Felipe Matos, Startup Brasil, on Copycats, Innovation & the Tech Bubble

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Felipe Matos is the COO of Start-up Brasil, a national program promoted by the Brazilian Government to foster and stimulate the nation's startup ecosystem.

The program provides funding, space, business services and mentorship through partnership with top accelerators.

Felipe Matos has worked with IT management since 1995. He founded the first Latin American mobile website, Girando. Since 2002, he has worked as the Partner and Founder at Instituto Inovação, an innovation management group, that provides business acceleration, consulting, technology transfer services and venture capital investing. He has managed several start-up companies, all related to IT.

In 2011, Felipe founded Startup Farm, an acceleration program for digital startups.

We spoke to Felipe about the tech "bubble" in Brazil; how the current influx of US and European entrepreneurs affects the startup scene there; and his advice for would-be angel investors.

TNW: Tell us about some of the most exciting startups currently in the Startup Brazil program.

FM: The Start-Up Brazil program is now within an open call for its first batch of supported startups. We don't have startups currently in the program, but we do want to attract exciting ones for sure! Applications closed at the end of May, results should be out by the end of June and the first batch of the program starts in July.

TNW: Do you believe that there is a bubble in the tech world in Brazil? If so, when do you think it will burst?

FM:

Well, when you think about a bubble, there are some points to consider. The main one is about irrational valuations being paid off, over and over, with no economic ballast.

Another one is a market excitement, overloading news, large numbers of companies, that keep feeding it. When you look at Brazil I see some excitement, but I don't see huge valuations nor a liquidity space for exits that would feed such a bubble. 

From my perspective, Brazil has experienced an economic boom in the past three years that attracted a lot of money for new ventures here, but we couldn't produce as many good entrepreneurs and businesses at the same speed. There were few very good ones and this increased valuations. 

Meanwhile, tech entrepreneurship has grown dramatically due the market opportunities and a large number of initiatives to foster the ecosystem, with angel investors, entrepreneurial education, acceleration and community building. I'm proud to be part of this effort with Startup Farm acceleration programs all over the country.

Now we start to see qualified startups being born at a good rate and I believe this will relight the appetite of investors.

Markets behave in cycles of growth and adjustments and I believe they are important to the healthiness of an ecosystem.

TNW: Are you seeing an increase in later stage funding in Brazil following all the series A and seed investments that happened in the past few years? If not, why do you think Brazil is not yet seeing the subsequent series B and series C rounds?

FM:

In my perspective it's a matter of time and having success stories. Once they start showing up, the money will come.

Three years ago we had very few seed funds in Brazil and even angel investors and a lot of capital on Private Equity, at the other side of the chain, complaining about a lack of companies to be invested.

When the first seed funds started to show some good results, others have followed and now we see a growing number of angels and seed capital and some private equity firms starting to consider writing smaller checks.

But we now still miss the middle funding, especially Series A and B. There will be a lot of good companies that have been invested in the seed phase in need for more capital. I believe those opportunities will attract the capital.

TNW: Historically, people see Latin America as a big market for copy cats, especially in ecommerce. Do you see much real innovation coming out of the Brazil startup scene? If not, why not? If yes, can you give us some examples?

FM: Innovation also means high risks.

It's natural that younger ecosystems, with less money available, few success cases and exit options, both investors and entrepreneurs will prefer to place their bets in less risky business models.

That's why copycats are a good fit for this stage. I don't see this as a bad thing, but as a step we have to take in order to get to a stage where past successes will encourage more risky businesses, leading to more innovation.

Anyway, Brazil is not just about copycats now. A good example is the work of Criatec Fund. It is one of the first seed funds in the country and it was 100% focused on innovative high tech startups. 36 companies were invested, with businesses such as geo-data mining with artificial intelligent algorithms, high tech cloud-storage software, robotic agricultural devices, low cost silicon chips and many others. This is a good example of how Government money can help on pushing the ecosystem. Criatec is 100% funded with public money, since this kind of innovation in Brazil was too risky for the private sector. Its success cases are now driving private money into this space. That's also the logic we are trying to use with Start-up Brasil program.

TNW: There is a current influx of European and US entrepreneurs in Brazil. Why do you think this is? What is the overall impact on the local startup scene?

FM:

Brazil is a hot market now, with its growing middle class, many market needs and inefficiencies, a good economic moment.

We will have big sport events such as the World Cup in 2014 and the Olympic Games in Rio in 2016, which also put our country on the spotlight. At the same time, developed countries, such as US and European ones are facing a strong economic crises. This produces this influx of people coming in to the country. I see this positively, as an opportunity for us to exchange knowledge and experience with other nations and increase the competitiveness of our companies. 

That's also why Start-up Brasil program is open for international startups who want to come to the country, with visa facilities.

TNW: What is the most common piece of advice that you give to startups looking for funding? Generally speaking, do you find that male and female founders need the same, or different advice?

FM:

Focus on building a great company and investors will look for you. I don't see a difference between male and female entrepreneurs in terms of advice.

Only that, unfortunately, we still have few women in the tech entrepreneurial space. This is a worldwide fact that also happens in Brazil and I congratulate initiatives such as The NextWomen that look for changing that reality.

TNW: What three pieces of advice would you give to someone considering becoming an angel investor?

FM:

1. Find an investment that is related to your experience, knowledge and connections. Startups need smart money.

2. Be aware of the risks and times involved. If you are going to need that money in the short-to-mid term, you should think twice about becoming an angel investor.

3. The perfect investment rarely exists, especially in emerging ecosystems.

You won't find a great team with a great product and business model just waiting for your money. It's not just about finding good opportunities, but also building them with the entrepreneurs.

I can't avoid to say a 4th one. That's classic:

Having good teams is what really matters. It's not the horse, but the jockey!

TNW: What kind of technology are you most enthusiastic about and why?

FM:

Mobility. It's amazing just to imagine the possibilities of having computational power and connectivity everywhere. I think we are starting to see this revolution. The internet of stuff, low cost sensors and next generation networks will create a new paradigm in terms of what technology can do.

Big Data.

We've never produced so much data in the human history. Analyzing this data and turning it into real insights is a big trend and a great market opportunity.

Cloud-based enterprise software. Most enterprise software is still in that old desktop in-site client-server model. Just think about how easy, fast, interconnected and friendly your Facebook page is compared to the systems you use in a corporation. There is a huge amount of efficiency improvements that may be pursued with the development of enterprise cloud solutions.

TNW: Is there anything you haven’t asked us, but you would like to share with our community?

FM: Start-up Brasil program is going to provide funds, mentorship, infra-structure, market access and international visibility to 100 selected startups this year. 25% of these startups may come from other countries, all over the world. Each one will receive around U$ 100K (R$ 200K) in grants, plus U$ 10K to 500K in direct private investments, infra-structure and business services from one of the 9 startup accelerators that are partners of the program that will be paired with each company.  

We are also opening a space located in the Silicon Valley area, in the US, in order to promote our companies there, attract investments and bridge both ecosystems. In addition to that, the program will have a team dedicated to connect startups with large Brazilian companies, in order to make them the first clients of those startups. It's a very complete program, with a great opportunity for those who want to do business here. 

Applications for Startup Brasil open again in October.

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