A brief story of the ecosystem evolution and how it is indicative of its future

Written by Guilherme Lima and Vitor Pajaro

In the last two decades, the entrepreneurial environment has emerged, flourished, and yielded results in Brazil. This is thanks to different agents in the ecosystem, developed mainly by individuals and the private sector with a long-term vision. This movement has allowed for a prosperous environment of talent and value creation to thrive. If in the early 2000s Brazilian entrepreneurs played street soccer with a ball made of socks, today we can say that we are already competing in the Champions League while polishing the necessary foundations to dispute the World Cup.

The basis of an entrepreneurial ecosystem, as the name suggests, is its community of talent. From founders and collaborators with experience in high-growth companies who build organizations and startups, and entrepreneurial capital to investors, professional managers, and individuals who drive and promote the construction of these emerging companies.

Along with this, in the same environment, there are several other agents - such as innovation hubs and spaces, accelerators, government, advisors, etc. - key to making connections and value creation between investors and entrepreneurs happen.

As the ecosystem matures and the first successful cases occur through the distribution of value from successful exits and the materialization of startup building knowledge. Founders end up becoming investors and mentors of the new generation of startups or decide to create new companies, becoming the so-called serial entrepreneurs. Likewise, these first-generation company collaborators use their experience to found new companies, creating what we call technology company employee mafias or mafia-tech entrepreneur profiles.

These connections generate loops that feed back into each other, creating a cycle of prosperity for the ecosystem, as visually presented in the image below.

Venture Capital Prosperity Flywheel

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Along such lines, this prosperity inspires and attracts new entrepreneurs, investors, and agents to further foster this driving force.

The graph below demonstrates well the cascading effect of the value generation Flywheel maturation cycle promotes in a startup ecosystem. The example demonstrates how Paulo Veras who co-founded 99 (Uber Brazilian competitor) back in 2012 continued to support with investments, mentoring, and inspiration, for several other initiatives that emerged in the subsequent years.

The purpose of this article is to share a bit of our vision, as a fund manager specialized in Brazil, on how history has supported the development of the entrepreneurial capital environment in Brazil, how we have reached such maturity, and what we can expect for the next years.

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