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Written by Claudia Fan Munce, IBM Venture Capital
On an island off the coast of Southern Brazil is the resort town of Florianópolis. "Floropolis," as it is nicknamed, has been called the Silicon Valley of Brazil—with beaches. Floropolis is one of the rising centers of technology innovation in Latin America. One Florianópolis technology company with global ambitions is Hoplon Infotainment. Founded in 2000, Hoplon started as a pioneer in Latin America's online gaming industry and is now targeting 2010 for the global launch of Taikodom, a "Massive Social Game," as Hoplon CEO Tarquinio Teles refers to it, which can simultaneously handle thousands of on-line gamers.
Hoplon is developing this platform to also include middleware and cutting-edge information systems that can handle thousands of users simultaneously for commercial and corporate applications, online entertainment and complex simulation. While playing Taikodom is free, the more than 15,000 regular players are spending US$25 a month in Taikodom's online virtual universe of gaming products. Taikodom was officially launched in 2008, and today it is the first game in the world running on an IBM gameframe—a hybrid server that combines the computing power of the CELL chip with the processing capabilities of a System Z mainframe.
That a Brazilian startup like Hoplon is getting attention and interest from around the world shouldn't surprise anyone. There are several reasons consumer-facing companies like Hoplon are thriving in Latin America. Countries like Brazil, once hampered by hyperinflation, now have strong fiscal policies; the price of development for software startups continues to decrease; Latin America's university systems are incubating thousands of startups, and a growing middle class with money in their pockets is injecting money into the economy. For the growing middle class, cars, computers and consumer electronics are increasingly within reach.
Add to this the fact that Rio de Janeiro was recently chosen by the International Olympic Committee to host the 2016 Summer Olympics (in addition to cities across Brazil hosting the 2014 World Cup), all point to a growing optimism that Latin America is emerging as a player on the world stage.
Here are a few insights and trends that are shaping the current investment environment in the technology world:
Public and Government Sector
Across the globe—and Latin America is no exception—the digital world is increasingly merging with the physical world.
Many Latin American governments have instituted economic stimulus packages to help spur the economy. Since economic stimulus funding is targeting job creation, spending will drive targeted investments down to the city level. For much of the Americas, the primary focus areas for stimulus spending will be in areas like transportation, infrastructure build-out and green technologies. These new projects will undoubtedly be "smarter" and give individuals and communities more control over how they view such things as electric usage, traffic and transportation. Mexico City, for example, is one of the most congested cities in the world. Traffic not only causes major economic and societal challenges, it also creates environmental issues as well. As new infrastructure projects are built, engineers are looking beyond the traditional solutions of steel, asphalt and concrete to a mix of technologies such as cameras, sensors and analytics.
Mobile Web and Social Media
Computational power is being put into objects that until recently we wouldn't have thought possible—phones, cameras, cars, appliances, roadways, power lines, and even natural systems like livestock and rivers. The fascination with social media isn't lost on Latin America. Mobile phones and social media sites are connecting consumers at an astonishing pace. In fact, in a study from ComScore in 2008, 85 percent of Brazilians age 15 and older who accessed the Internet from home or work visit a social networking site. And while Brazil may lead the pack, the same study indicated that Chile and Columbia were not far behind. Orkut, owned by Google, is fully managed and operated in Belo Horizonte, Brazil. Social media has quickly evolved from a fad to a business tool, prompting the continuing need for the development of solutions to support that growing ecosystem. This, in turn, will continue to create opportunities for hardware, software and services. For Brazil, the 2014 World Cup and the 2016 Olympics will further increase investment in Brazilian telecom operators as they move to next-generation networks to handle increased data needs.
Analytics
Stimulus and economic recovery investments around the world are accelerating the development and deployment of smarter systems such as intelligent utility grids, electronic medical records, improved transportation systems and food traceability. These smarter systems require advanced analytics to turn data into predictive intelligence, which enable these new digital infrastructures to improve the speed and quality of decision making. While business analytics isn't new, there is a renaissance going on in the area of analytics, as systems become more intelligent. Analytics can help make sense of the world's digital knowledge and pulse, and help turn mountains of data into intelligence.
Caution And Promise
While stimulus plans are in place in many Latin American governments, inflation, taxation and incentives for new company development are always a concern. Startups will continue to face the challenge of access to financing.
Global companies continue to look at emerging markets as a source for revenue growth. Just as reported by the 2009 International Business Report on mergers and acquisitions by Grant Thornton, although the current tightening of lending policy and an uncertain economic outlook is clearly impacting transaction volumes globally, privately held businesses are retaining a surprisingly robust attitude to deals over the next three years. The report goes on to say that there has actually been an increase in the proportion of businesses planning to transact cross-border, suggesting that international mergers and acquisitions remain on the agenda a key strategic tool to drive growth.
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