Getting to know the Brazilian Internet economy
The Brazilian Internet economy is constantly growing. No matter if the overall economy is in a good or in a bad mood the Internet economy keeps on going up. And there are good reasons for that. Brazil has a large number of people connected to the Internet who are accessing online services on a daily basis. And it has a growing startup environment producing constantly improving services for its user base. Keep on reading and you will see why investing in the Brazilian Internet economy is a good choice for your business.
Brazil’s Internet market size
Brazil is among the strongest economies in the world and the biggest in Latin America. The country has the 5th largest population in the world, nearly 210 million inhabitants. About 150 million of them are Internet users. Brazil is also a very active country when it comes to social media. Almost 130 million Facebook accounts belong to Brazilian Internet users. And further millions are using Instagram, Twitter, Pinterest and similar platforms.
About 60 million Internet users in Brazil are using e-commerce services purchasing everything from electronics to clothes, furniture, food and more. And also this number is increasing. In 2017, retail enterprises registered over 200 million purchases through the Internet, that summed up roughly 60 billion BRL (about 14 billion EUR). The average amount of money spent on each purchase was around 300 BRL (70 EUR). 30% of all these transactions were made through mobile devices. Expectations are to cross the line of 45% in 2018. Overall, e-commerce in Brazil has grown over 35% in the last two years and the projections show it can grow another 50% until 2020.
The numbers are impressive and they give a slight overview of what the Internet economy in Brazil has to offer. There is a large diversity of Internet companies in Brazil and in the following section, we will take a look at the best locations.
The geography of the Brazilian Internet economy
Choosing where to implement your business is an important step. A newly set up Internet business needs a stable infrastructure and service, great employees and more. Also, depending on the kinds of services offered companies could choose a larger metropolis like São Paulo or Rio de Janeiro or a relatively quiet place like Campinas, Londrina or Recife. The variables taken into consideration include the necessity to interact (or not) personally with a large number of people, different models of taxation in different states, representative addresses and office building versus coworking spaces and decentralized home office teams.
São Paulo and Rio de Janeiro are certainly two of the most important cities for the Brazilian Internet economy mainly because of their huge population, infrastructure, and diverse economy. However, there are many more options. Other capital cities such as Belo Horizonte (Minas Gerais), Florianópolis (Santa Catarina), and Recife (Pernambuco) are recommended environments in different parts of the country for Internet businesses starters.
If staying in big cities is not a necessity, you could be interested to know that a recent study took an x-ray of the Brazilian startup environment, revealing where best cities for investing. And among them, 10 are located in the countryside, far from the big trading centers.
Small towns, located in the South and the Southeastern region, are perfect places when it comes to implementing a business. The reason is that these cities are located near universities (with abundant and high skilled labor), have a good infrastructure, low costs and relatively high quality of living. According to the study, these factors lead to an environment highly inclined to innovation.
The recommended cities are:
- Campinas (São Paulo),
- São José dos Campos (São Paulo),
- Joinville (Santa Catarina),
- Maringá (Paraná),
- Ribeirão Preto (São Paulo),
- Sorocaba (São Paulo),
- Caxias do Sul (Rio Grande do Sul),
- Londrina (Paraná),
- Uberlândia (Minas Gerais),
- Blumenau (Santa Catarina).
The Brazilian startup environment
According to the Brazilian Startups Association (ABStartups), there are about 4500 startup businesses in the Brazilian Internet economy. Of course, we know there are plenty of more. The number can be understood as an impression by one of the big startup associations in the country, mostly taken around their membership data. Following the ABStartups data, roughly 31% of those companies are located in the city of São Paulo. Belo Horizonte houses 9% of the startups and Rio de Janeiro is in 3rd place, with 8%. Following the poll data these three capital cities, (all located in the Southeastern region), account for almost half of all startups in Brazil.
Now, let’s take a look at their fields of activities.
- 5% of those startups are in the SaaS sector (web applications). Here we highlight companies such as ContaAzul, Movile and PSafe.
- Internet service companies in Brazil account for 4% of all startups, examples are Catarse, and Heap Up.
- Also 4%: education. MOOCS platforms such as Descomplica and Me Salva reach more than 30 million people.
- 2% are in the fields of communication and media. Enterprises such as Rock Content and Samba Tech are well established in this sector.
- 1% are currently in the fintech sector. Here we highlight the newest tendency in banking among Brazilians (mainly among the younger population): Nubank, a digital bank that has over 3 million customers, is valued at more than 1 billion USD and recently became a unicorn.
- There are less than 1% in the transportation field, but it receives attention for having launched the first Brazilian unicorn ever: 99, a taxi-app enterprise that has gained more clients and more visibility than its greatest rivals.
- As to business models: 21% are B2B, 15% B2C, and 11% are subscriptions.
With a population that huge, diverse and connected, there are hundreds of niches in which startups can work in. One can see successful enterprises in delivery, bakery, pets and also in the agricultural sectors. One of Brazils most important industries. One could say there is space for every type of product and service.
By seeing the potential of this sector the Brazilian government has studied to offer tax incentives, both to startups and investors. They are trying to make changes to tax legislation in order to support the Brazilian startup environment. There are also other projects aiming to promote Brazilian startups abroad.