Experiencing Brazil

On our first official business day in Rio, we visited two completely different companies: BNDES, the state-owned development bank, and Peixe Urbano, the Brazilian Groupon.

Welcome to the government..

During the 90’s, a lot of Brazilian companies got privatized. However, the government secretly still owns the power. One of the most important levers for the government is BNDES, the Brazilian development bank. Its asset base is over 300bn USD. In comparison, the total nominal GDP of Brazil is ~2.5 trillion USD. So in a way, they own over 10% of the economy. In order to not get too powerful, they officially limit their investments to not more than 30% of a single company.

However, in addition to BNDES, the government has also significant influence via the pension funds of their national companies such as Banco do Brazil and Petrobras. Therefore, even if most of the companies are officially privatized, the government is still pulling the strings.

The funds of the BNDES come from two sources: 1) a general revenue tax for Brazilian companies, 2) funding from the national bank (although this was only significant during the financial crisis in order to fund the Brazilian economy with liquidity).

This opens room for a lot of questions. First of all, if their main source is from a general tax, who makes sure that they reach their goals and do their work? As it turned out, their success measures are not really well developed. So basically they can do whatever they want (as long as Dilma doesn’t disapprove it).

Furthermore, one could question their rules of investment. They gave us the example of one stadium for the World Cup, which they didn’t finance, because it didn’t meet their requirements. Although this seems like good governance, I would question if this is always the case. If the government really wants to push an investment, they will probably get the cheap money from BNDES. I really doubt if the directors at BNDES will say no, if Dilma is behind an idea.

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The opposite world – Entrepreneurship in Brazil!

In the afternoon, we visited “Peixe Urbano”, the Brazilian Groupon. It was founded by a Stanford alum in 2010 and is one of the most successful start-ups in Brazil.

Peixe Urbano means literally “urban fish” 🙂

Their vision is to combine different platforms such as Groupon, Yelp etc. to become the one stop shop for everything you want to do when you go out. Therefore, their logo and slogan is not tied to daily deals but is called “exploring the city”.

We met with Julio Vasconcellos, one of the founders and a Stanford MBA alum, and talked a lot about entrepreneurship in Brazil.

Key takeaways:

• Internet Market in Brazil: population: ~200m, internet access: ~75m, actually active internet users: ~50m, thereof active Peixe Urbano users: ~15m. So in a way, they will reach a ceiling for growth very soon. Therefore, the diversification into other offers except daily deals is very important for them.

• Talent: Good technical skills are very scars in Brazil. They can’t grow was much as they want to because of the lack of talent.

• Equity salary: People are not used to get paid with equity. Therefore, their salary costs in the beginning was higher than expected.

• Competition: They got a lot of followers once their business model was proven. In his view, the main reasons why they’re still the market leader is probably their strong brand and their ability to scale very quickly.

• Silicon Valley: Even though he travels to the silicon valley at least twice a year, it’s still very difficult to keep up with what’s happening there. However, being closer to the main hotspot of entrepreneurship and new ideas is still a key differentiating factor for them compared to other start-ups in Brazil. They’re actually one of the first start-ups in Brazil with an American entrepreneurial culture.

General advice for entrepreneurs:

• “Through yourself into the action”: Go where the main things are happening! When he was at the GSB, he literally did everything around start-ups. Fully immerse yourself in whatever you’re passionate about!

• People, people, people: Probably their most important hire was their “HR and Recruiting” manager. His main advice is to hire a lot, but to cut out low performers very fast as well. They often solved a problem just by “throwing more people at it”.

• Scale and delegation: As soon as your business starts growing you realize that you cannot do everything yourself. So delegate everything you can to someone who is better than in you at this specific task. Focus on those things that only you can do (e.g. strategy, key hiring decisions, communication etc.)

• Acquisitions: Be clear why you buy a company – people or assets. If you buy it because of the assets, then if it comes down to hard decisions, don’t care about the people, take the assets. However, if you buy a company because of the people, then your main job is to keep them, not the assets (e.g. don’t care about using their technology going forward.. shot down their website, take the people and go). Everything else gets really messy..

• Data: Try to collect as much data as possible from an early stage on. It allows you to improve your product and your communication tremendously.

• Legislation: Law changes are always a hidden risk, because it can turn the whole industry upside down in a way you’d never expect it.

The meeting was really insightful and inspiring. However, it started a discussion among the trip members about if copying an existing platform is ok or not. Some thoughts..

• It’s part of the innovation process: Entrepreneurship is about ideas and innovation. Getting inspired by other people is part of this process. A lot of good inventions developed out of coping other people’s work.

• Making money: Where it gets blurry is when someone takes an idea, brings it to another country, quickly grows it to a nice size and then tries to sell it to, well, let’s say, less well informed companies, before the original player takes the country over. There are a couple of examples where people made millions with this approach and left behind poor investors with an unsuccessful business model. If you sell something knowingly which doesn’t have any value, that’s where you cross the line in my view.

• Taking it to the next level: However, there are also examples like Peixe Urbano, who not just take an existing approach, but also try to develop it further. You will never be successful by just blindly coping other peoples work. In order to stay on top of the game, you have to be innovative yourself.

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One last thing I have to mention about Peixe Urbano is that their office is incredible! Two top floors in one of the beautiful skyscrapers in the middle of the city :)! Not bad! It definitely had the same entrepreneurial vibe when we entered the floor.. but the building itself seemed more like big business than “start-up garage”. And here’s their view:

On Sunday we explored Rio in more detail: we visited one of the favelas, the Christ statue and a samba school 🙂

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The other side of Rio: the favelas..

The basic safety rule in Rio is “don’t go up any hill!” Everywhere else the rich build their mansions on the hillside with the most beautiful views. Not here in Rio. You can see the chaotic and mostly illegal sprawling favelas everywhere.

Unfortunately, I didn’t bring my camera along. So I post one of the million online pictures here.. It’s actually a really nice location! In the middle of the city with great views to the Christ statue 🙂 This property could be worth millions if it were not a favela!!

For more impressions check out those two videos (thanks to Fernando):

Most of the music video is shot somewhere in the north of Brazil. But the favela scenes are from the one we visited 🙂 They even built a statue of him at the exact place where he did the video.. although it’s a really funny looking statue 😉

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Two things really impressed me when we were walking through the favela:

• Architecture: When I was travelling in Africa and Asia a lot of the shacks were made out of wood, waste or other crazy materials. Here, all the houses were actually made out of bricks. Maybe that was because this is one of the “nicer” favelas. But I was really impressed with the architecture quality of the houses! Although I have to confess that there is absolutely no order or logical structure 😉

• Modern dreams: At one point we passed a house with an open door. So we took a short, secret glimps of the interior. And what did we see: a huge flat screen TV 😉 In the middle of one of the poorest areas of Rio.. But I have to admit that I saw similar things in Africa and Asia as well.. As soon as people have a little bit of spare money, they usually want to buy “luxury” things such as mobile phones and TV’s.. Although it might seem crazy to us, but for them they are really desirable, because they symbolize the difference between the poor and the others.

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For lunch we went to an “all you can eat” restaurant with meat as specialty 😉 The waiters basically walk around with huge spits full of meat.. Exactly my taste 😉 Although I have to admit that I completely fell asleep after this incredible lunch.. 😀

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View from the top

In the afternoon, we went to see one of the highlights of Rio: the Christ statue!

And I have to say that the view is really breathtaking!!!

Unfortunately, it got really foggy after a couple of minutes at the top. So I post an official picture here instead..

Rio has a very interesting landscape of hills and beaches. It’s really difficult to understand the structure of the city. On the other hand, this supported the development of very distinct neighborhoods, such as Copacabana, Ipanema or Botafogo. Sao Paolo, in contrast, looks more like a huge carpet of houses..

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Let’s dance!

And finally, we visited one of the famous samba schools in Rio 🙂 It was really cool watching all the girls dancing! And the music is just amazing!!! I LOVE the drums!! It immediately get you moving 😉

(property of the picture owned to A.Y.)
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Although I have to say that I was a bit shocked by the outfits of those ladies.. I mean they all looked sexy and wow, they can really dance!! However, in our country only females in the horizontal industry would wear costumes like that.. But I guess different countries are different..

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Tomorrow we have our next meetings in Rio. Looking forward to learn more about this exciting country :)!!

I’m finally back in a country which values the one and only really sport on earth: soccer!

As any real European, I love the Euro and World Cup! Although Switzerland was never particularly successful, luckily our neighbors around us can easily fill the gap. Nothing is better than a final between Germany or Italy. Or watching the Spanish team score one goal after the other.. Incredible!!

For my American friends: you don’t have to understand this passion 😉 Just imagine it would be American Football or maybe even better – Rose Bowl 😉

In order to understand the current status of the preparations, we met with the CEO of the local organizing committee. Because I worked at a large event as well (www.stgallen-symposium.org > 1’000 participants, 3 days.. although this is of course not even close to the size of the World Cup), I was naturally excited about this meeting.

But before we talk about the organization, let’s talk about “Fuleco” – the mascot.

(is it only me or has Ronaldo gained weight since he stopped playing soccer professionally?!)

Well.. so “Fuleco” is apparently a Three-banded Armadillo (>check out Wikipedia). It’s a special subspecies of Armadillos and only exists in Brazil. In addition to this fact, it also has the soccer related capability of rolling itself into a ball 😉

It’s a really weird but somehow cute animal 😉

I don’t really know what the name “Fuleco” means and Google Translate didn’t give me any answer either. However it was decided in an online voting among “Zuzeco” and “Amijubi”, so at least it has some democratic legitimation 😉

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The meeting..

Who: Ricardo Trade (or as the real insiders call him “Ricci Trade” ;))

Key takeaways:

• Infrastructure needs: They have to balance short-term World Cup needs with real long-term demand. For example, in his view the holiday rule isn’t that bad because it helps coping with the short-term demand without building too much infrastructure.

  However, he acknowledges that it is a huge additional workload to have games in 12 cities instead of just a couple. However, this was a clear wish of the government in order to spread the benefits of the cup to more regions. But who needs a huge stadium in the middle of the Amazon?!

• Municipalities: The local government officially builds and runs the infrastructure, including the stadiums. So the relationship with them is key, because they have no direct power over them. They are a private club in the end.

• Privatization: Is strongly for privatized infrastructure, such as airports and roads, because they need efficient organizations who can deliver the promised performance and can be hold accountable.

• Knowledge transfer: The invited event managers from all over the world to teach them how to organize a successful event of this scale. A really smart move in my view! There are not many events of this size in the world. And at the same time, the fundamentals usually are the same. So I really value their openness of asking other people for their experience.

• FIFA: It seems that the relationship between FIFA and the organizing country is pretty clear: FIFA gets all the revenue and the country get all the cost 🙁 Seems like a really good business model.. at least for FIFA 😉

And of course the final question: Will Brazil be ready for the World Cup??

Of course, Mr. Trade was fully convinced that they will be ready in time. However, it will be a very close call 😉 But as usual in Brazil, everything will work out in the end 😉

When asked what his concerns are he said: “my only concern is the Brazilian soccer team ;)!”

So let’s keep our fingers crossed – for Brazil and of course the team 😉