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Tech Roundup: Digital players thrive amid Brazil’s IPO boom

. Oct 09, 2020
Tech Roundup: Digital players thrive amid Brazil's IPO boom Image: Fatmawati Achmad Zaenuri/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: new tech players thrive in Brazil’s IPO spree, the growth of contactless payments in Brazil, and the federal government’s booming spending in IT. 


IPO boom brings Brazilian investors closer to digital players

2020 will be remembered by Brazilian capital markets as the year of the IPO boom.

As of October, at least 19 companies have held initial public offerings on São Paulo stock exchange B3. But unlike IPO sprees of the past, this one has a tech element that may give investors unprecedented opportunities.</p> <p><strong>Markets ready for an IPO boom.</strong> In its latest offer, digital second-hand marketplace Enjoei offered its shares within the BRL 10.25 to BRL 13.75 price range. If successful, the sale may raise BRL 1.1 billion. Another newcomer is broadband provider Triple Play, which aims to reach up to BRL 1.7 billion on its offer. In September, at least four other digital players announced plans for an IPO:</p> <ul><li>Cashback startup Méliuz, wine subscription service Wine, digital estate agent Housi and Mosaico, the owner of price comparison platforms Buscapé, Zoom, and Bondfaro, have all applied for IPOs at B3.&nbsp;</li><li>The case for tech IPOs in Brazil has been supported by prior success stories. Since going public in February, website hosting company Locaweb’s shares have risen by over 200 percent.&nbsp;&nbsp;</li></ul> <p><strong>Tech retailers.</strong> In Brazil, the biggest tech players are often e-commerce companies and this IPO wave is no different. According to Diogo Lupinari, CEO at tech company Wevo, which works to integrate systems and data, retailers are becoming so focused on tech in Brazil that “it’s even unfair to say they are not tech players.” In his view, the new entrants will beef up an incipient sector, but which already has strong players such as software providers Totvs and Linx, as well as major retailers. </p> <p><strong>Is Faria Lima the new Wall Street? </strong>The decision to go public in São Paulo is a new trend for domestic tech players. While unicorns such as Nubank and Gympass have resisted public offers, finding plenty of venture capital funding available, other tech players such as XP, Inc. and Arco Educação have chosen Nasdaq as their home.&nbsp;</p> <ul><li>Luan Gabellini, managing partner at Betalabs, a company focused on tech for e-commerce, believes the increasing number of investors in the Brazilian market made it more attractive to companies, and the new &#8220;IPO batch&#8221; is an important step to make the sector stronger.</li><li>For Mr. Lupinari, more tech companies still need to go public in Brazil before we can say capital markets are as popular as venture capital as a source of funding for startups. </li><li>A new deal announced this week shows that the VC market is still going strong. Private Equity fund Warburg Pincus just <a href="https://braziljournal.com/warburg-pincus-investe-us-100-mi-na-take-no-maior-series-a-do-brasil">made</a> the biggest investment in a Series A round in Brazil: a USD 100 million investment in Take, a digital platform that helps companies communicate with customers through WhatsApp.  </li></ul> <hr class="wp-block-separator"/> <h2>Pandemic spurs boom of contactless payments and mobile shopping</h2> <p>Social isolation and hygiene measures linked to the Covid-19 pandemic gave an extra boost to the adoption of contactless payments in Brazil, according to a new report by Mobile Time/Opinion Box.</p> <ul><li>From March to August, the share of Brazilians that carried payments through QR Codes jumped from 35 percent to 48 percent.&nbsp;</li><li>The share of consumers who use contactless payments by their mobile devices jumped by 10 percentage points, to 33 percent. In comparison to August 2019, the share basically doubled.&nbsp;</li></ul> <p><strong>M-commerce.</strong> The share of Brazilians who have purchased goods and services through their phones reached 91 percent in August. The frequency has also grown and now 83 percent consider themselves monthly active users and 76 percent of Brazilians say they buy products on their phones more than they do on computers.&nbsp;</p> <ul><li>The preference for mobile phones, however, may be a symptom of social inequality, as the preference is higher among low-income classes, which are less likely to own computers.&nbsp;</li></ul> <p><strong>New trends.</strong> The pandemic has also accelerated new trends. Of all the segments analyzed, food delivery had the best performance: as of August, 83 percent of Brazilians said they had ordered meals through an app — 11 percentage points above March levels. Another surprising boost came from beauty services: as of August, 22 percent of Brazilians had used an app to require such services — 6 percentage points above March levels. To do this, 42 percent of the users <a href="https://brazilian.report/tech/2020/10/02/tech-roundup-can-whatsapp-curb-fake-news-in-the-2020-election/">resorted to WhatsApp.&nbsp;</a></p> <hr class="wp-block-separator"/> <h2>Government IT purchases speed up during pandemic</h2> <p>Covid-19 highlighted the need for digital transformation across the board and it is not different in the Brazilian government. From January to August, IT purchases by the federal government increased 25 percent, reaching BRL 876 million, according to a study by Effecti, a platform specialized in technology for public procurement, <a href="https://www.convergenciadigital.com.br/cgi/cgilua.exe/sys/start.htm?UserActiveTemplate=site&amp;infoid=55091&amp;sid=10">seen by</a> Convergência Digital website.&nbsp;</p> <p><strong>Higher prices.</strong> The increase in spending came despite a reduction in the number of contracts, showing that the government is paying more for services. The median value per contract was BRL 43,000, or BRL 2,000 above 2019 levels.</p> <p><strong>Strategic areas. </strong>The government areas that spent the most on IT in the period are, in that order, the Air Force, Economy Ministry, Regional Development Ministry, Federal Service for Data Processing (Serpro), and Justice Ministry.</p> <p><strong>Pandemic impacts.</strong> That the Economy Ministry is second place on the list could be explained by the technological effort to implement the government&#8217;s BRL 600 coronavirus emergency aid program for the unemployed and informal workers. According to the report, several of the biggest contracts in the period were related to the pandemic, including a BRL 29 million agreement between the Economy Ministry and state-owned firm Dataprev.&nbsp;&nbsp;</p> <p><strong>More to come. </strong>The full digitalization of federal services is one of the goals of the Jair Bolsonaro administration. Currently, the Economy Ministry <a href="https://www.gov.br/economia/pt-br/assuntos/noticias/2020/outubro/mais-de-80-milhoes-de-pessoas-sao-usuarias-do-gov.br">estimates</a> that 60 percent of the 3,800 services offered by the government have already been made digital.&nbsp;</p> <ul><li>The government is also hiring 350 IT professionals temporarily and has just announced a <a href="https://www.convergenciadigital.com.br/cgi/cgilua.exe/sys/start.htm?UserActiveTemplate=site&amp;infoid=55105&amp;sid=10">new bidding process</a> for 160,000 Microsoft Office 365 licenses, at an estimated total cost of BRL 48 million.&nbsp;</li><li>Meanwhile, Brazilian development bank BNDES is moving forward with its plan to privatize Serpro and Dataprev. This week, the bank opened a selection process to hire due diligence services for the operation.&nbsp;</li></ul> <hr class="wp-block-separator"/> <h2>Take note</h2> <ul><li><strong>Ransomware. </strong>Petrochemical company Braskem, the largest resin maker in the Americas, suffered a ransomware attack that interrupted its operations on Thursday. According to the company, its security system blocked the attack before data was lost, but operations were interrupted. <a href="https://valor.globo.com/empresas/noticia/2020/10/08/alvo-de-hackers-braskem-declara-forca-maior.ghtml">According to</a> newspaper Valor Econômico, the disruption led the company to declare force majeure to some clients, though it is working to reestablish operations. </li><li><strong>Unicorn.</strong> Used car dealership platform Kavak became <a href="https://labsnews.com/pt-br/noticias/negocios/kavak-mexico-unicornio/">Mexico’s first unicorn</a>, with a USD 1.15 billion valuation after a new fundraising round led by the Japanese conglomerate SoftBank, as well as investment firms DST Global and Greenoaks. The company, which operates in Mexico and Argentina, already has 800 employees and aims to hire another 500 ahead of its debut in Brazil in early 2021.  </li><li><strong>Science and Technology. </strong>Nestlé <a href="https://www.meioemensagem.com.br/home/marketing/2020/10/07/nestle-abre-centro-tecnologico-focado-em-inovacao-aberta.html">launched</a> a new open innovation Science and Technology lab in the city of São José dos Campos, in São Paulo state. The main goal of the center’s fifteen researchers is to develop new technologies based on the Industry 4.0 model, which will be tested at Nestlé&#8217;s facilities in Caçapava and, if proven useful, expanded to its entire production chain.   </li><li><strong>SMB. </strong>Microsoft launched its management platform Microsoft Dynamics 365 Business Central for small businesses in Brazil. The company aims to grow amid a segment that often lacks operational and financial management tools. The Business Central will work on Microsoft’s cloud, Azure, and has features to help users to comply with the country&#8217;s new general data protection law LGPD. </li><li><strong>Digital law. </strong>Brazil’s National Council of Justice <a href="https://www.cnj.jus.br/plenario-aprova-proposta-para-varas-atuarem-de-modo-100-digital/">allowed</a> courts from all over the country to execute lawsuits in a fully digital and remote way. The Juízo 100% Digital project allows plaintiffs and defendants to opt for their hearings to take place via video conferences, while courts will be forced to provide the necessary infrastructure. Results will be analyzed within a year, when courts will decide whether to adopt the model permanently or not. </li><li><strong>Internet access. </strong>Colombia’s House of Representatives approved a bill that aims to make internet access an essential public service. The project has broad support from lawmakers and the federal government, <a href="https://www.lafm.com.co/politica/internet-punto-de-ser-un-servicio-publico-esencial-en-colombia">according to</a> the local press, and could be the first step toward policies that grant universal access, especially for lower-income populations. </li><li><strong>Labor laws. </strong>For the first time, a Chilean court <a href="https://www.t13.cl/noticia/negocios/se-marca-hito-juzgado-del-trabajo-reconoce-relacion-laboral-plataforma-y-repartidor">recognized</a> the existence of an employment relationship between a delivery app and a courier, granting the victory to a worker in a lawsuit against delivery app PedidosYa over his dismissal without cause. The ruling comes as Congress discusses a bill to grant social security protections to app workers. 

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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.

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