Brazil turning to an innovation-led economy through corporate venture capital

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” While the current headlines are often negative for Brazil and other BRIC economies, a closer look at their innovation reveals a potentially more positive outlook.

Author: James Mawson, Editor-in-chief, Global Corporate Venturing

Hopes the so-called Brics, Brazil, Russia, India, China and South Africa might continue their relatively fast economic growth over the past few decades, and pull the world more broadly along, are facing doubts.

Oil prices and commodities more broadly have fallen and manufacturers have struggled to sell and debt level and/or political turmoil have affected investors. The International Monetary Fund this month titled its world economic outlook (WEO), “Adjusting to Lower Commodity Prices,” and recognized that 2015 would mark the fifth consecutive year of declining growth for emerging market and developing economies as a whole even if they would still account for the lion’s share of world growth.

Brazil and Russia’s economies could shrink this year, by 3% and 3.8% respectively, China’s growth rate is expected to fall to 6.8% from 7.3% last year, while South Africa and India’s forecast rates of growth in 2015 have fallen by 0.6 and 0.2 percentage points respectively against prior expectations, all according to the IMF’s latest WEO.

But, while the current headlines are often negative, a closer look at their innovation economies reveals a potentially more positive outlook. Using money from exporting or using natural resources can provide an economic fillip but unless the sums are so huge and carefully managed and population relatively stable, as with Norway, then the petro-dollars can detract from an innovative economy rather than help it.

A commodities downturn, therefore, could focus minds, resources and creativity on innovation and startups, which will help if these businesses are open to and affected by international competition rather than artificially supported through economic isolation.

And all these economies, as well as other countries with soaring populations, such as Nigeria, have focused more attention on innovation to provide jobs of the future rather than take a cut on natural resource extraction.

The World Bank’s study of development grants to entrepreneurs in Nigeria was reportedly the most “effective” development programme researchers had found anywhere in the world.

Brazil, therefore, could be a significant bellweather for whether these economies can make more of this leap.

As the world’s sixth-biggest economy, Brazil already has substantial businesses, positive demographics and a government looking to help join up the innovation capital ecosystem internally and link it more with the world’s thought leaders.

The country’s inward-investment trade promotion agency, Apex-Brasil, is preparing to launch an impressively joined-up package of support measures for corporate venturing investors, starting with a conference from 19-21 October curated by trade paper Global Corporate Venturing that will see many of the world’s top corporate venturers flying into Sao Paulo.

Claudia Fan Munce, managing director of IBM Venture Capital Group, and keynote speaker at this Corporate Venture in Brazil event, said: “Over 71% of all Brazilians are online continuously, practically every hour, feeding the ever-increasing demand for internet and mobile services.

“The record internet usage levels in Brazil and its emergence as the largest smart phone market in Latin America have made it a very attractive destination for leading technology companies, startups and venture capitalists.

“In fact, Brazilian venture investment is poised to hit record levels of funding in 2015. I feel that ‘Corporate Venture in Brasil’ provides a great platform for global corporate investors to engage with the Brazilian entrepreneurs, venture capitalists, entrepreneurial ecosystem players and network, partner and learn from each other. I commend Apex-Brasil and Global Corporate Venturing for launching this initiative and eagerly look forward to participating in this conference.”

David Barioni Neto, president of Apex-Brasil, said: “We are delighted to be welcome so many of the world’s top corporate venturing leaders to Sao Paulo for our inaugural Corporate Venture in Brasil event.

“As Brazil is one of the world’s most dynamic and internet-enabled economies, there are plenty of amazing funds, technology and entrepreneurs for global venturing units to meet.

“Creativity and innovation are part of the Brazilian DNA and new solutions are developed every day in many different sectors. Investors can take this opportunity to find out what is going on in the local investment and innovation ecosystem and that can support corporations to be competitive.”

The international corporate venturing head from another unit active in Brazil said that its portfolio companies had all been growing revenues even against a backdrop of rising inflation and a shrinking economy as startups made the overall economy more efficient and productive.

Another keynote speaker at next week’s Corporate Venture in Brasil event in Sao Paulo, Erik Vermeulen, senior counsel corporate at Philips and professor of business and financial law at Tilburg University and Tilburg Law and Economics Center (TILEC) in the Netherlands, added: “Startup communities are increasingly seen as a necessity for every country as it provides a reliable means of job creation and economic growth.

“Although many of these new innovation systems may be small in scale – at least when compared to the Behemoth that is Silicon Valley – it is equally clear that more and more high risk venture capital deals are being put together far from California and that a global business really can begin anywhere.

“It is thus important to explore the potential opportunity of Brazil’s venture capital community.”

As Apex-Brasil said about its intentions: “Corporate Venture in Brasil is an endeavour from the Brazilian trade and investment promotion agency to support the soft landing of global venturing units’ expansion to Brazil, as well as to foster the development of corporate venturing programs of Brazilian corporations.”

In addition, the programme was designed based on Apex-Brasil experience working in partnership with global investors screening opportunities to commit capital to Brazilian VC funds, companies and startups since 2010.

More than 20 corporate venturing leaders from non-Brazil-based corporations prepare to speak at the summit, they will meet the top innovation experts from about 30 of the largest local businesses, including Braskem, Embraer, TOTVS and Stefanini, leading universities, accelerators venture capitalists (VC) and – perhaps most important – entrepreneurs.

In total, 22 local institutional partners, ranging from entrepreneurial programs and angels to tech parks and traditional venture capitalists, have come together to promote the Corporate Venture in Brasil alliance.

Perhaps uniquely as a government venturing initiative, the Corporate Venture in Brasil 2015 event marks the launch of a programme with a full suite of nine resources to support a global corporation wanting to develop and enter a new market or industry by matching partners, deals and technology through a dedicated Aftercare Services Assistance section.

As Apex-Brasil said: “You just need to tell us which way you prefer to discover and network with the Brazilian investment and innovation ecosystem and we will do it!”

Such openness to working with the global leaders and develop a coordinated approach could be a strong signal about a country’s opportunity to convert innovation potential into jobs and economic growth. The world will welcome that.

– See more at: http://www.globalcorporateventuring.com/article.php/12177/brazil-turning-to-an-innovation-led-economy-through-cvc#sthash.mOqa5QGI.dpuf

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