Startup Ecosystem in Porto Alegre

It’s funny to write about the startup ecosystem in Porto Alegre (POA), the city I was born and where I spent 30 years of my life. Why is it funny? Well, a true startup ecosystem takes some time to be built – and if you asked a gaúcho (that’s how we call ourselves) 10 years ago, what is a startup, most of us would think it’s a new sandwich from McDonalds.

But that changed. Or maybe it didn’t change at all – it just naturally evolved, since I was one of those guys that would ask for a McStartup 10 years ago. The thing is: an embryonic ecosystem already existed in 2006 (and even earlier) although unnoticed by most of us. Yet today we have a startup ecosystem in POA, a promising one I might say.

One of the main lessons I learned while studying this phenomenon during my classes at Wasabi Ventures Academy (@wasabiacademy) is that a true startup ecosystem usually begins with…startups, and that’s probably why we are having such a late development in this regard. Brazil is a country with high entrepreneurship rates, but our entrepreneurs are mostly dedicated to traditional business – in the near past no one wanted to deal with high risks, especially around here.

Why? We have a complex tax system, a burdensome labor law, an inefficient corporations registry, a lengthy intellectual property registration procedure and a financial system with high interest rates. In Brazil, +50% of companies close before 4 years of existence. Therefore, to find an entrepreneur ready to deal with that, plus the technological risk intrinsic to a startup enterprise, was something extremely rare.

Startup funding opportunities were also scarce in the 2000s Brazil, especially here, away from cities like São Paulo and Rio de Janeiro (POA is located in the extreme south). Even when investors showed up, the risks cited above still generated negative effects on their decisions - angel and seed investment are topics that recently entered in our daily conversations.

As for the government, the efforts we see today toward the development of startup ecosystems, gathering entrepreneurs, investors, universities and pubic representatives around a common goal, should’ve started earlier. Our laws and regulations that created legal mechanisms to improve those relations and bring more legal certainty are also recent, and that is another reason for the lack of governmental support in the last decade.

However, things changed. In the last 5 years startups arose in every corner of our city and nearby regions. Although most of the local success cases we can think of are e-commerce ones, mostly based on models and technology widely known outside Brazil, new inspired players are slowly shaping our ecosystem - entrepreneurs that are developing their own technology and forging their own path in the market. Companies like Cliever (first Brazilian 3D printer), Appus (predictive people analytics) and Superplayer (music streaming) are examples of this new era of Porto Alegre startups.

Universities are now fully aware of their important intermediary role in this ecosystem, even though they are still seeking a perfect model. Besides offering courses designed specifically to members of this ecosystem, most incubators we have today are located within academic ground. We cannot forget our technological parks, places that attract tech enterprises with several advantages, managed by universities that are interested in forging links between their alumni, startups and established companies.

Investment and growth support players are also more present – angel investors and associations, independent accelerators and even VC firms are showing their faces around here. Although we still lack a continuous successful exits record, investing in startups is being demystified and Brazilian investors are slowly losing their risk allergy. The arrival of foreign firms is also something that is helping to improve the investment flow in this scenario.

Even the government is showing an active behavior in this regard – Porto Alegre is one of a few Brazilian cities that created a Public Investing company to invest in nascent enterprises. Nonetheless, our municipal government is also using this moment to offer tax benefits to technology-based companies. Another important mechanism that is being used by our State government is a non-reimbursable financial support to accredited incubators, in order to increase the number o incubated startups.

At last, there is a recent move in our ecosystem that might change things drastically (in a good way). A German organization responsible for the establishment of a heath cluster called Medical Valley, with branches in Erlange (DE), Boston (US) and Shanghai (CN), just selected Porto Alegre to be another branch of such initiative. In this magnificent project, which counts with the collaboration of every important player in a startup ecosystem (startups, government, associations, universities, investors, established companies), a health tech ecosystem will be created in our city. This will be an interesting and important experience, with potential to include us in the startup ecosystem world map.

I see a bright future ahead for POA startup scene, let’s wait (or act) and see.