brazil ecosystem
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Brazil EcosystemTRANSCRIPT
Investing in Tech Markets in BrazilCopyright @ 2013 Monashees Capital
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+ Founded in 2005+ US$ 135 M in capital
commitments+ 7 partners+ 27 companies+ Target sectors include Mobile,
Marketplaces, e-Commerce, SaaS, EdTech, FinTech, Healthcare
+ Focus on leading Seed & Series A rounds, reserving capital for Series Bs
+ Co-invested with Accel, Benchmark, Felicis, Insight, Meritech, Tiger, Valar, 500 Startups, Flybridge, Valiant, Thrive, Intel Capital, Social + Capital, among others
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Timeline of tech VC industry in Brazil
“Nuclear Winter” “Boom” “Correction”
20122005 2009
“First wave”
New local investors
2000“The Burst”
2013
You are here
New localaccelerators
First generation of internet companies
Early internet investors International investors
…
Funded startups
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MARKETS TEAMS LIQUIDITY
What really matters
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Large domestic market
Sources: FGV, World Bank, Business Monitor International, Brazil Central Bank, Monashees’ analysis
GDP
[US$ Trillion, 2011]
2002 2012
49.0%
27.0%
38%
52%
13.0%21.0%
Consumption power
Se-ries1
15.0
7.35.9
3.62.8 2.5 2.4 2.2 1.9 1.8
2nd Largest beauty market
4thLargest
automotive market
5th Largest clothing market
2nd Largest pet
supplies market
B2C: 200 M people
B2B: + 5M companies
2002 2012
49%27%
38%
52%
13% 21%Upper class
Middle class
Lower class
3rd Largest
computer market
On average they invest 5.5% of revenues in IT
For the first time, emerging
middle class that can afford
to buy tech
products & services
Leadership in relevant markets
6
3%
6%
Far from plateau
Sources: eMarketer, New Media Trend Watch, Google Think Mobile Research, Ibope, ebit, Monashees’ analysis
Internet
[% of the population, 2012]
E-commerce
[% of total retail, 2012]
Smartphones
[% of population, 2012]
Online ad spending
[% of total ad spending, 2012]
46%
78%
88.5Minternet users in Brazil
15%
50%
7%
28%
28.5MSmartphones in Brazil
US$11.3B
ecommerce sales in
Brazil
US$3.3B
Spent on online ads in Brazil
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Large underserved tech markets
Sources: Monashees' analysis
Enterprise tech
E-commerce EduTechReal Estate
220K brokersMost properties are not online yet
Jobs 80M of operational employees, lack of solutions to recruit these professionals
Services 75% of the employment is in services sector. Information asymmetry makes it hard to match customers and services providers
Mobile FinTech
Marketplaces
Invest-ments
US$ 1 tri AUM only mutual funds, on average Brazilians only use their banks and invest on traditional products
Insu-rance
US$ 10B market, online accounts for less than 5% of the transactions
Credit US$ 1 tri in credit, huge information asymmetry between banks / companies / consumers
Profes. Educa-tion
2.6M students talking online professional coursesLack of top-quality alternatives
TestPrep
12.7M people taking standardized tests, lack of intelligent and scalable solutions
K12 300K K12 schoolsUrgent need to improve quality and efficiency
Mobile-first
28.5M smartphones, the Brazilian AppStore and Google Play lack top localized alternatives
Feature phones
Feature phones and pre-paid plans still dominate the market, 76% and 80% penetration respectively
Furni-ture US$ 20B market, lack
of an alternative with good quality, design and accessible price
Home impro-vement
US$ 25B markettop 10 players accounts for less than 10% of the market
Desin-terme-diation
US$ 6B only apparel market, by cutting the middle man, it is possible to create affordable and aspirational brands
SMBs +5M companies, mostly underserved by technology. Only 26% use any kind of SW for mgt.
Enter-prise
Only 36% of the companies have an ERP and only 27% have a CRM
SaaS 77% of companies will increase their investments in SaaS in the next 2 years
Mobile payment
The proportion of purchases made from mobiles phone is strikingly small, below 1% of total online sales
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Brazilians embrace innovation, specially social - 2nd most Facebook and Twitter users in the world (41.5M and 33.3M respectively)
Favorable timing
Sources: Febraban, eMarketer, ABECS, Gartner, Monashees' analysis
Adoption Infrastructure
Brazilians trust the internet, internet banking is almost at the same levels of developed countries, 46% of transactions (vs US 54%)
Companies are using more technology, 71% of companies already adopted SaaS in Brazil, 27% of them during last year
Payments - high penetration of credit cards in Brazil (53% penetration), 173.2M credit cards accounting for $200B in transactions / year
High-speed internet - Brazil had 25.5M broad-band connections in 2012 (16 M in 2010). 80% of companies already have broad-band internet
Logistics – Still a challenge, high cost, but 79% of deliveries are made on time. Customer satisfaction with handling/shipping is increasing
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Moving towards innovation
“Imported”Provenmodels
Local innovation
Global innovation
RiskUpsid
e
TimeSources: Monashees’ analysis
Economic growth
Sources: Brazil Central Bank, Ipeadata, Bradesco, eMarketer, New Media Trend Watch, Google Think Mobile Research, Ibope, Monashees’ analysis
2008 2009 2010 2011 2012 2013 (e)
2014 (e)
5.2%
-0.3%
7.5%
2.7%
0.9%
2.5%3.2%
GDP Growth [%]
Internet
users
Ecommerce
sales
Spending on online
ads
Smartphone users
8% 22%
21% 88%
Online growth [% vs 2011]
Cost of doing business
Sources: World Bank, Monashees' analysis
Ranking Country
1 Singapore
2 Hong-Kong
3 New Zealand
4 USA
5 Denmark
… …
129 Bangladesh
130 Brazil
131 Nigeria
132 India
World Bank Ranking - Ease of doing business [2013, 185 Countries]
Starting a business
Protecting investors
Trading across
borders
Getting credit
Complex tax
strucutre and labor
laws
Enforcing contracts
Cost of doing business
Starting a business
Protecting investors
Trading across
borders
Getting credit
Complex tax
strucutre and labor
laws
Enforcing contracts
Cost of doing business
Lower competitive pressure + premium of
scarcityEducation
KrotonIT
Linx
Marketplaces
MercadoLibre
SoftwareTotvs
Growth equity
Time
Revenue Seed/Series A Private EquityGrowth
Sources: Monashees’ analysis
Best companies
US VCs
New local growth investors
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MARKETS TEAMS LIQUIDITY
What really matters
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The rise of the high-impact entrepreneur
Sources: Monashees’ analysis
High-impact
entrepreneurs
LocalsCorporations
Returning expatriates
Tech
Foreigners
Academy
Startups
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Technical talent
VC are helping on this
❯Talent Management
Active support on head-hunting
❯AdvisorsBring seasoned tech advisors for the companies
❯CommunityShare knowledge among entrepreneurs
Series1
6
25 25
Engineers availability[per 1000 professionals]
2010 2011 2012
16.518.0
21.6
IT manager salaries[Monthly, in 000 BRL]
Sources: Robert Half, Finep, Monashees’ analysis
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MARKETS TEAMS LIQUIDITY
What really matters
Tech exists
Sources: Thomson Reuters, Startup DealBook Brazil, Crunchbase, Monashees’ analysis
Number of VC investments based on “Startup Dealbook Brazil”
Relevant tech exits in emerging markets
2008 2009 2010 2011 2012
6 6
17
45
79IPO M&A
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Timeline
“Correction”
2015
“Boom” “Virtuous Cycle”
1st wave of tech acquisitions and
IPOs
20122009
Local Investors
International investors
Accelerators
2013
+ 5-7 years
You are here
Many potential acquirers
Role models / angels
…
Funded startupsInternational Tech Companies
Local incumbents
19
Thank you!
Exchange rate
Sources: World Bank, UBS, Brazil Central Bank, Ipeadata, Bradesco , Monashees’ analysis
Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-130
50
100
150
200
250
300
350
September/11
1998 Russian crisis
2008 Global credit crisis
2002 Presidential election
Nominal rate
* As of June 20th 2013
Foreign Exchange, inflation adjusted [BRL / USD, 1997=100]
1.97
3.52
2.94
2.62
2.31
1.67
1.98 2.26*1.9
81.04