I'm a Brazilian who use to work at some startups here. I have a strong feeling that we didn't produce more and better companies because of two things:
1) Public Universities here hates private money and do business, entrepreneur classes are rare and most of the teachers never did create a company (to teach here you must be an academic, a successful entrepreneur can't give classes about it). If you suggest to your teacher to start a business with his Ph.D. thesis, probably, he will feel offended by your suggestion.
2) Our legislation is bad. I'm mean, very very bad. Open a company in Brazil is crazy:
- So many taxes. I'm not talking about the value that you pay here, I'm talking about an insane amount of taxes. At the federal level, for example, there're 6 or more different taxes. And if you need to send a package across states, you need to deal with a lot of bureaucracy to transport it (and more taxes);
- Labour protection here is insane too. It's not cheap for small and medium companies. And there is a thing that makes it even more complicated for startups: legally, the owner of the company is in charge of the labor debts even when the company is broken. So, if your company broke, you can't close it until you pay all the labor debts, and if you don't pay, you can lose your home or other assets that belong to you, not to your company;
- Almost everything here is regulated, and our regulations are not easy to deal with.
”Labour protection here is insane too. It's not cheap for small and medium companies. And there is a thing that makes it even more complicated for startups: legally, the owner of the company is in charge of the labor debts even when the company is broken. So, if your company broke, you can't close it until you pay all the labor debts, and if you don't pay, you can lose your home or other assets that belong to you, not to your company;”
This is pretty normal, you need to lay off people before you run out of money to pay them. You don’t gamble with your employees paychecks.
As a business owner, you get the upside if business is going great. The downside is that you, the owner, only get paid if there is money left over after you pay your employees.
But I'm not talking about wages. I'm talking about other rigths that an employee has, for example: if you bankrupt and need to fire you employees, you'll be forced to pay a fine of 40% of the FGTS (FGTS it's like a saving account the company is obligated to pay in name of they employees).
Speaking as a fellow Brazilian: so account for it beforehand, in the same way you should account for 13th salaries and other "hidden" worker rights, which are liabilities in the accounting sense.
Yeah, that's how we have always hired, and I don't see a big problem with CLT (the Brazilian employment law), perhaps with the exception of how vacation time and union membership is handled.
It's bizarre that the threads on this post seem to straddle "founders are only in it to make money off the back of their employees" and "worker's rights and compensation are onerous" simultaneously.
I can’t speak for all of the US, but this is California law: a business owner is _personally_ liable for unpaid wages in the event of bankruptcy. The Department of Labor does not take kindly to people or business who cheat their employees out of a rightfully earned paycheck.
It's not optimal, but it's pretty common in management courses. I wish I had more of that in Engineering (even though we hated it at the time).
> Open a company in Brazil is crazy
Crazy? Try shutting one down to see what's crazy.
> Labour protection here is insane too
I have to disagree with you on that one. As an entrepreneur, you have responsibilities towards your employees. Far too frequently you see entrepreneurs who think they are doing employees a favor by giving them jobs when very few realize that they hired people because they couldn't do it themselves. It's a privilege to have a smart team working to make your dreams true.
I didn't say that an entrepreneur should not have any kind of responsibility for the employees. What I said it's that we have too many responsibilities. For example:
- We have 13º salary, with may be easy for a large company to pay, but it's expensive for a small company;
- We have FGTS, that is like a saving account paid by the company in the name of employee;
- It's very complicated to hire someone with a non-conventional work contract.
And so on. I'm not saying that we should remove labor rights, what I'm saying it's that we need to find a balance that is good to everyone: employee, small companies, large companies and so on.
The 13th salary exists in other countries too (example: Switzerland). It's a dumb thing to complain about because you have to be able to pay an employee's yearly salary in a year. It's not a surprise. It comes every December.
FGTS also has its equivalents in several forms of unemployment insurance. It's a bad thing only in how the insurance is mismanaged by the government, not because it exists at all. I guess countries that do not have unemployment insurance are rare and extremely poor?
I posted something but don't have the time to double-check the math. I suggest you do your own calculations. In particular do not count income (13th salary, food tickets, travel reimbursements, etc.) as though it was taxes.
The point is that this is expensive to small companies, startups are small, with a budget that may not allow this kind of cost. To large companies, pay those things are fine.
1) That's far from true. I had a company in an incubator associated with one of the largest federal universities. Professors were supportive, overall. A few helped with contacts in the industry and ideas.
2) The overall tax rate isn't that bad (I live in England now, you'd be surprised). The tax system is complicated but for small companies, falling under Simples rules, it's fairly easy.
Re. labour laws, the fact that labour debts aren't protected by limited liability is fairly bad.
Re. regulated, yeah, it's also pretty complicated to get good legal counsel, despite the amount of law school graduates.
1) Some universities are good, but most of our public universities are not. UFMG, USP, Unicamp, UFRJ and some others are exceptions, not the rule.
2) I agree completely that the tax rate is not bad, it's around 30%, less than Germany and other countries. The problem is the number of taxes and how complicated is our tax system.
I used to work at a Robotics startup in Brazil.
Talent was top notch - I’d say as good as any big Bay Area tech company (SWE, Mech & Financial).
Founder was the main investor - he didn’t understand SW, treated SWEs & Mech Engs as if he was making them a favor for giving them a job and paid below market.
At one point the guy fired the CFO for authorizing buying a cheap Split AC for our little 10ppl office in the middle of the summer while everyone was sweating their life’s away (he was off somewhere on vacation on his boat).
But the main takeaway for me was: corruption. The startup was doing something legitimately exciting and innovative but still the founder thought it was wise to sneak in a contract with his buddy at the state government’s office (super shady bidding process) to have them as a first client.
Eventually the law caught up with it and the whole thing became a legal mess.
+ Equipment import taxes were ridiculous!
Oh yeah, and we had to buy our own coffee!!!!! Sacrilegious!
I'm a Brazilian, living in São Paulo state. I've lived here for 35 years, and before that lived in a number of other countries. In my current role, I do roughly 50% international travel. There's only one thing I'm certain about this post: it's that most brazilian commenters here will zero in on everything that's wrong about Brazil, regardless of the facts. I don't yet have a grand theory for why this happens, but it usually does. Anyway, on to the topic of the post.
Brazil has a really great startup scene, and there are many small and new companies popping up everywhere with interesting ideas. I've had my own companies participate in acceleration rounds and pitches and have been positively impressed with the quality of the programs and participants. In the past five years, funding has become much easier to get access to, and there are good hubs to exchange ideas and find talent to hire. Lots of interns and trainees coming out of university are hungry and talented, so there's a real talent pool to leverage. And the potential customer base for any class of product is massive.
A lot of the negativity will be around legislation, taxation, etc. From decades of experience both here and abroad, I can say Brazil doesn't deserve it -- it's easy and cheap to start a new company, and while taxes aren't trivial they are for the most part handled entirely by an accountant for a monthly flat fee. Yes, there are some vexing circumstances -- I've had companies subject to double taxation due to bureaucracy, and handling the chain of tax credits for physical goods that cross state boundaries is annoying. But by and large, for software companies, these are not very relevant concerns. And even with physical goods, there are lots of companies doing e-commerce nationwide, so it can't be that bad.
If there is one defining challenge to startups operating in Brazil it is that B2B deals are very slow to close. In my experience this derives from a tendency to undervalue services delivered by small companies, which for young startups is often the meat of a serious B2B contract. You can spend a year working on a 5-digit deal at risk before seeing the first payment from a customer. Often you don't have that runway and have to give up, pivot or die. In comparison, American and European companies tend to be much more agile about buying services. However, the transition to SaaS has made this problem tractable and I have seen many startups selling higher-value SaaS subscriptions successfully.
In summary, if you can manage to ignore the negativity, the country has great potential, and another round of successful startups should follow the existing crop the article mentions.
> most brazilian commenters here will zero in on everything that's wrong about Brazil, regardless of the facts. I don't yet have a grand theory for why this happens, but it usually does
It’s the age of Brazil (governmentally speaking). The current republic is fairly young and so the popular view is the equivalent of a twenty-year-old college student that is into libertarianism and thinks that all regulation and bureaucracy is bad and that the market should decide all things
I'm Brazilian and I tried building a company there after two successful products both in the EU and US.
Brazil simply doesn't have the culture that's necessary to foster a startup ecosystem.
Chile is in a much better position to be that sort of local leader, but still only relatively.
And it's not something you can change by prosecuting corrupt politicians - it goes all the way back to our colonial heritage, and the crookedness and "classicism" will always hinder the progress of companies and, more sadly, great engineers and entrepneurs.
This stereotype that "we're the most creative" is just another self entitlement like soccer or beautiful women that may build a brand, but certainly doesn't represent reality or live it up to its expectations.
I've come to realize that a Brazilian in power is often a synonym of extreme arrogance, shallowness, selfishness and an unbearable classicism that leads to an unfathomable mistreatment of both customers and employees.
It's unlike any other elites from the western world. It might compare to some countries in Africa.
If you're an investor thinking about Brazil , either understand and live by that culture or lose your money. They won't change the habits they gathered for a lifetime just because you have money or moral authority.
If you're Brazilian and talented, either as an engineer or entrepreneur, get out. Look for jobs remotely, incorporate a company in another country, find a market fit in a healthy economy that selects based on the productivity, efficiency and quality of your work.
Don't gamble your potential, talent and safety for the sake of FOMO on companies that rich, talentless, spoiled kids built with family money, and even our own (as taxpayers).
Since I can't downvote, I just wanted to note I find your comment really offensive. Is the current zeigeist is to devalue anything remotely Brazilian? My experience is the absolute opposite of yours. I've built companies here that worked with very little prior experience. I've worked with lost of spectacular leaders, made really good money, and seen many things technology and business-wise improve dramatically over time.
It's hard to have a constructive debate about specifics on this thread because your post is essentially a list of negative generalities. But to take your first point, why would you say we don't have a startup ecosystem? I see dozens of startups around me that are bustling, hiring, taking financing, failing, pivoting, growing. Just in my small city we have Arquivei & Monitora who are success stories, and many that have gone through at least one funding round. A new startup center, ONOVOLAB, was set up here this year. There are other examples nationwide. Gosh, Google just opened its own accelerator here after witnessing the success of others' existing programs. It can't be as bleak as you are painting.
I'm sure there are exceptions, but the majority of cases always rules.
There's an entire historical background that explains why most "executives" and founders see programmers, or any employee of any sort, as obedients servs that must compel and be grateful for their jobs.
That "classism" will always be present and act as the strongest force against innovation in that country.
Technology is not a factory and, whenever you try to modularize it in such form, you see mediocre, subpar, results.
There might have some small local companies that are able to challenge the even worse local oligarchs from past generations, but they will never be able to compete at a global level, as you'd expect from a real startup ecosystem.
And if they end up facing an international competitor, they might as well be crushed or acquired by them.
I don't get into a personal attack here, but you may want to experience more in depth some of these places like SF, Israel, Chile, Paris, Berlin to understand these profound cultural differences.
I started my career as a developer, working at Promon on the Tropico R and RA exchanges, and then shifted completely to Linux and open source development, which is when I founded my first companies. I don't really do a lot of real coding any longer, though.
I see the symptoms you describe, of our startups being less globally impactful [1], as a natural consequence of a smaller, more internally focused [2], and less mature ecosystem, but I don't see all the dysfunction you allude to. I have worked with poor leaders and good ones in Brazil and abroad, and I can't say Brazil tends to any of the extremes of the spectrum. Yeah, there's an oligarchy that has a strong effect on the ability for an entrepreneur (or employee) to "make it", but name a country where there isn't one?
I write this mostly for the benefit of this thread, as I don't think you're really approaching this discussion with useful data or an open mind.
[1] although you have Movile, 99Taxis, iFood to serve as counterpoints to that generalization
> Brazil simply has no culture to foster an ecosystem of startups.
Yes. A startups incubator in Brazil had a 'pool of developers': if a startup needed a developer, just enter the pool. Incubator startups had just one busines founder, never a technical founder. The technical things in Brazilian culture are irrelevant (any 'manual work' is, and developer is a manual work in Brazil culture).
> If you're Brazilian and talented, either as an engineer or entrepreneur, get out. Look for jobs remotely, incorporate a company in another country, find a market fit in a healthy economy that selects based on the productivity, efficiency and quality of your work.
Brazil has the potential to be good and make anything bloom, be it startups, big corp etc. It has a good geographic area, plenty of natural resources (water, oil) and whatnot.
BUT!
What keeps Brazil from entering the row of 'actually a good place to live' countries is nothing but the rampant corruption and the sheer amount of bureaucracy involved in anything regulation or taxes in the country. It's not a matter of simply high taxes, but mainly a really complex system of hoops one has to jump to incorporate even a small and simple company. This sucks.
We also have a very serious issue with electing the wrong people. São Paulo, the richest state in the country, has been electing the same centre-right (dressed as centre-left) kleptocrats for about 30 years now, with disastrous results.
And don't get me started on that "impeachment" shitshow.
Maybe the country has the largest ecosystem because there are a lot of people in there. That doesn't imply in high quality, positive ROIs etc. Lots of people are just trying.
The country has some decent universities, some large and rich cities (despite the country, being, on average, poor) and some entrepreneurial attitude.
The drawback I observed the most is the same @cscotti pointed out: the people who end up creating companies are not particularly well suited for that. They want quick money out of outrageous profit margins - they are often already rich, but think they are entitled to more. It's the Brazilian version of the robber baron standard, but in a fractal pattern almost down to the bottom.
And, now, there's also the crazy politics (thanks, Obama) with a coup and all those shenanigans.
Brazil absolutely was a Baron country for most of its life (except they were more commonly called Colonels or Captains). Starting on the 16th century the Portuguese kingdom would distribute land for agrarian usage, and the Barons not only owned the land but its ownership was also hereditary. An intricate taxation system was developed that stimulated lang aggregation and so not long after you'd find many of these land owner families owned immense tracts of land - larger than cities or states, and became very rich.
As centuries passed, this system of power persisted, and there is still very very old money in Brazil. Many of these families would give tracts of land away for poor people in exchange of political support, and so they grew into the national political scene. Numerous past presidents came from these families (such as Sarney and Collor).
In short: Brazil has a longstanding colonial culture that persists even though its population might not be aware of it. All its symptoms are still there, including distrust in political entities, assertion of political power by intimidation or populism, archaic taxation systems, and a general sense of powerlessness to change things.
There is no venture capital here. The biggest funds (Redpoint, etc) here are in fact "growth" funds, i.e. once you get a revenue about BRL 1,000,000 per quarter, you will be considered otherwise good luck. Try to build a technology company here and get the funds and then let me know.
Incubators are in fact cheap outsourced innovation departments of large companies. Once you get there (which is not difficult), they will steer your solution to fit the large corporation behind. Largest companies pay lip service saying they support "innovation" by providing start-up competitions. In fact, they buy almost none from start-ups. They are in fact searching for cheap or free technology ideas and services. Absolutely no significant success has come from corporate incubators in Brazil. You are there as a small piece on the board.
My advice to start-ups in Brazil? Build as much as you can by bootstrapping and try to sell as early as possible and avoid any "free" pilots by corporations trying to use your solution.
Charge and charge upfront. I sadly see too many start-ups providing free services to large companies in exchange of vague promises.
You are just a piece used by employees in these large companies to promote innovation and cheap solutions.
if large comporations want to support startups they should sign a CONTRACT and BUY from you. That's it! Anything else is just exploitation of technical talent and naiveté from your start-up founds.
It's a myth that Brazilians are more creative. Doing business in Brazil is incredibly difficult - lack of talent, ethics and terrible financial sector.
I am Brazilian and it's been a year since I went into a bank to do anything. All expat friends say that Brazilian bank system is the best. This has a specific reason: inflation in 1980s imposed fast banking service.
But what drove me away was not the money - I make a lot more money now, but in a much more expensive place. Retirement projections remain firmly planted on the very same date since I left and aren't going to change much either way unless some major upheaval happens.
What really drove me out was my lack of faith. Corruption was rampant (it was always like this, since well before I was born) but it was being investigated, in some cases more seriously than others, but the local equivalents to the DoJ and the FBI (I'm doing this for the Americans in the audience, hope it helps), for the first time since essentially ever, able to work free from executive interference and, unsurprisingly, uncovered a lot of misdeeds. With that, the perceived corruption skyrocketed, government popularity sunk, trust in the government went into a death spiral and the legislative and judiciary decided it'd be convenient to stage a coup (sorry, "impeachment" is not the right word) so that someone more malleable would be in power (there was even a phone recording stating that much).
At that moment I was over for me. I grew up in post-64 coup Brazil and don't want my daughter to go through the same.
Couldn't agree more. Of all the engineers I worked with back in Brazil that I would happily work with again, more than 75% of them left Brazil. They now live in places like the San Francisco, Palo Alto, NYC, Toronto, Montreal, Berlin, Amsterdam, London. What's most ridiculous is that at the recent BayBrazil event here in São Paulo, I explicitly asked the panelists if the situation had changed since when I worked there a manager would make 2.5x to 3x what the ICs earned. Every single panelist dodged the question by spouting some bullshit about how people have other motivations besides money for staying in Brazil. Yeah, I'm sure a minority of them do, the majority however keep leaving.
Have you been to Brazil? Brazilians take the entire day off to go to the bank because it takes that long and processes are so inefficient. I was shocked at how non functional the society is as a whole.
Their national museum just burned down because the country couldn't even allocate funding properly. You expect running a business there is going to be a simple and transparent affair?
This is not a knock on the people themselves. They're smart, caring and competent, but to be honest, the country is a mess.
There are long lines on most bank branches I go to, unless you're wealthy enough for the manager to pamper you. Red tape in this country is so bad that there is a whole industry to avoid it ("despachantes").
BTW, the trick this industry uses to avoid banking lines is to hire old retired people to buck the line for them (there's a law here giving to old people that privilege). They basically screw everyone else by buying privileges. Some call it the "Brazilian touch" (jeitinho brasileiro), I call it corrupted morals.
> Brazilian baking is years ahead of the US
Really? To do online banking in your computer with Banco do Brasil you need to ask permission to your branch manager and install a specific virus on your computer. I believe the same goes for Bradesco and Itaú. Many ATMs and branches in small towns are being closed and leaving those places without financial services because mobs moved from big cities to rob those places without good police. And, guess what, people there can't do online banking.
Red tape is bad, but obiquious cellphones helps a lot. The US still uses checks and signed credit card receipts. Compared to that Brazil’s banking system is state of the art.
>To do online banking in your computer with Banco do Brasil you need to ask permission to your branch manager and install a virus on your computer
Yes, but most people use the phone app, which is ok. Banking on a computer is bad everywhere.
Online banking in Spain is pretty ok with a computer dude. I mean I have accounts with 4 different banks and only one of them has an awful website. Still usable thoug.
Most banks don't require you to be physically present anymore. I don't know about Banco do Brasil, but I had accounts in Bradesco and Santander, both have a line to call your manager in a call center, and you can do pretty much everything besides getting physical cash from the phone.
As a Brazilian I'm not going to deny that the country is full of problems, but the person you replied to said that the country is big and that both extremes exist. No need to focus only on the negatives when the country has many things going for it.
Completely agree, pretty inflammatory and vaguely racist comment. I think we can also agree things are far more negative than positive nowadays. Temer is really just the another nail in the coffin for functional Brazilian society. Things are looking much more bleak compared to a decade ago.
I must say that even though it might look great for investors and business owners, software engineers suffer a lot.
In the recent years, the situation in Brazil has only got worse. The BRL is worth nothing and engineers get a lot less than anywhere here in Europe or the US.
Life quality is also bad and it's rare to find a good work environment, especially outside São Paulo.
If I had to go back to Brazil, São Paulo is definitely the only city I would live in.
1) Public Universities here hates private money and do business, entrepreneur classes are rare and most of the teachers never did create a company (to teach here you must be an academic, a successful entrepreneur can't give classes about it). If you suggest to your teacher to start a business with his Ph.D. thesis, probably, he will feel offended by your suggestion.
2) Our legislation is bad. I'm mean, very very bad. Open a company in Brazil is crazy:
- So many taxes. I'm not talking about the value that you pay here, I'm talking about an insane amount of taxes. At the federal level, for example, there're 6 or more different taxes. And if you need to send a package across states, you need to deal with a lot of bureaucracy to transport it (and more taxes);
- Labour protection here is insane too. It's not cheap for small and medium companies. And there is a thing that makes it even more complicated for startups: legally, the owner of the company is in charge of the labor debts even when the company is broken. So, if your company broke, you can't close it until you pay all the labor debts, and if you don't pay, you can lose your home or other assets that belong to you, not to your company;
- Almost everything here is regulated, and our regulations are not easy to deal with.