Financing the favelas: a shanty town in São Paulo. Photo: Getty
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Start-up finance and the Brazilian favelas

The country has embraced e-commerce since a series of tax reforms in the Noughties, despite stifling bureaucracy.

Parked under a tree in a cul-de-sac off the gleaming Avenida Brigadeiro Faria Lima in São Paulo, the strip that is home to Google’s new Brazilian headquarters, Deocleciano Tolentino sets out his wares, popping open the boot of his car to reveal a spread of cheeses, salamis, nuts, home-made jam and bottles of honey and cachaça. The epitome of a microempreendedor (micro-entrepreneur), Tolentino is one of a generation of Brazilians whose small businesses in the informal economy were regularised in a programme of tax reforms that began in 2003.

Twenty yards down the road stands a building whose beanbag-lined hallways and ping-pong table mark it out as an archetypal start-up HQ. Mansão Startup (“the start-up mansion”) was co-founded in September 2012 by Florian Hagenbuch of the online print-on-demand service Printi.

Hagenbuch, a 27-year-old German brought up in Brazil, left his job as a financial analyst in New York to set up in business in São Paulo in 2012. Printi was one of a wave of Latin American start-ups in the early-2010s which brought an influx of young, foreign would-be entrepreneurs into Argentina, Chile, Mexico and Brazil in particular. Hagenbuch is predictably upbeat about the opportunities for businesses like his, particularly given the enthusiasm with which Brazil has embraced e-commerce.

Yet it is not easy to infuse an emerging economy with start-up culture. Brazil’s formidable bureaucracy can make sorting even basic documentation expensive, time-consuming and unpredictable. As Hagenbuch says, “In places like London, you just start work. Here, it takes around six months to get going legally.” Most daunting of all is the labour legislation. “No matter how careful you are, if there’s a problem, people can sue,” he says. “The risks are huge and you are personally liable.”

Start-Up Brasil, the federal programme launched last year, shows how fragile new firms can be. A fifth of the 62 companies chosen in the second round of selections in December 2013 have already dropped out. The reported reasons include demands for 20 per cent of a company’s equity in return for investment.

Such statistics explain why some micro-entrepreneurs are “bootstrapping” – rejecting outside finance. Since Bruna Figueiredo launched her jewellery firm in 2010, she has held back from seeking external investment. She is targeting what is often referred to as Brazil’s “new middle class” but might be more accurately described as a growing, newly solvent, formally employed working class. “Our customers come from all walks of life,” she says. “Some of them are living in semi-favelas: we can tell from the addresses.” Her jewellery starts at R$200 (£53) for tiny, wafer-thin religious pendants in 18-carat gold – “We have all the saints, even the really obscure ones” – and goes up to R$5,000 (£1,300) for diamond bracelets and earrings. “They can pay in instalments, and it’s e-commerce,” says Figueiredo. “People don’t need to feel intimidated by a fancy storefront.”

Unexpectedly, the biggest-name foreign start-up in recent months is MoneyGuru, modelled on Britain’s MoneySuperMarket and backed by George Mountbatten, the Marquess of Milford Haven.

Hagenbuch confirms that despite the rise of a new, richer working class in Brazil, the tech scene is still dominated by people with wealth. “Creating a start-up has become a real career alternative,” he says. “They used to dream of being bankers.” 

This article first appeared in the 10 April 2014 issue of the New Statesman, Tech Issue

Photo: Getty Images
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What do Labour's lost voters make of the Labour leadership candidates?

What does Newsnight's focus group make of the Labour leadership candidates?

Tonight on Newsnight, an IpsosMori focus group of former Labour voters talks about the four Labour leadership candidates. What did they make of the four candidates?

On Andy Burnham:

“He’s the old guard, with Yvette Cooper”

“It’s the same message they were trying to portray right up to the election”​

“I thought that he acknowledged the fact that they didn’t say sorry during the time of the election, and how can you expect people to vote for you when you’re not actually acknowledging that you were part of the problem”​

“Strongish leader, and at least he’s acknowledging and saying let’s move on from here as opposed to wishy washy”

“I was surprised how long he’d been in politics if he was talking about Tony Blair years – he doesn’t look old enough”

On Jeremy Corbyn:

"“He’s the older guy with the grey hair who’s got all the policies straight out of the sixties and is a bit of a hippy as well is what he comes across as” 

“I agree with most of what he said, I must admit, but I don’t think as a country we can afford his principles”

“He was just going to be the opposite of Conservatives, but there might be policies on the Conservative side that, y’know, might be good policies”

“I’ve heard in the paper he’s the favourite to win the Labour leadership. Well, if that was him, then I won’t be voting for Labour, put it that way”

“I think he’s a very good politician but he’s unelectable as a Prime Minister”

On Yvette Cooper

“She sounds quite positive doesn’t she – for families and their everyday issues”

“Bedroom tax, working tax credits, mainly mum things as well”

“We had Margaret Thatcher obviously years ago, and then I’ve always thought about it being a man, I wanted a man, thinking they were stronger…  she was very strong and decisive as well”

“She was very clear – more so than the other guy [Burnham]”

“I think she’s trying to play down her economics background to sort of distance herself from her husband… I think she’s dumbing herself down”

On Liz Kendall

“None of it came from the heart”

“She just sounds like someone’s told her to say something, it’s not coming from the heart, she needs passion”

“Rather than saying what she’s going to do, she’s attacking”

“She reminded me of a headteacher when she was standing there, and she was quite boring. She just didn’t seem to have any sort of personality, and you can’t imagine her being a leader of a party”

“With Liz Kendall and Andy Burnham there’s a lot of rhetoric but there doesn’t seem to be a lot of direction behind what they’re saying. There seems to be a lot of words but no action.”

And, finally, a piece of advice for all four candidates, should they win the leadership election:

“Get down on your hands and knees and start praying”

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.