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The Brazilian venture capital ecosystem and its innovative reactions to the current crisis Added in 5/26/2020

The spread of the Covid-19 pandemic substantially changed the scenario for the global and Brazilian economies. The size and persistence of the shock will depend on how fast countries succeed in the fight against the virus, the exit of the lockdown period, and on how successful the economic policy responses to offset the impact of the virus will be.

Reducing impact is the critical point and seeking normality (considering risks and safety) should be the final objective. For this goal, technology and creativity must play important roles for the resumption of growth in economies.

The Brazilian venture capital ecosystem flourished in the past years. Today, we have funds, accelerators, angels, incubators, corporate and government initiatives and associations in a universe of approximately 13 thousand startups. 

The current crisis, despite its widespread negative consequences, offers an unique opportunity to spark innovation within many sectors that have been directly impacted by the pandemic - healthcare, work lifestyles, education and food security, for example.

In Brazil, several entrepreneurs are already rising to the challenge and helping address the situation. Some examples follow below:

- Magnamed: one of the few healthcare startups in the country that produces lung ventilators signed a $61.2 million purchase agreement with the Brazilian government for 6500 pulmonary respirators;

- Hi Technologies: a Brazilian healthtech startup which specializes in laboratory exam equipment, is producing a batch of diagnose tests for Covid-19,  which drastically increased the demand for prevention and detection kits. The tests provide results in 15-minutes and will be sold at affordable prices;

- Cargo X: A Brazilian logistics startup that has zeroed its marketing investments planned for 2020 to create a BRL 30 million ($5.7 million) fund to help small carriers and fleet owners in the country amid the coronavirus pandemic. With the money, the startup will pay upfront 70% of the freight for essential products, such as food and medicine items, at the time of loading, as a way to help these small companies maintain their operations;

- A Brazilian startup focused on the distribution of digital content, live streams, and on-demand videos for companies, is helping corporations maintain operations remotely during the period of social isolation.

- Descomplica: A Brazilian edtech startup originally focused on preparatory content for college admission exams, this year expanded its offering to include graduate programs and saw its demand increase substantially, despite the virus outbreak and social distancing restrictions.

In a nutshell, Brazilian startup founders have already had to deal with numerous recessions, political volatility and other crises in the past few years but, despite these adverse circumstances, have consistently proven their ability to innovate and in the process also create value for society and investors. Real startup entrepreneurs think long-term, and within the current challenging scenario numerous opportunities are arising to accelerate the country´s digital and technological transformation. Companies that embrace these opportunities should get out of the crisis stronger, and we expect once again that the Brazilian venture capital ecosystem will prove invaluable in spurring innovation and helping society overcome this difficult moment, further increasing its size and strengthening economic role moving forward.

Gabriela Medina is Strategic Planning, Venture Capital and Impact Investment consultant at ABVCAP


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