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In sync with the market

Incubators invest in creativity to drive technology companies forward

ESTEVAN PELLIIn the widest range of environments, ranging from government offices to research laboratories, in lecture halls, technology-based companies or small circles in academia, the phrase is repeated almost like a mantra: to become a developed country, with a dynamic economy, Brazil must invest in innovation, earmarking more funding for research and development and support for the creation and strengthening of technology-based enterprises. An innovative environment improves companies’ competitiveness level, helps to win over new markets, and increases the generation of good quality jobs and income opportunities. The outcome is the growth of national wealth and improved quality of life for the population. Despite this unanimous thinking, the reality data show that current results are still weak – Brazil’s performance in the field of corporate innovation and patents is outdone by China, India and Russia, the other Bric countries forming the bloc of emerging nations with major economic potential.

“The task of transforming good ideas into products requires sensibility, intuition, determination and competence, but, above all, an understanding of company management,” stresses Cláudio Rodrigues, president of the Center for Innovation, Entrepreneurship and Technology (Cietec) of São Paulo, the largest incubator centre for technology-based companies in Brazil. “From the point of view of the entrepreneur, one of the main challenges is precisely to be able to tread the opposite path: to have good ideas after identifying real market needs. It’s no use having a great idea – and even developing a fine product – if the market doesn’t need it or isn’t willing to absorb it,” says Rodrigues.

One of the players with a relevant role in driving the country’s innovation forward is the group of very small and small businesses that currently account for more than 90% of the roughly 6 million formally established enterprises in Brazil. These firms generate 14 million jobs and represent 25% of the country’s GDP. “In this universe, the technology-based companies are seen as a locus or a firm in a privileged position to leverage the growth of innovation and consequently of corporate competitiveness,” says Rodrigues. According to him, despite this potential, only 15% of the very small and small enterprises in Brazil regularly implement innovations in their products and services. One of the ways of expanding innovation in these technology-based concerns, which has recently been adopted in some incubators, is to extend their field of activity, in particular during the processes of incubation and post-incubation, to firms that are not set up within their facilities. These “non-resident” enterprises, which are normally located in their own facilities, even though they lack the synergistic interchange provided by the physical infrastructure of an incubator and the firms it contains, benefit from the same services that the institution offers.

ESTEVAN PELLI“Basically, the non-resident companies enjoy the same support that is offered to resident companies concerning technological, corporate and marketing management, with access to incentives and special sources of funding, partnership agreements with universities and science and technology institutions, and information and preparation for taking part in trade fairs and other entrepreneurial events, besides advisory services to make their businesses more international,” explains Rodrigues. “This was created to serve companies that had already been set up, that were developing a product or a service and that needed Cietec support without having to take over a module in the incubator. Development takes place within their own facilities and this is yet one more way to provide support for innovation in Brazil,” states Sérgio Risola, the executive director of Cietec and chair of the Advisory Board of the São Paulo State Incubator Network. There are currently 149 firms incubated at Cietec (which is established within the facilities of Ipen, the Energy and Nuclear Research Institute, at the University of São Paulo’s main campus in the São Paulo state capital), of which 96 are resident and 53 are non-resident. All the entrepreneurs attend courses, talks and training programs, besides having consultants available in several areas.

Artificial rainfall
One of Cietec’s non-resident firms is ModClima, a research and development enterprise that focuses on clean, sustainable solutions for climate and environmental recovery, including the production of artificial rainfall. The partnership began in January 2010. “Cietec has been helping us with many activities. Whenever it hosts international delegations interested in something that is in keeping with our projects, the incubator invites us to attend the meeting. We also get information about the public notices for FAPESP projects, such as those involving Pipe [Program of Innovative Research in Small Companies], Finep [the Finance Agency for Studies and Projects] and CNPq [the National Council for Scientific and Technological Development], among others,” says Majory Imai, a business administrator and ModClima director. “Additionally, if we need to meet with potential investors, we can schedule meetings at Cietec, which is very good, because they see that we’re part of a select group of cutting-edge firms.”

Headquartered in the airport of Bragança Paulista, a town 90 km away from the state capital, ModClima has innovative technology for the generation of artificial rainfall. Since 2001, it has been providing services to Sabesp (the São Paulo State Basic Sanitation Company), producing artificial rainfall that has helped to fill the reservoirs that supply some 20 million inhabitants in the São Paulo Metropolitan Area. ModClima’s technology consists of stimulating water in clouds with rain potential, increasing the process of rainfall. The production of artificial rainfall may also be used in connection with forestry, agriculture, power (to raise the level of the water in hydroelectric reservoirs) and to prevent forest fires, among other uses.

Another non-resident enterprise is Laboratorio Panizza, from São Paulo, which specializes in the production of so-called functional foodstuffs, i.e., those that can prevent diseases, along with organic foods, grown with no chemical fertilizers, pesticides or herbicides, and freeze-dried foods, preserved through dehydration. The contract began in July 2008. “The Cietec brands and of its strategic partners, such as the University of São Paulo (USP), the Technological Research Institute (IPT), Ipen, the Ministry of Science and Technology and the São Paulo state government have added even more reliability to our business, which has always sought to develop products based on scientific research,” says Sérgio Panizza, a company’s director. According to him, the fact that Cietec is within a major research center makes developing new technologies easier. “The incubator opens doors for the company to establish contact with university professors, which enables new products or technologies to be developed more easily,” he explains. Cietec is now a storehouse of contacts with people, companies and institutions that can help to drive forward an innovative idea that can be turned into a product.”

ESTEVAN PELLIIn this context, the company incubators and technology clusters are fundamental partners for these small entrepreneurs that have an innovative product or service and who want to take this to market successfully. “These institutions provide a suitable environment for the creation of innovative entrepreneurial initiatives. They act as facilitators for this process, helping to solve the technological, corporate and marketing bottlenecks that technology-based startups face,” says Cláudio Rodrigues. The country currently has about 400 such incubators spread over 25 states, comprising some 8 thousand companies. According to Anprotec – National Association of Innovative Enterprise Promoters, the entity that represents the interests of the incubators and of the technology centers, these enterprises jointly generate average annual sales of R$2.5 billion – which represents some R$500 million in taxes a year. As for the 25 technological centers in operation in the country – a further 49 are currently being implemented or designed – they house roughly 520 firms that turn over R$1.68 billion in business and generate 35 thousand direct jobs.

Essential support
Approximately 80% of the companies entering the incubators conclude the process, which is high. Some 1,700 firms have already classified in Brazil during the course of the 28 years the movement has existed. The small businesses that have the support of the incubators enjoy complete infrastructure in which to conduct their activities. The counterpart is that they must have sound expertise for their technology, a structured business plan and a minimum level of guaranteed capital. Besides the physical space per se in which to set up their companies, the entrepreneurs have the support of technology, marketing and sales consultants, as well as legal assistance and advice regarding intellectual property. They are also given guidance in relation to getting funding from finance agencies.

For Rodrigues, the presence of the State is necessary to induce wide-ranging support policies for and the strengthening of corporate innovation, as was the case in the past concerning the establishment of Brazil’s academic base and the country’s industrialization. Likewise, innovation also adds growth, with quality, to the country’s economy. “Brazil has experience and has achieved commendable results with promotion agencies, such as CNPq, FAPESP and Finep, and entities such as Sebrae [the Brazilian Support Service for Small Enterprises] that should be expanded and diversified, along with a base of science, technology and knowledge generation that can ensure a national incentive program for the maximization of innovation in Brazil,” stresses Rodrigues. However, he voices one limitation: “Innovation doesn’t happen by accident or with a magic spell. It also can”t be seen as an isolated event. It’s a process that demands continuity, maturing, understanding, training and a favorable environment, which must be suitable and motivating.”