{"id":284742,"date":"2019-04-30T16:43:46","date_gmt":"2019-04-30T19:43:46","guid":{"rendered":"http:\/\/revistapesquisa.fapesp.br\/?p=284742"},"modified":"2019-04-30T16:43:46","modified_gmt":"2019-04-30T19:43:46","slug":"the-land-of-the-unicorns-2","status":"publish","type":"post","link":"https:\/\/revistapesquisa.fapesp.br\/en\/the-land-of-the-unicorns-2\/","title":{"rendered":"The land of the unicorns"},"content":{"rendered":"

The Brazilian technology sector had a remarkable first quarter of 2018. In less than two months, two startups joined the elite Unicorn Club\u2014which is the name given by American investor Aileen Lee to the special group of technology companies that are valued at US$1 billion or more. In an article written in 2013, the investor estimated that only 0.07% of startups go on to accomplish this feat\u2014which makes it almost as \u201crare and magical\u201d as the mythological creature.<\/p>\n

The first Brazilian startup to join the group was 99 Tecnologia, which is a taxi app that was founded in 2012. In January of this year, 99 was valued at US$1 billion and acquired by Chinese conglomerate Didi Chuxing, which first bought shares in the startup in January 2017 when it invested more than US$100 million.<\/p>\n

In March, the financial technology startup Nubank reached the same valuation after receiving US$150 million of new investments. Nubank was founded in 2013 to offer credit cards with no annual fees and low interest rates. The company was created by three individuals: David V\u00e9lez, 36, a Colombian who graduated in engineering from Stanford University in the USA; Edward Wible, 34, an American who studied computer science at Princeton University in the USA; and Cristina Junqueira, 35, a Brazilian production engineering graduate from the University of S\u00e3o Paulo\u2019s Polytechnic School (Poli-USP). All three have MBAs.<\/p>\n

Others developed similar apps but did not achieve the same success. What made 99 different was its team, says Renato Freitas, one of the founders of the company<\/p><\/blockquote>\n

V\u00e9lez came to S\u00e3o Paulo in 2011 while working for Sequoia\u2014a US venture capital fund\u2014to look for investment opportunities in the Brazilian technology sector, but he found no companies of particular interest. In 2013, he left his job to work on his idea for a new kind of credit card, which was managed solely through a mobile app. After receiving his first round of funding, he invited Junqueira, who had experience at Itaucard, and Wible, an expert on big data who was working in Argentina at the time, to join his venture. More than three million credit card users later, V\u00e9lez announced in March this year that Nubank was officially a unicorn company. There is already speculation that Movile, which owns popular applications such as iFood and PlayKids, could be next.<\/p>\n

V\u00e9lez has regularly mentioned that Nubank was founded and prospered during the Brazilian economic crisis. The adverse financial landscape of the last few years does not scare Renato Freitas, who is a mechatronics engineer who graduated from Poli-USP and one of the founders of 99 Taxis. \u201cThe interesting part of working with innovative projects is that they suffer very little from macroeconomic fluctuation. There is always space for new technology. With 99 becoming a unicorn and other startups following suit, I think Brazil will soon begin to attract more attention from foreign investors, which should be good for the startup sector,\u201d he says.<\/p>\n

According to Marcelo Caldeira Pedroso, a professor at the School of Economics, Business, and Accounting at USP (FEA-USP) and the coordinator of the university\u2019s Master\u2019s Degree in Entrepreneurship, there are a number of factors that can lead to a startup becoming a unicorn. These include a proven business model that generates value; scalability, which is a company\u2019s capacity for rapid growth; and employees with skills that can give the company a competitive advantage. 99 is one of the companies that has fulfilled all of these criteria.<\/p>\n

\"\"J\u00falia Cherem Rodrigues with images from Freepick<\/span><\/a><\/p>\n

To start, the founders of 99 were inspired by a business model that has already been successfully tested abroad. According to Freitas, he had the idea for the company when Ariel Lambrecht, a mechatronics colleague at Poli-USP, traveled to Germany and used the world\u2019s first mobile taxi app, MyTaxi. \u201cWe thought it would be a great idea to launch in Brazil because of the transportation challenges people face here: expensive public transportation, heavy traffic, etc.,\u201d says Freitas. The initial investment was R$50,000.<\/p>\n

The challenge of expansion has been overcome by in-depth knowledge of the characteristics and needs of the target audience. \u201cAt the time, taxi drivers still used what we call feature phones rather than smartphones. We put a lot of time into teaching them which smartphones to buy, how to use them, and which apps could help them in their day-to-day work,\u201d he says. Freitas says that he and Lambrecht searched for taxi points on Google Maps and then went around the city handing out flyers and raising awareness of their company practically every day in its first few months in 2012. \u201cWe already had our final application at that point\u2014the only people who used it during the developmental stage were me and Ariel. But development has never stopped; we always have new things to add. This closeness with our customers allowed us to better understand them, and we were able to incorporate their thoughts into the app. Surveys later showed that taxi drivers preferred our app because they considered it to be more intuitive and easier to use.\u201d<\/p>\n

However, according to Freitas, neither the application itself nor the business opportunity was the main reason for the company\u2019s success. Instead, it was the third factor mentioned by FEA\u2019s Pedroso: the skills of the team. \u201cMany companies were developing the same application at that time and had the same business opportunity, but did not achieve the same success. What made the difference at 99 was our team. We always seek to hire people with a passion for the challenges we face,\u201d he says. The initial staff was composed of Lambrecht and Freitas, who focused on product development, and Paulo Veras, a former Poli-USP student who had experience creating startups, such as Tesla. Tesla was one of the first companies specializing in website development and e-commerce, which he founded in the late 1990s.<\/p>\n

The ecosystem has evolved, but startups are still too focused on the domestic market, says UFSCar\u2019s Marcelo Pinho<\/p><\/blockquote>\n

\u201cThe three of us are very different, although we all studied the same degree. I\u2019ve always focused on the technology and how it relates to the product. Paulo deals with the business side of things; finance, marketing, and human resources. And Ariel was mainly responsible for product, he was the \u2018glue\u2019 that held the different areas together and focused on how they affect our customers,\u201d says Freitas. In 2017, 99 expanded its services. It began to accept private drivers, thus becoming a competitor of the US ride-sharing company Uber, which had been operating in Brazil since 2014. The company continued to grow and attracted the attention of Chinese conglomerate Didi Chuxing, whose intention was to surpass Uber in the global market by expanding into Latin America.<\/p>\n

Today, under the control of Didi Chuxing, 99 connects more than 300,000 drivers to 14 million passengers in more than 400 cities and towns across Brazil. In February 2018, the company launched a new application, which was developed in partnership by the Brazilians and the Chinese. \u201cMore than 250 employees from the engineering and product teams in Brazil and China were involved in its development,\u201d says Jo\u00e3o Costa, product leader at 99. \u201cThe app uses artificial intelligence to better distribute pickups, reducing the amount of time passengers have to wait for a driver by 20%,\u201d he says.<\/p>\n

After selling 99, Freitas and Lambrecht began a new project, this time in partnership with former Caloi CEO Eduardo Musa: a bicycle-sharing service where bikes are released via a mobile app. The service uses a \u201cdockless\u201d model that requires no bicycle stations. Bikes are fit with GPS trackers and can be left anywhere after use. The next user simply unlocks the bike using their cell phone to scan a QR Code that is printed on the frame.<\/p>\n

\"\"J\u00falia Cherem Rodrigues with images from Freepick<\/span><\/a>The company is called Yellow and plans to offer 20,000 bicycles for use in the city of S\u00e3o Paulo starting in July, with that number increasing to 100,000 in the near future. \u201cWe came up with the idea for Yellow in China, where we used a similar service. We really enjoy seeing how companies have solved problems in other countries. But we do not want to simply copy other ideas. We developed our solution from scratch, learning from other companies and taking our own values into account,\u201d says Freitas.<\/p>\n

The success of these innovative new companies came as no surprise to those who study the world of business. According to Moacir de Miranda, head of the FEA department at USP, Brazil\u2019s innovation ecosystem may finally be reaching maturity. \u201cWe are at last beginning to enter the 21st century,\u201d he says. Miranda believes that the market has now realized that strategic knowledge management is the key to survival. \u201cCompanies are investing in knowledge as a competitive advantage. What we were discussing 20 years ago is now starting to happen on a large scale.\u201d<\/p>\n

According to the researcher, greater involvement of the private sector is one of the main factors behind the increasingly favorable environment for startups in Brazil. \u201cTen years ago, incubators were almost exclusively university initiatives. Today, large corporations regularly fund incubators and coworking spaces, creating business units designed to produce disruptive innovations. By taking on this leading role, private companies have brought a new dynamic to the industry,\u201d he says. The private sector\u2019s inter\u00e5est in innovation grew alongside diminishing public investment as a result of the economic crisis.<\/p>\n

\u201cPublic investment in innovation has dropped dramatically since 2014. Today, it is at its lowest level in the last 10 years,\u201d says Miranda, referring to data from the Brazilian Funding Authority for Studies and Projects (FINEP). According to the National science, technology, and innovation indicators 2017<\/em> report by the Brazilian Ministry of Science, Technology, Innovation, and Communications (MCTIC), private investment in R&D increased from R$37.4 billion to R$38.1 billion between 2014 and 2015 despite the economic crisis. The release, which is based on information from the IBGE Innovation Survey (PINTEC) and studies by the Organisation for Economic Co-operation and Development (OECD), provides an overview of innovation in Brazil.<\/p>\n

According to Marcelo Pinho, an industrial and technological economics researcher from the Center for Exact Sciences and Technology at the Federal University of S\u00e3o Carlos (UFSCar), universities play an important role in the development of future entrepreneurs, but the technological strategy is part of the corporate experience. It is at this point that most Brazilian startups commit their \u201cfatal error.\u201d \u201cBrazil\u2019s tech companies do not usually develop global innovations or target markets outside the country,\u201d he says.<\/p>\n

Pinho notes that Brazilians generally operate in niches, which limits their growth to the markets in which they were created. These limitations are usually the result of a technology strategy that does not lead to primary innovation. \u201cThese companies often reproduce businesses that have already been developed abroad.\u201d He is not so optimistic about the current state of the startup ecosystem in Brazil.<\/p>\n

Pinho believes that because other obstacles to growth have been removed in recent years\u2014through an increasing number of private funding options and new legislation that encourages partnerships between universities and businesses, such as the Brazilian Legal Framework for Science, Technology, and Innovation\u2014there is a view that the startup environment in Brazil has evolved. However, technology companies are still primarily focused on the domestic market, which is a problem that is shared with other periphery economies.<\/p>\n","protected":false},"excerpt":{"rendered":"First billion-dollar startups begin to emerge in Brazil","protected":false},"author":131,"featured_media":284747,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[169],"tags":[225,243,2413],"coauthors":[440],"class_list":["post-284742","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-technology","tag-economy","tag-innovation","tag-technology"],"acf":[],"_links":{"self":[{"href":"https:\/\/revistapesquisa.fapesp.br\/en\/wp-json\/wp\/v2\/posts\/284742","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/revistapesquisa.fapesp.br\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/revistapesquisa.fapesp.br\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/revistapesquisa.fapesp.br\/en\/wp-json\/wp\/v2\/users\/131"}],"replies":[{"embeddable":true,"href":"https:\/\/revistapesquisa.fapesp.br\/en\/wp-json\/wp\/v2\/comments?post=284742"}],"version-history":[{"count":2,"href":"https:\/\/revistapesquisa.fapesp.br\/en\/wp-json\/wp\/v2\/posts\/284742\/revisions"}],"predecessor-version":[{"id":285345,"href":"https:\/\/revistapesquisa.fapesp.br\/en\/wp-json\/wp\/v2\/posts\/284742\/revisions\/285345"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/revistapesquisa.fapesp.br\/en\/wp-json\/wp\/v2\/media\/284747"}],"wp:attachment":[{"href":"https:\/\/revistapesquisa.fapesp.br\/en\/wp-json\/wp\/v2\/media?parent=284742"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/revistapesquisa.fapesp.br\/en\/wp-json\/wp\/v2\/categories?post=284742"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/revistapesquisa.fapesp.br\/en\/wp-json\/wp\/v2\/tags?post=284742"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/revistapesquisa.fapesp.br\/en\/wp-json\/wp\/v2\/coauthors?post=284742"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}