Big-business Brazil taps into its young entrepreneurs

The Genesis Institute in Rio de Janeiro looks nothing like the high-tech offices that grew amid the boom in Silicon Valley.

But this incubator, where about two dozen start-ups are divided into tiny offices with shared bathrooms down the hall, has helped young entrepreneurs create operational software for bus companies, new equipment for maintaining oil and gas pipelines, and robotics technology to measure environmental damage associated with petroleum exploration.

In doing so, the Genesis Institute is helping to grow a new class of technological entrepreneurs in Brazil.

The news about Brazil's booming economy is dominated by big business, foreign investment, a huge consumer appetite, and the prospects of oil. But Brazil has also blazed forward as an entrepreneurial leader. And while entrepreneurs here face a bureaucracy that could deter the most determined go-getter, they are also being nurtured by a government that sees them as a key engine of job growth. The government's Financing Agency for Projects & Studies (FINEP) has launched its largest project ever to support start-ups.

"We are betting this will have a transformative effect on the country," says Eduardo Costa, FINEP's innovation chief.

Creating job creators

Brazil is, in many ways, poised to transform. The country has led the region in R&D, investing in it the recommended 1 percent of GDP, according to the Organization for Economic Cooperation and Development (OECD). A 2007 Global Entrepreneurship Monitor shows Brazil as a leading entrepreneurial country, with 13 of 100 residents involved in a start-up.

And its incubator network has grown from 136 in 2000 to 400 today. Most are affiliated with universities, says Ary Plonski, head of the Brazilian Association of Science Parks and Business Incubators. "The idea is to create new opportunities for students so they don't leave university fighting for a job, but being job creators," Mr. Plonski says.

That's what Paulo Lerner, an industrial engineer, and Andre Averbug, an MBA graduate, did. The two friends could have joined an established company. Instead, in 2004, they set out to build a public phone for buses to benefit commuters. During a visit to a garage to test the product, they saw how complicated managing a bus fleet is, and began developing software to help managers track vehicles.

Their firm, PV Inova, is at the Genesis Institute at the Pontifícia Universidade Católica in Rio de Janeiro, which gives subsidized access to legal advice and logo designers. "If they are stuck ... they are next to other entrepreneurs, or professors and laboratories in the university, to help them," says Julia Zardo, a professor at the Genesis Institute.

Mr. Averbug says Brazil's culture of entrepreneurism is changing. "Friends who are graduating from universities today don't just think of getting a job at a big company, they think about opening their own business," he says. "A few years ago, Brazil was seen as a commodity country. I think Brazil now is being looked at as a good country [in which] to do business."

Brazil's entrepreneurial spirit

International development agencies see business incubators as a spur to technology and entrepreneurship. "This can be a tool for development for jobs creation, and as a way to maintain the engine of economic growth," says Valerie D'Costa, program manager of Infodev, a partnership of international aid organizations housed at the World Bank.

Infodev runs incubator programs in 86 countries that have generated more than 220,000 jobs since 2002. The entrepreneurs they support, she says, "are harnessing technology with a view to making a scalable business out of it."

Brazil has been a success, something Mr. Costa sees rooted in an entrepreneurial spirit grown from racial and cultural diversity and the economic chaos of the 1980s. "When people had to survive with inflation, they had to adapt," he says.

Still, starting a business here takes 120 days, double the average for Latin American and Caribbean countries and far worse than the average 13 days for OECD countries, according to the International Finance Corp. Entrepreneurs also face a complex tax system and poor funding.

But this year FINEP began a program called PRIME, which gives about $65,000 to start-ups, selected by 18 incubators, focused on innovation. The group seeks to help 10,000 companies over four years.

The idea is not to just create new products, but new jobs. Each job generated by a new company, Costa says, can generate 10 indirect ones. The Genesis Institute alone has graduated 47 companies that have created 887 jobs. Infodev surveys show that 75 percent of companies that "graduate" from incubators are still operating three years later.