In light of the social and economic consequences generated by the COVID-19 pandemic, Brazil’s well-developed technology sector promises to play a vital role in economic regeneration. While many businesses in the country have faced severe difficulties and others were forced to close permanently, some startups, particularly those in the technology sector, have adjusted to the ‘new normal’ of pandemic-affected business conditions and are expected to grow in the coming years. Here we highlight three Brazil startups to keep an eye on in 2021.
With a gross domestic product (GDP-PPP) of around $3.46 trillion (all figures in USD) in 2019, Brazil is by far the largest economy in Latin America and the eighth largest in the world. The country, commonly known as the ‘South American giant,’ was the world’s fourth-largest recipient of foreign direct investment (FDI) in 2019, reaching inflows of $75 billion, according to the United Nations Conference on Trade and Development (UNCTAD).
Brazil has historically enjoyed a politically stable environment and friendly relations with the United States and European Union, contributing to its popularity as an investment destination. In addition, the country’s Central Bank has decreased its official interest rate to 2%, as part of a strategy to boost foreign investment and promote economic reactivation.
Furthermore, the South American nation is the largest and most populous country in South America, with a population of 182 million people, and shares common boundaries with many of Latin America’s key markets. Brazil is also a founder member of the Southern Common Market (Mercosur), an economic bloc that encompasses Argentina, Brazil, Paraguay, and Uruguay.
If you are considering doing business in Brazil, learning about the three Brazil startups that will grow after the COVID-19 pandemic might provide you with valuable ideas about your own business venture and how to ensure the success of your operations during these challenging times.
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The impact of the pandemic on business in Brazil
With more than seven million COVID-19 infections as of December 2020, Brazil is the third-most affected country in the world by the virus. According to a survey of 1,700 entrepreneurs conducted by Brazil’s National Confederation of Industry (CNI) during the first half of 2020, 76% of companies in the industrial sector in Brazil were forced to reduce or entirely paralyze their operations due to the restrictions imposed by the health authorities to hinder the spread of the virus.
The CNI also revealed that three out of four local companies reported a sharp decline in demand for their products. In addition, half of the companies claimed to have implemented strategies to reduce the value of their payroll, 16% of the organizations surveyed started collective vacations, 15% laid off a large part of their employees, and 8% temporarily suspended multiple employment contracts.
Furthermore, according to the International Monetary Fund (IMF), due to the economic and social crisis, an overall fall in GDP of 5.3 percent is expected in 2020. According to Silvia Mattos, coordinator of the bulletin Macroeconomic report from the Getulio Vargas Foundation, the unemployment rate in Brazil caused by the pandemic could become the worst since the 1980s, reaching a figure of 18.7% by the end of the year.
The economic sectors most affected by the pandemic in Brazil include the industry of commerce, construction, domestic services, accommodation, and food, which for the month of April reported massive layoffs.
Brazil startups and industries that saw growth during the pandemic
Despite the crisis, sectors such as e-commerce managed to grow during the pandemic and reach a record number of sales. According to a study published by Nielsen-EBIT, during the first six months of the year, e-commerce revenues in Brazil grew 47%, with profits close to $90 million, the highest figure reported in 20 years. Furthermore, purchases made through e-commerce platforms increased by 39% and nearly 7.7 million Brazilians bought online for the first time, bringing the number of electronic shoppers to 41 million people.
According to the Felipe Gonçalves, country manager in Brazil for online payment company PayU:
“In recent months, due to the state of emergency, retail has faced important changes in consumer habits. One of them was a strong migration to electronic commerce, which has been registering positive growth, allowing thousands of enterprises to maintain the continuity of their business with comfort, security, and credibility in the virtual environment.”
Some of the economic sectors that registered the most sales through e-commerce platforms between January and June 2020 were the fashion sector, which recorded a 100% sales increase compared to 2019; the household goods industry, whose sales increased by 200% after May; streaming services, which were driven by the quarantine and which reached a monthly growth of 100% compared to 2019; and the telecommunications sector, which became more essential to the working and personal lives of people in Brazil.
3 Brazil startups to keep an eye on
The following startups in Brazil have grown during the pandemic and should be expected to continue on their upward trajectories in 2021:
QuintoAndar: a digital real estate startup in Brazil
QuintoAndar is a digital real estate company founded in 2003, which aims to facilitate the rental of houses and rooms in a fast and safe way with the use of technology. What is innovative about this platform is that the entire leasing process is done virtually. That includes property registration, scheduling visits, and signing contracts from anywhere in the world. In 2019, QuintoAndar was listed as one of the unicorns among startups in Brazil, with a team of more than 1,000 employees.
As part of its business approach, QuintoAndar developed a credit analysis method that avoids the need for co-signers, deposits, and rental insurance. The startup, founded by Gabriel Braga and André Penha, has accumulated a total of $345 million in vestment, including from major international investors such as General Atlantic, Kaszek, and Softbank, with the latter recently announcing an investment of $600 million.
Shawee: a human capital focused startup in Brazil
Founded in 2017 and winner of the 2020 Startup Awards in the Startup of the Year category, Shawee is an online platform that seeks to apply the “hackathon methodology” to make “coding marathons” useful for the processes of recruiting new talent. The objective of these “coding marathons” is to identify, develop, and retain the best human capital for companies in Brazil. In addition, it is also a way of increasing the positive perception of an organization, boosting creativity among future employees.
Shawee seeks to transform the recruitment and hiring processes of companies, using technology and innovation to attract participants to their events. According to the Brazilian startup, during the last three years, they have managed to impact more than 40,000 people and to contribute to eradicating poverty, increasing the quality of education through technology, guaranteeing gender equality, and reducing inequality by generating more jobs.
Menu: a food trade startup in Brazil
This startup was founded in 2017 and is part of the Ab Inbev group. Menu is the first and largest marketplace platform for food trade, which aims to connect distributors and wholesalers with restaurants in a more simplified way.
Since 2016, Menu has transformed the Brazilian food service market, favoring local retail sales, especially during the toughest months of the pandemic. To date, Menu offers more than 30,000 products on its platform, which supplies thousands of local establishments in important states for the Brazilian economy, such as Sao Paulo and Rio de Janeiro.
Biz Latin Hub can support your Brazil startup
At Biz Latin Hub, our team of experienced market entry specialists is equipped to help you enter the Brazilian market and take advantage of the country’s vibrant tech scene. With our full suite of corporate legal, accounting, and back-office services, our multilingual team is equipped to deliver excellence and ensure the success of your commercial expansion in the country.
Get in touch with us today today to discuss the assistance that you need.
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