Tech Roundup, Feb. 21, 2020 | Brazil a hot spot for unicorns

From unicorns to “IPOgriffs”: how Brazil became the hottest spot for legendary growth companies Photo: Rudall30/Shutterstock

You’re reading The Brazilian Report‘s weekly tech roundup, a digest of the most important news on technology and innovation in Brazil. This week’s topics: Brazil a hub for unicorns; the race for digital maturity in Brazil; Twitter Brazil has a hate speech problem. And more. 

From unicorns to “IPOgriffs”: how Brazil became the hottest spot for legendary-growth companies

A report by Distrito

puts Brazil as one of the most important hubs for unicorn companies worldwide, as five new startups reached valuations over USD 1 billion in 2019, the third-best performance in the world. Together, Brazil’s 9 unicorns amassed USD 1.23 billion in investments last year, enough to bring another company into their dream team.&nbsp;</p> <p><strong>Unicorns or IPOgriffs? </strong>Distrito has updated its definition of unicorn companies to be compliant with the international definition of a privately held startup company that is valued over USD 1 billion. Due to the change, NYC-listed companies Arco Educação, PagSeguro, and Stone Pagamentos are now IPOgriffs (a portmanteau of IPO and hippogriff). Nubank, Brazil’s first unicorn, was also updated to the status of “decacorn,” after reaching a valuation of USD 10 billion.&nbsp;&nbsp;&nbsp;</p> <p><strong>What explains the boom of unicorns? </strong>In Distrito’s view, the low-interest-rate environment around the world has increased the appetite for riskier investments, while the increasingly frequent success stories have turned startups into a more interesting target for investors.&nbsp;&nbsp;&nbsp;&nbsp;</p> <p><strong>Slow and steady.</strong> Compared to the U.S. and China—who have 50 and 25 percent of the world’s unicorns—Brazil appears to be lagging behind, especially considering that a local company takes six years on average to reach that status. However, Brazilian companies’ more cautious approach may be worthwhile at a time when companies such as Uber and Slack are seeing a steep devaluation in their stocks after highly publicized IPOs. “Our model has always been profitable. We don’t have that culture of cash-burning growth, we aim to [grow] in a healthy way”, said Ebanx CFO and co-founder Wagner Ruiz to Distrito.&nbsp;</p> <p><strong>Yes, but …</strong> Loggi, one of the unicorns that received investment from Japan’s Softbank, has reportedly begun a restructuring process and fired nearly 120 people. Other startups that received the group’s investments, such as Colombia’s Rappi and India’s Oyo, have been undergoing the same issues. According to the publication, the change in strategies may be a response to the blow Softbank felt with the recent troubles of Uber and WeWork, which made the group’s profit decline 99 percent in Q4 2019.   </p> <hr class="wp-block-separator"/> <h2>Newbie fintechs winning the race for digital maturity in Brazil</h2> <p>A recent report by consultancy firm E-consulting and published by website <a href="">Consumidor Moderno</a> puts fintechs Nubank, Stone, and Original at the top of its 2019 digital maturity ranking, elected by 847 C-level leaders in Brazil. Santander, the best-positioned big bank on the list, is only in the sixth spot.&nbsp;</p> <p><strong>What does it mean to be “digitally mature”?</strong> The ranking considered how the companies use innovative strategies, multichannels, digitally-native offers, digital culture and working practices. Nubank was considered the most disruptive company, using new technologies to reshape their customer experience.&nbsp;</p> <p><strong>Why it matters?</strong> Digital maturity measures how prepared companies are to thrive in a new economy.&nbsp; As we reported in our <a href="">February 14 Daily Briefing</a>, Brazilian banks might have had record profits in 2019 but, as competition increases—spurred on by the Central Bank itself—the scenario is getting harder. Digital strategies will, therefore, be keen on conquering new customers and slashing costs.&nbsp;</p> <hr class="wp-block-separator"/> <h2>Vile attacks on female journalist spark hate speech debate on Twitter</h2> <p>A collective of female Brazilian journalists launched a petition to demand explanations from Twitter Brazil as to what it classifies as hate speech on its platform. The move comes after <em>Folha de S. Paulo</em> journalist Patrícia Campos Mello has been targeted by a slew of attacks online following false testimony given about her in a parliamentary hearings committee.</p> <p><strong>The case. </strong>During a hearings committee in Congress to investigate the spread of fake news during the 2018 election campaign, Hans River do Nascimento, a former employee of a digital marketing company, claimed that <a href="">Patricia Campos Mello</a> had &#8220;insinuated&#8221; herself sexually in exchange for information on a story related to the illegal sending of mass messages at the behest of political campaigns. The reporter quickly provided ample evidence to show Mr. River do Nascimento had lied to Congress, which is a criminal offense. <strong>The Brazilian Report</strong> <a href="">summed up the events </a>recently on Twitter.</p> <figure class="wp-block-embed-twitter wp-block-embed is-type-rich is-provider-twitter"><div class="wp-block-embed__wrapper"> <blockquote class="twitter-tweet" data-width="550" data-dnt="true"><p lang="en" dir="ltr">VIDEO: On Tuesday, <a href="">@folha</a> journalist <a href="">@camposmello</a> was the target of accusations in a parliamentary hearings committee. According to witness Hans River, she had allegedly made &quot;sexual insinuations&quot; in exchange for info., which <a href="">@folha</a> quickly proved to be false and slanderous <a href=""></a></p>&mdash; The Brazilian Report (@BrazilianReport) <a href="">February 14, 2020</a></blockquote><script async src="" charset="utf-8"></script> </div></figure> <p><strong>Backlash. </strong>Despite proving the libelous nature of the claims made about her under oath, Ms. Campos Mello was targeted by an onslaught of hate speech on social media, including from prominent far-right accounts, among them that of Congressman Eduardo Bolsonaro, the president&#8217;s son.</p> <p><strong>No more. </strong>Journalists in Brazil have taken a stand against Twitter for not removing certain posts which they constitute as hate speech, and have threatened to abandon the social network entirely. There is also a movement toward adopting Mastodon, a decentralized open-source social media, which allows the creation of several different servers.</p> <p><strong>Twitter&#8217;s response.</strong> In a <a href="">tweeted statement</a>, the company said it &#8220;has rules which determine which content and behavior is permitted&#8221; on social media. &#8220;In the case involving the journalist Patricia Campos Mello, we have already taken measures related to some tweets and accounts which violated these rules, and there is content still to be analyzed.&#8221;</p> <hr class="wp-block-separator"/> <h2>Take note</h2> <ul><li>Congressman Lucas Vergilio has presented a Legislative Decree to strike down a resolution by certifying authority ICP-Brasil that allowed companies and individuals to renew digital certificates remotely, if they have already registered their biometric data. As he told the <a href="">House of Representatives’ official news website</a>, “only legislators may waive the need for physical presence,” a requirement he believes ensures the safety of the process. The proposal must be analyzed by three House committees before a floor vote. Meanwhile, the emission of digital certificates <a href="">is set to increase by 15 percent in 2020</a>.&nbsp;</li><li><a href="">São Paulo’s military police</a> used drone technology to apprehend a teenager suspected of pickpocketing revelers during Carnival festivities. After receiving the complaints, the officers were able to identify the suspect using the equipment and direct a patrol team to seize him in the crowd.&nbsp;&nbsp;</li><li>A <a href="">report</a> by cybersecurity company PSafe discovered that roughly 198,100 Brazilians had their WhatsApp accounts cloned in January 2020. According to the company, the criminal’s new strategy is to target famous people with a “party scheme”: criminals search for social events, identify potential victims and send them an “identity confirmation” request through a PIN number, disguised as an invitation. After victims enter this code, their accounts are blocked and redirected to the criminals, who have access to their WhatsApp accounts.&nbsp;&nbsp;</li><li>Brazil’s Education Ministry opened up an application process for five new innovation hubs in federal institutions, in a partnership with Embrapii, the National Company for Research and Industrial Innovations. The institutions will be awarded BRL 3 million over three years to execute R&amp;D projects in partnership with companies.

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Natália Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Before joining The Brazilian Report, she worked as an editor for Trading News, the information division from the TradersClub investor community.

Euan Marshall

Originally from Scotland, Euan Marshall is a journalist who ditched his kilt and bagpipes for a caipirinha and a football in 2011, when he traded Glasgow for São Paulo. Specializing in Brazilian soccer, politics and the connection between the two, he authored a comprehensive history of Brazilian soccer entitled “A to Zico: An Alphabet of Brazilian Football.”

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