Rio: Brazil's Silicon Valley?
For White, Rio is a natural location not only for an accelerator, but as a potential Silicon Valley in Brazil. Since companies have to import talent and foreign money, Rio is the place where that can happen, White believes, because foreigners want to go there to have the full Brazil experience. "It's an emotional, lifestyle thing, not a bottom line, money-making thing," White said, "but it's probably more powerful of any other aspect of 'why Rio' question." Botafogo, where 21212 has its offices, is becoming the city's tech hub with a growing number of startup companies. "Startups cluster to rely on each other," White noted. Botafogo has the advantage of being more "homey" as well as being a convenient location with easy transportation, near the airports, and close to other parts of Zona Sul where international visitors stay. White notes that São Paulo is close enough to do business, but isn't as appealing for foreigners coming from big cities. "If you need to get your best talent to work in Brazil, Rio is a much easier sell," he said.
Image: Courtesy of 21212