Mineral industry has historically been the center of the State’s economy. With 44% of Brazil’s mineral production, big automotive factories such as Fiat or Mercedes-Benz and a huge agricultural potential (major producer of coffee and milk), the area that’s as big as France has all the potential to sustain its economy. Whereas Brazilians had the chance to know full employment in 2012 (4,5% unemployment rate), the recent political and economic crisis that has been happening for the last 2 years brought this rate up to 13.7% in March 2017. To find the advantage of this tragedy, one could argue that it participated in a transition illustrated by the expansion of a new entrepreneurial ecosystem : Belo Horizonte. Relying on the presence of the country’s best universities, the State’s Secretary of Economic Development, Science, Technology and Higher Education (SEDECTES) decided to tackle the issue by empowering innovation. A combination of factors changed the faith of Mineiros (inhabitants of Minas Gerais), which resulted in the emergence of a strong and famous community : the San Pedro Valley.

All the Tools for a Successful Transition

It seems so easy said nowadays but we can assume that this redeployment shouldn’t be surprising. First of all, Minas Gerais contains the largest number of Federal Universities such as UFMG (Federal University of Minas Gerais) and it is the home of the best universities in Brazil. Combined with a willingness of the government to develop entrepreneurship, the presence of big corporates such as Google’s R&D center, industrial wealth, we can claim that Minas Gerais owned an entrepreneurial powder keg in its heart : Belo Horizonte. Finally, the culture that is an essential ingredient has played a key role in this upheaval. Mineiros have the reputation to be open-minded as well as helpful towards each others, which pushed many individuals to take risky initiatives feeling surrounded by brilliant and available people. This could be viewed as the spark that lighted the powder keg through synergies between the different actors. All things considered, it resulted in successful initiatives such as SEED MG (a government-owned equity-free accelerator program) or Microsoft Innovation Center which fosters innovation for startups inside PUC Minas University. The only cultural drawback that could be seen is the reluctance of a conservative part of the population as well as the alternation in government. Nevertheless, the community acted so well that none could stop this skyrocketing ecosystem.

SEED, a Kick Start for the Ecosystem

SEED MG, which stands for Startups and Entrepreneurship Ecosystem Development, is the perfect illustration of SEDECTES’s willingness to boost the ecosystem. In 2013, the Minas Gerais State Government decided to launch an initiative to support national and international entrepreneurs to develop technology-based projects in the area. Jaderson T. Trindade, one of the co-founders, claims they aimed at developing the entrepreneurial culture and the startups ecosystem inside the State. No matter where they come from, entrepreneurs are helped being integrated to the local environment. Some administrative procedures are made easier for foreign founders, visa obtention for instance. SEED MG is now announcing the startups that will be chosen for the 5th batch. Every 6 months, 40 high-potential startups are selected to take part in the acceleration program. During this process that’s totally equity-free, entrepreneurs receive seed capital from US$ 22k to US$ 27k, benefit from various services including a coworking space, mentoring but also from incredible connections. Inside this global network, start-ups will have the potential to develop quickly in the ecosystem and scale right after. Among 112 start-ups from 11 countries accelerated, many projects have succeeded in raising funds during the acceleration program. The idea is also to create a solid network of entrepreneurs. Most of them remain deeply implicated in SEED after they leave and help redesigning the process to increase its relevance. Success stories that came out of SEED can witness for the impact of this solution. And success stories are the most influent actors in the development of local entrepreneurship. One of them is BeerOrCoffee whose co-founder Pedro Vasconcellos told us about his experience at SEED and his role afterwards. After having succeeded in the launch of a market place for coworking spaces and networking, you can nowadays often see him at SEED talking about his experience. This Brazilian success story has still a strong connection with Belo Horizonte and is not planning to move offices. SEED has without a doubt been one of the keys to the impressive growth of this entrepreneurial mindset that brings sustainibility to the ecosystem. The deep interactions and solidarity between all local actors is nowadays known as the San Pedro Valley.

Interview of BeerOrCoffee at Impact Hub by Smart Valleys

The San Pedro Valley from Joke to Fame

Any entrepreneur in Brazil knows about Belo Horizonte’s success story. Its most famous illustration is the informal San Pedro Valley that gained official recognition. A few years ago, 4 entrepreneurs that were at the basis of the ecosystem started to joke around « the San Pedro Valley ». The reason why? It was the name of their neighborhood. A calm and residential neighborhood that had nothing in particular. Actually, all this started when these entrepreneurs launched their start-ups and won several national prizes. A TechCrunch journalist relayed one of their tweets and the buzz started. A WhatsApp group dedicated to entrepreneurs of Belo Horizonte was created afterwards. That was the milestone of a very supportive community. With now more than 200 entrepreneurs on the group, it is more dynamic than ever. No matter who you are, it is very easy to reach anyone from the ecosystem regarding any kind of advice. We could even experience it ourselves when Davi Reis from WorldSense asked on the group who was available to meet us and talk about the ecosystem. A couple minutes later, we received tons of messages from people that were keen on helping us and sharing their experience. Moreover, the strength of the San Pedro valley relies on its informality and thus its accessibility. As Davi says « the only condition to be part of the San Pedro is to say you are from the San Pedro Valley ». Furthermore, they even suceeded in gaining official recognition with for instance preferential interest rates for bank loans. All in all, this community is undoubtedly the strength of Belo Horizonte’s ecosystem that many other cities should take as an example. Independently from their fame, entrepreneurs need to understand how profitable for them and the ecosystem it can be to remain available for others.

Interview of the Minas Gerais government by Smart Valleys

Success Stories for New Generations

The ecosystem contains impressive stories in its heart. Sympla, RockContent, Hotmart are all success stories that have shown their ability to keep their original identity. Well known in the whole country, they assume the role of evangelist preaching for entrepreneurship in their hometown : Belo Horizonte. Hotmart offers a platform that helps businesses go digital. They have had a tremendous growth since its creation in 2011 as they now count more than 700 000businesses using their platform on a worldwide scale. Nevertheless, it is still very easy to reach them in Belo Horizonte, no matter who you are. To sum it up, it’s those stories that not only boost the ecosystem by giving hope but mainly because of their dynamism in the San Pedro Valley. On a more concrete way, some successful entrepreneurs from Belo Horizonte even boost the next generation of start-ups through investment. That’s the case of Davi Reis that formed a group of business angels with other local founders. He assumes that the success fo the first generation of entrepreneurs will be a key for the next generations that will benefit from an amazing environment. That’s certainly the most impacting strength of the ecosystem as the community could in a way compensate the remaining lack of investment that could be seen.

Check out the interviews of some entrepreneurs of Belo Horizonte in a video directed by Smart Valley!

A Bright Future Despite Some Interrogations

It may be worthwhile to consider that Belo Horizonte’s ecosystem still has room for improvement. Its influence shouldn’t be exaggerated even if the beginning of this story is full of hope. Despite interesting initiatives regarding investment such as business angels mentionned above, there is a lack of funds available for later stage. Series A investments often come from São Paulo-based VC funds or from overseas, which makes things a little trickier. Nevertheless, some major Brazilian funds such as Inseed Investimentos or Confraparhave offices in Minas Gerais. Besides, José César Martins famous and inspiring entrepreneur from Porto Alegre says not to worry about finding investment : « If you are good, investors will find you ». This quote could be really adapted to Belo Horizonte whose ecosystem begins really shining on the country’s economy. And there are resources in the country. After the first exits, funds will be availabale. Therefore, other issues are more worrying : both political instability and bureaucracy. Litteraly no local entrepreneur to whom we asked about the weaknesses of the ecosystem didn’t tell us about the weight that administrative procedures can have on a Brazilian-based start-up. Drew Beaurline, an American entrepreneur that came there to launch Construct Latam with SEED told us that it took him not less than a year just to register his company. Furthermore, a recent event witnesses for the vulnerability of governement programs such as SEED. After the second batch, Minas Gerais swinged from Antônio Anastasia (PSDB) to Alberto Pinto Coelho Jr (PT). The new government led by the Labor Party soon showed its reluctance towards the pro-entrepreneurship measures taken by the former social-democrats. They even decided to close the SEED program from one day to another. Needless to say that SEED and its entrepreneurs, backed by the whole San Pedro Valley started demonstrating and quickly showed the advantages that it brings to the whole economy at a time when it was necessary to prepare a transition. The government gave up and kept the program running. However, this truly shows the impact that politics could have on this ecosystem. Next time, they might not give up. Finally, let’s hope that when it happens again, the ecosystem will be strong enough that no step back could be taken on this incredible entrepreneurial mindset.

Original article can be found here on Smart Valleys website. Many thanks to Smart Valley Latin America team for their insightful work on Belo Horizonte entrepreneurial ecosystem.