Brazil has consolidated its position in the Unicorn club. As of today, 20 Brazilian Unicorns (companies with a valuation above US$1 billion) have an estimated market value of more than US$150 billion. And that is only the beginning, as more companies are expected to achieve billion-dollar valuation status in the coming months.
A rapid surge in the number of deals and the international expansion of Brazilian companies to other markets has accelerated this movement and brought the Brazilian ecosystem under the spotlight.
Even so, little attention has been given to its founders, especially, where they come from and their academic and professional backgrounds. Antler recently launched a series of articles mapping the origins and backgrounds of Unicorn founders in the DACH (Deutschland, Austria, and Switzerland) region and in Africa. With that in mind, we analysed the founders of billion-dollar companies in Brazil to uncover what they had in common before founding their businesses. Here's what we found.
The Brazilian ecosystem is unique
Brazil is a protagonist in the new economy, being one of the most innovative and digitised in the world. With a very active private sector across the board, the country has market leaders in finance, consumer goods, agriculture, healthcare, and education.
Even with all the ingredients for stellar success, the country is well-known for its chronicle structural and social bottlenecks, making it one of the most challenging countries to do business in. Even so, for talented entrepreneurs, these problems and inefficiencies are opportunities to become billion-dollar companies.
Taking a helicopter view of Brazil's most exceptional tech founders, we have observed similar patterns that led to founding a Unicorn.
The importance of the right founding team
In the rapid and challenging business environment that we live in, managers and product developers must adapt and formulate ways to grow and retain customers. That is even more critical for startups, that at the beginning of their development, face challenges to get market validation and issues associated with growth, such as in culture development, talent recruitment and product scalability.
Take Gympass, for example, which began as a service to reduce the low occupancy in gyms and now is considered an employee benefits provider to other companies.
In that context, the team is fundamental for the execution success and, thus, the startup's development in its early stages.
A startup's founding team must have a strong vision, spike, and drive. It's an endeavour that usually takes years and is accompanied by several burdensome obstacles that see many fail or quit. But, as revealed further into this article, having complementary skills and experiences increases the likelihood of success.
The performance of a typical VC fund is driven by a small percentage of deals with exceptional returns, which compensates for the high share of losses. Therefore, it is important to understand the profile of founders that were able to execute a good idea and transform it into a very successful company.
— ANDREA MINARDI, INSPER
That is why early-stage investors such as Antler focus on extensive founder diligence and support them at the beginning of their entrepreneurial journey with capital, mentorship, network, and infrastructure.
With the maturation of the Brazilian ecosystem, and its increasing number of serial and successful entrepreneurs, we have shed some light on what these founders have in common in skills and other characteristics.
Brazilian unicorns are mostly B2C with mass market focus
Brazilian Unicorns operate in various sectors, such as gaming, logistics, food delivery, consumer marketplaces, education, B2B applications, and financial services. With the complexity of developing and accelerating a business in such complex markets, one would imagine that a strong background and networking would be essential to start such ventures. While both factors can be helpful, we noticed that it is not necessarily the case for most founders.
The Brazilian startup ecosystem is accelerating rapidly - 20 companies have become unicorns in the past four years.
Key findings
The typical Brazilian Unicorn founder profile
The first vintage of Brazilian Unicorn founders followed a pattern similar to other ecosystems: a very homogeneous group, dominated by men (only two female founders exist across the data), coming from prestigious business and engineering schools. We also observed patterns in working experiences, with a prevalence of serial entrepreneurs and background in tier one consulting and financial services companies.
Being a female founder is as difficult as being a male founder; we need to deal with uncertainty and the unknown. For me it was important to learn how to live with butterflies in my stomach and to break big problems into smaller problems so they become less scary and more achievable. I would encourage more women to take risks without feeling fully prepared for them. We are never fully prepared and there are many great problems to be solved in LatAm!
— MARIANA PAIXÃO, LOFT AND MELVI CO-FOUNDER
Being the country's industry and business capital, São Paulo has consolidated as the headquarters of the Unicorns, home to 83% of them. The state of Paraná comes in second, holding 16% of the companies, which can be surprising for many as the State is not very known for its services sector. That shows a development of the ecosystem in other regions, whereas the South region is standing out.
We also saw the participation of 14% of foreign founders. Although it seems small, it represented 20% of the biggest and fastest-growing unicorns, such as Loft, Nubank, Loggi and Creditas. In most cases, the founders arrived in the country in study exchange programs and stayed to develop their companies, providing them with local expertise. Europeans, coming from Germany, Spain and France represented 10% of the total founders, while Americans represented 4%.
On average, the founding team was composed of three founders, of which approximately one-third had at least one tech founder.
More than half of Brazil's Unicorn founders studied at STEM-focused universities
Founding a tech startup usually requires a combination of technical skills, such as coding, and a high level of business acumen to solve problems and think outside of the box. This is reflected in the study and university attendance of these founders, with 51% of Brazil's Unicorn founders studying at engineering or computer sciences schools. In addition, in most cases, this was followed by a continuation of studies at a business school with nearly 40% of them completing an MBA at one of Brazil's or international top business schools.
The Universidade de São Paulo (USP) stood out as the primary Unicorn maker, accounting for one-third of the overall diplomas. An equal share of seven founders graduated from FEA (Faculdade de Economia e Administração, School of Business and Economics) and POLI (School of Engineering). Prestigious business schools such as FGV (Fundação Getúlio Vargas), Insper, Harvard and Stanford were the preferred choice for an MBA or another postgraduate degree.
What typical career path did the founders take before creating their unicorn?
It was not at all obvious to make the decision to be an entrepreneur in 2008 when we abandoned our promising careers in consulting. There were few investors, few entrepreneurs we could learn from, and hardly any local success stories to inspire us. Still, we felt that our vocation to solve problems and get our hands dirty, allied to the dream of building something with impact and the ingenuity that nothing could go wrong, motivated us to embark on this journey with no return.
— GUILHERME BONIFÁCIO, IFOOD AND MERCÊ DO BAIRRO CO-FOUNDE
As mentioned earlier, founding and developing a startup is not an easy endeavour. The likelihood of success correlates with experiences founding another company or in other businesses focused on organisational change or in environments that nurture risk-taking.
This is highlighted in the backgrounds of Brazil's Unicorn founders. On average, they had eight years of professional experience before the founding of their company, and 42% of them had founded at least one startup company previously. This is in line with our findings in other ecosystems, as second or third-time founders have enhanced skills and networks to develop their new companies.
Brazil, being a powerful market with large incumbents, is not for the faint of heart. Successful founders typically have previous experiences that provide access to the incumbent ecosystem to help in spotting opportunities and securing initial clients. It's also important for founders to have a feeling for the limits of disruption to the ecosystem in terms of level and velocity at each point in time, and understanding these nuances comes with deep experience in the market.
— ARTHUR O'KEEFE, FOUNDER, BAMBOO ALTERNATIVES ASSET PLATFORM, FORMER MOVILE BOARD MEMBER
Previous employers have an important influence on the founding of the company. Around 60% of the founders analysed had experience working in top management consulting and financial services in McKinsey, BCG, Morgan Stanley, Goldman Sachs, BTG and Santander.
Watch this space: The Unicorn boom in Brazil is coming
Brazil's Unicorn founders and the business models built match trends Antler is seeing in other markets: homogeneous teams scaling ventures that largely focus on the Analog to Digital movement. The winners took advantage of the high smartphone penetration to offer B2C services enabling a fully digital gig economy. Like in Africa and SouthEast Asia, financial inclusion, logistics and transportation, and e-commerce were the core sectors.
The next generation of Unicorns are already using the digital and customer infrastructure created by these companies. This will lead to an ecosystem in which technological complexity has increased exponentially and where many of the larger tech players are creating interconnected marketplaces.
As the local funding ecosystem grows and matures, larger rounds of capital will be more accessible, allowing for Brazilian companies to, for the first time, become regional players, tackling the Spanish-speaking markets in LatAm. We can already see the emergence of different exits, from M&A deals to NASDAQ listings, with strategic investors and incumbent players taking a stake in the hottest companies. This trend is expected to intensify in the future as the market adapts to these types of deals.
As the Brazilian ecosystem matures, founder vintages will become more diverse, breaking the stereotype that successful companies are built and managed by male, white, upper class, middle-aged and from elite schools. Repeat entrepreneurs and early employees from fast-growing scale-ups and unicorns are already taking center stage using acquired know-how to build their ventures.
The diversity of talents can be translated into the unfolding of new tech verticals to tackle longtail social mobility, climate change, healthcare, pet and education problems. A proliferation of themes that vary from "bus sharing" to SMB's ERPs are accessing the mass market once neglected by the big corporations. The evolution and stimuli given in the ecosystem coming from investors, corporates and an increasing interest in early-stage investments have been fostering founders from unusual backgrounds who have been able to spot these opportunities.
That movement is already happening in the country, as seen in the growing number of pre-seed and seed deals and the volume invested. In the first half of 2021, the volume achieved a record number of US$5.2 billion, surpassing the total investment made in the year of 2020.
We believe that is only the tip of the iceberg. The spark in the democratisation of tech entrepreneurship and knowledge in Brazil is allowing more talents to develop their ideas. We are very excited to see what comes next and to partner in the disruptions that will bring even more opportunities for Brazil to grow.
All data was obtained through Crunchbase, Pitchbook, CB Insights, LinkedIn, and other publicly available information. Feel free to contact gustavo.portellinha@antler.co and sergio@antler.co if you have any questions, comments, or additions to the data obtained.
This article was written by Gustavo Portellinha and Sergio Massano.
