With a population of over 215 million inhabitants, the 8th largest economy in the world and its 5th largest territory, it is understandable that Brazilian startups have traditionally focused on their domestic market to grow their revenues and market share.
Home to 23 unicorns, in VC terms, one can say that the country is one of the few in the world where a startup can go “from zero to a billion” without having to understand cultural differences, adapt to foreign regulations, integrate with different payment infrastructures and so on. For us at Kfund, Brazil has already become home to two of our investments and is a country we have been increasingly focused on, both for new investments and for business development for portfolio companies headquartered in other geographies.
Yet, as the country’s tech ecosystem matures and local talent evolves, Brazilian entrepreneurs are increasingly aiming to compete in international markets. Founders are finding that the solutions developed for the country’s complex, fragmented and inefficient local market also resonate in countries around the world.
There are several models one can follow when expanding abroad. While this is not intended to be an exhaustive list, these are some of the most usual and successfully adopted models we find.
This strategy is more common in places like Israel or Colombia, where the local market is small, and the startup knows, from scratch, that it will eventually outgrow its home country during its scaling phase.
In Brazil, Pipefy is a good example of this strategy, having developed, since its early days, a product that required little adaptation to local markets and cultures.
Having previously worked at an Israeli accelerator, the company’s founder had been exposed to the Israeli “global first” mindset and was one of the first Brazilian founders to take this approach, which ended up rendering difficulties in convincing initial investors and in hiring qualified talent with a global mindset.
But Pipefy’s amazing success has shown local and international VC funds that this strategy can yield fruits, making it easier for future founders seeking venture capital to fund startups with global ambitions. These investors, which have channeled US$1.7bn in VC funding to the country in 2023 (after a record US$10.2bn in 2021), are more and more seeking these global-minded Brazilian companies.
Another interesting strategy is that of expanding in accordance with the presence and demand of global clients.
Probably, the best-known example of this strategy is Wellhub (formerly known as Gympass). The startup had multinational companies as clients in Brazil and they asked it to render the same services to their operations in other countries. It began with Mexico, four years after the company’s foundation, and then to other Latin American countries. After having validated its business model in Latin America, the startup then expanded to Europe and only later to the US.
This is a strategy we, at Kfund, find particularly accretive. By connecting our portfolio companies with our corporate LPs, Kfund aims to help the startups scale using the corporates as a channel, partnering with them as clients, partners and/or distributors and leveraging on their distribution channels to grow internationally in a more efficient and assertive fashion.
Finally, having multinational companies as clients also ease international expansion to the extent that the startup can showcase logos that resonate in its newly targeted market. This can severely help GTM and accelerate sales cycles.
Just as it happens with the startup’s initial product, the framework of running low-cost tests to see what sticks also works for international expansion.
A good example of this strategy is Stefanini, the Brazilian IT company. Stefanini began expanding internationally in 1995, setting up a very small office in Argentina. The low-cost operation allowed it to have time to test product, market, positioning, etc., increasing its commitment only after finding a real and feasible opportunity. Since then, the company made similar moves throughout Latin America and in the US, and, more recently, launched an international acquisition strategy. The typical “fire bullets then cannonballs” strategy taught by Jim Collins.
CI&T is known to have adopted a similar playbook, after an unsuccessful initial launch in the US in 2006 – 18 years later, the US is the country’s largest market.
Here, some comments are warranted:
Here, Europe emerges as a great alternative. Although having a bit smaller GDP and being more heterogeneous than the US, costs in Europe are much lower and competition is less fierce, making the region a good one for the startup to learn its way into international expansion while generating revenues in hard currency and getting logos that will further resonate internationally.
Regardless of the model chosen, it’s important to be fully committed. Expanding internationally involves building relationships, performing adaptations in the company’s culture and in its products and expanding the reach of its GTM channels, making it a job for at least one of the startup’s partners. This is not a task to be easily delegated. Founders living abroad and personally conducting the first hires and the first sales are of the essence in the building of a successful international story.
With a population of over 215 million inhabitants, the 8th largest economy in the world and its 5th largest territory, it is understandable that Brazilian startups have traditionally focused on their domestic market to grow their revenues and market share.
Home to 23 unicorns, in VC terms, one can say that the country is one of the few in the world where a startup can go “from zero to a billion” without having to understand cultural differences, adapt to foreign regulations, integrate with different payment infrastructures and so on. For us at Kfund, Brazil has already become home to two of our investments and is a country we have been increasingly focused on, both for new investments and for business development for portfolio companies headquartered in other geographies.
Yet, as the country’s tech ecosystem matures and local talent evolves, Brazilian entrepreneurs are increasingly aiming to compete in international markets. Founders are finding that the solutions developed for the country’s complex, fragmented and inefficient local market also resonate in countries around the world.
There are several models one can follow when expanding abroad. While this is not intended to be an exhaustive list, these are some of the most usual and successfully adopted models we find.
This strategy is more common in places like Israel or Colombia, where the local market is small, and the startup knows, from scratch, that it will eventually outgrow its home country during its scaling phase.
In Brazil, Pipefy is a good example of this strategy, having developed, since its early days, a product that required little adaptation to local markets and cultures.
Having previously worked at an Israeli accelerator, the company’s founder had been exposed to the Israeli “global first” mindset and was one of the first Brazilian founders to take this approach, which ended up rendering difficulties in convincing initial investors and in hiring qualified talent with a global mindset.
But Pipefy’s amazing success has shown local and international VC funds that this strategy can yield fruits, making it easier for future founders seeking venture capital to fund startups with global ambitions. These investors, which have channeled US$1.7bn in VC funding to the country in 2023 (after a record US$10.2bn in 2021), are more and more seeking these global-minded Brazilian companies.
Another interesting strategy is that of expanding in accordance with the presence and demand of global clients.
Probably, the best-known example of this strategy is Wellhub (formerly known as Gympass). The startup had multinational companies as clients in Brazil and they asked it to render the same services to their operations in other countries. It began with Mexico, four years after the company’s foundation, and then to other Latin American countries. After having validated its business model in Latin America, the startup then expanded to Europe and only later to the US.
This is a strategy we, at Kfund, find particularly accretive. By connecting our portfolio companies with our corporate LPs, Kfund aims to help the startups scale using the corporates as a channel, partnering with them as clients, partners and/or distributors and leveraging on their distribution channels to grow internationally in a more efficient and assertive fashion.
Finally, having multinational companies as clients also ease international expansion to the extent that the startup can showcase logos that resonate in its newly targeted market. This can severely help GTM and accelerate sales cycles.
Just as it happens with the startup’s initial product, the framework of running low-cost tests to see what sticks also works for international expansion.
A good example of this strategy is Stefanini, the Brazilian IT company. Stefanini began expanding internationally in 1995, setting up a very small office in Argentina. The low-cost operation allowed it to have time to test product, market, positioning, etc., increasing its commitment only after finding a real and feasible opportunity. Since then, the company made similar moves throughout Latin America and in the US, and, more recently, launched an international acquisition strategy. The typical “fire bullets then cannonballs” strategy taught by Jim Collins.
CI&T is known to have adopted a similar playbook, after an unsuccessful initial launch in the US in 2006 – 18 years later, the US is the country’s largest market.
Here, some comments are warranted:
Here, Europe emerges as a great alternative. Although having a bit smaller GDP and being more heterogeneous than the US, costs in Europe are much lower and competition is less fierce, making the region a good one for the startup to learn its way into international expansion while generating revenues in hard currency and getting logos that will further resonate internationally.
Regardless of the model chosen, it’s important to be fully committed. Expanding internationally involves building relationships, performing adaptations in the company’s culture and in its products and expanding the reach of its GTM channels, making it a job for at least one of the startup’s partners. This is not a task to be easily delegated. Founders living abroad and personally conducting the first hires and the first sales are of the essence in the building of a successful international story.
