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Tech Roundup, May 22, 2020 | Startups in the post-pandemic Brazil

. May 22, 2020
What does the post-pandemic future hold for Brazilian startups Image: Mary Valery/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: The future of Brazilian startups after the pandemic. Retailers’ bets to weather the crisis. Internet accessibility is an issue in Brazil.

What does the future hold for Brazilian startups?

Before the Covid-19 pandemic, Brazil was perhaps the most promising startup ecosystem in Latin America.

However, with the disruption caused by the crisis — and expectations of a  significant decline in venture capital, the future seems uncertain for the sector. <strong>The Brazilian Report</strong> discussed the future for the sector with Amure Pinho, chairman of the Brazilian Association of Startups (ABStartups).</p> <p><strong>Is the ecosystem in Brazil strong enough to weather the crisis? Is there a chance of massive bankruptcies?&nbsp;&nbsp;</strong></p> <blockquote class="wp-block-quote"><p>I don’t think there will be that many bankruptcies, because startups specialize in living with little money. I see adaptations going on, cost-cutting … Some have fired part of their staff, others were able to negotiate wage reductions. But I don’t see startups closing shop. Those who had their revenues reduced to zero are having to find alternatives, but others have already managed to go back to pre-Covid-19 levels and there are those who actually grew in this time. </p></blockquote> <p><strong>But with venture capital expected to hold back on spending, will Brazilian startups have enough cash flow to hold on?&nbsp;</strong></p> <blockquote class="wp-block-quote"><p>Some startups had just fundraised, but those who were preparing new investment rounds suffered a little. I don’t see a funding shortage, though. Investors remain looking for good opportunities. It’s more about timing than capital shortage. </p></blockquote> <p><strong>If these funds are eventually drained, should we expect a wave of startups going public?&nbsp;</strong></p> <blockquote class="wp-block-quote"><p>I think that, in Brazil, there is still a gap between startups and the stock market. A business must be very mature before they go for an initial public offering, because it can restrain operations, which could kill innovation if done at the wrong time. I think the more money you have, the bigger you get and, therefore, have more conditions to go public. So, I don’t think an excess of capital delays an IPO. What it can cause is a search for extreme growth instead of long-time profitability. But that&#8217;s not really the case in Brazil. We don’t have cases of startups that fundraised a lot of money but remained unprofitable.</p></blockquote> <p><strong>Will we see a surge in mergers and acquisitions?&nbsp;</strong></p> <blockquote class="wp-block-quote"><p>I think this will happen, this will be a good phase for mergers and acquisitions. It has already begun, as startups are joining other businesses and creating larger companies to get market share. I see this as a moment to consolidate.</p></blockquote> <hr class="wp-block-separator"/> <h2>Retailers bet on “peer-to-peer” sales amid crisis</h2> <p>With street stores and shopping malls closed due to social isolation measures, Brazilian retailers are betting on digitalization to keep the lights on. The newest strategy of the sector is “peer-to-peer” sales, using e-commerce and even messaging app WhatsApp.&nbsp;</p> <p><strong>Win-win situation.</strong> As website <em>Brazil Journal</em> <a href="https://braziljournal.com/lojas-marisa-lanca-venda-direta-digital">reports</a>, fast-fashion retailer Lojas Marisa has created the <em>“Sou Sócia”</em> (I’m a Partner) program, in which people may sell the store’s products via special website links and get a 5-percent commission in return. The company aims to reach 100,000 sellers and increase e-commerce share of revenue, currently at 7 percent.&nbsp;&nbsp;</p> <p><strong>Specialized workforce.</strong> Other retailers are integrating their workforce to online sales tools through WhatsApp, in order to fashion more personalized services. The model is already being used by retailers as furniture store Casas Bahia and eyewear brand Chilli Beans. Fashion retailer Riachuelo is trying to adapt by using a hybrid model that redirects customers to a salesperson after a chatbot makes the first trial, <a href="https://neofeed.com.br/blog/home/da-via-varejo-a-riachuelo-o-whatsapp-virou-o-novo-fenomeno-do-e-commerce/">reports</a> website <em>NeoFeed</em>.&nbsp;&nbsp;&nbsp;&nbsp;</p> <hr class="wp-block-separator"/> <h2>Brazilian internet still inaccessible for citizens with disabilities</h2> <p>New <a href="https://mwpt.com.br/numero-de-sites-que-falham-nos-testes-do-web-para-todos-cai-mas-ainda-preocupa/">research</a> by initiative Web Para Todos shows that 99 percent of the 15 million websites in Brazil have some kind of <a href="https://brazilian.report/tech/2019/08/30/brazil-tech-roundup-digitally-excluded-create-internet/">accessibility issue</a> that presents a challenge for users with disabilities. The survey considered problems on images, forms, links and W3C markup validation (which analyzes the website’s code in search of problems that may generate accessibility issues).&nbsp;</p> <p><strong>Slow improvements.</strong> The ratio of websites that were successful according to all the accessibility criteria applied increased to 0.71 percent, versus de 0.64 percent registered in the previous edition of the study, in August 2019. Meanwhile, the ratio of websites that failed every criteria also fell from 5.6 percent to 0.1 percent.</p> <p><strong>Government advances. </strong>From August 2019 to April 2020, the amount of government websites with accessibility issues decreased from 99.66 percent to 96.71 percent. It’s important to note that the federal government performed several changes in the period, <a href="https://brazilian.report/business/2019/09/03/brazilian-government-investing-digital/">unifying websites under the gov.br domain</a> and offering more services in an online base.</p> <p><strong>Why it matters.</strong> Nearly <a href="https://educa.ibge.gov.br/jovens/conheca-o-brasil/populacao/20551-pessoas-com-deficiencia.html">46 million Brazilians</a> had some kind of disability, according to the latest census data. Roadblocks to internet access means that almost 22 percent of the population could be deprived of what is considered to be a <a href="http://g1.globo.com/tecnologia/noticia/2011/06/onu-afirma-que-acesso-internet-e-um-direito-humano.html">human right</a>.&nbsp;</p> <hr class="wp-block-separator"/> <h2>Take note</h2> <ul><li><strong>Data privacy. </strong>Cosmetics giant Natura <a href="https://www.safetydetectives.com/blog/natura-leak-report/">reportedly</a> had a security breach on a U.S.-based server. A hacking attack exposed 272 gigabytes of data, with personal information on more than 250,000 customers being exposed. Payment data of another 40,000 customers was made public for over two weeks. Natura &amp; Co. told <strong>The Brazilian Report</strong> it had eliminated the vulnerable data service as soon as it was detected, adding that there is no evidence of leaking, or that customers’ credentials or credit cards were accessed by a third party. The company also said it has adopted additional security measures, including investigating potential impacts and reviewing internal mechanisms. </li><li><strong>Covid-19. </strong>Brazilian startups and corporations joined forces to increase Covid-19 testing in São Paulo. The initiative, called Movimento #2em2, will allow people to purchase Covid-19 antibody tests via delivery app Rappi. They will be able to schedule a date to take their test at the Iguatemi Mall, where the tests will be collected by medical teams provided by startup Cia da Consulta on a drive-thru model, and transported to labs by logitech Loggi. Fintech Stone will be in charge of the payments. Each test costs BRL 251 and reportedly has a 94-percent efficiency level. Companies will match sales revenue in <a href="https://braziljournal.com/testes-rapidos-vitta-rappi-e-loggi-criam-o-2em2">donations</a> to public hospitals.</li><li><strong>M&amp;A. </strong>Startup Mobi7, which develops mobility solutions for fleet management and car sharing, was acquired by car rental company Localiza for BRL 20 million. With the acquisition, Localiza aims to save and avoid accidents involving employees, and increase productivity. </li><li><strong>Open Banking.</strong> According to Central Bank Regulation Director Otávio Damaso, <a href="https://brazilian.report/business/2019/04/30/open-banking-brazilian-customers/">open banking</a> in Brazil will be self-regulated. “If things don’t happen as the Central Bank wants, there’s always the prerogative of bringing it to regulation.” The model is expected to be implemented in four phases, from November 2020 to October 2021, and is focused on the idea that the user, not the financial institutions, owns their data, which creates a wide array of possibilities for the payments industry.

 
Natália Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Most recently, she worked as an Editor for Trading News, the information division from the TradersClub investor community.

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