The city of Sao Paulo doesn't have an entrepreneurial culture like that which exists in San Francisco and New York. But the Startup Mansion, located next to an art gallery down a quaint one-way street in a tech-heavy district of Brazil's largest city, is like a little slice of Silicon Valley in South America.
Started by Daniel Hatkoff, the founder of smartphone insurance service Pitzi, the sprawling structure—at various times, it was a nightclub and a clothing store—houses six startups. Today, the building is a combination of a co-working space and a hacker house, with beanbag chairs, a ping-pong table, and lots of coders and entrepreneurs working intently at their laptops.
Hatkoff isn't actually Brazilian; a Los Angeles native, he came to Brazil in 2010 while working at a private equity fund that was thinking about setting up shop in the country. He decided to stay. In the U.S., he tells me during my visit to the Startup Mansion, people can usually name at least a couple companies they love. But in Brazil, people have a hard time doing the same. "Brazil is very good at selling shit, but bad at everything afterwards," he says.
He noticed that people complained the most about breaking their phones and not knowing what steps to take next—a surprise considering the fact that Brazil has the largest mobile phone market in Latin America. So Hatkoff started Pitzi, a club where members pay a monthly fee to get their cell phone replaced when it breaks (Pitzi takes care of refurbishment of broken phones and sends repaired ones to customers).
The company now offers its services in 16 states throughout the country, but Hatkoff's expansion woes illustrate the problems associated with launching a new business in Brazil, which has a rapidly growing middle class but also staggering rates of poverty and wealth (In 2009, 11.68 million people in the country lived in extreme poverty, according to the 2011 World Economic Outlook).
"There are lots of people living in areas of risk," says Hatkoff. Pitzi has had trouble expanding into Rio de Janeiro, for example, because there's a high probability that a truck entering a favela or other poor neighborhood will be robbed. When they need to enter those areas, they are accompanied by police to ensure safety, which limits the number of times per week Pitzi can reach certain places.
In Rio, it's also easy to sue a company, according to Hatkoff. "There's no cost for a consumer to open a suit, the companies present a lawyer, the consumer doesn't. Companies like Groupon and Baby [a Diapers.com-like site for Brazil] have had a lot of issues around that."
Hatkoff has dealt with distinctly Brazilian problems in the Startup Mansion as well. Government officials will stop by at random times to make sure that the space is complying with local laws, which are often arbitrary (one example: glass panels are supposed to have a yellow strip to prevent people from crashing into them). Hatkoff says he's also had to pay bribes on a couple occasions to ensure that the building's water stays turned on.
While all of the companies in the Startup Mansion—including Nina Bruni, an customizable jewelry site; and EnglishUp, an online English language learning program—are growing, Sao Paulo is still only taking small steps towards becoming a tech hub. "There's no Brazilian Mark Zuckerberg," Hatkoff says. All of the companies in the Startup Mansion, however, are moving out in the near future so that Pitzi can expand.
Ariel Schwartz reported from Brazil as a fellow with the International Reporting Project (IRP).