Tech Roundup, Aug. 2, 2019 | How much is SoftBank investing in Brazil?


You’re reading The Brazilian Report‘s weekly tech roundup, a digest of the most important news about technology and innovation in Brazil. This week’s topics: SoftBank invests in Banco Inter. Artificial Intelligence in Brazil. Uber’s challenges. Rio, the most Instagrammable city in the world. Happy reading!

SoftBank pouring money into Brazil

Investment behemoth SoftBank invested

in yet another Brazilian startup earlier this week, offering fintech Banco Inter USD 198 million for an 8-percent stake. The fintech competes in the same market as what was reportedly <a href="">SoftBank’s first choice</a>, Nubank. Both startups are online platforms that provide banking services with no annual fees. Banco Inter, now <a href="">valued</a> at USD 700 million, saw its shares spike 17.5 percent after website <em>Brazil Journal</em> and <em>Bloomberg</em> published that SoftBank had invested BRL 1 billion for a 10-percent stake.</p> <div class="flourish-embed" data-src="visualisation/561569"></div><script src=""></script> <p>This is the second Brazilian fintech in which SoftBank has invested, the other being loan platform Creditas. The multinational, which focuses on late-stage investment rounds, has fingers in many tech pies. Its investments pushed both <a href="">e-commerce app</a> Loggi and gym network <a href="">Gympass</a> to unicorn status (for startups valued at more than USD 1 billion). The company also invests heavily in American coworking startup WeWork, which has opened 27 locations in Brazil in the past two years.</p> <p>SoftBank launched its Innovation Fund for Latin America in March. With USD 5 billion in venture capital to be applied in Brazil, Argentina, and Colombia, the investments show no signs of stopping. A few days ago, the company announced its second round of the Vision Fund in the neat sum of USD 100 billion, to be used worldwide.&nbsp;</p> <h4>A look into SoftBank&#8217;s history</h4> <p>Founded as a telecom company in 1981, SoftBank has emerged as a global leader in startup investment. The Vision Fund is backed in part by Japan’s three megabanks—MUFG, Mizuho, and SMFG—tech giants Microsoft and Apple, and sovereign wealth funds from Asia and the Middle East and North Africa.</p> <p>According to the Global Entrepreneurship Market, Brazil is one of the most entrepreneurial countries in the world, and this is largely pushed by necessity. Over 40 percent of adults have run a business, and one in four plan to open one in the next three years. Despite this, <a href="">many investors are wary of entering the Brazilian market</a>, both due to perceived risk and bureaucratic headaches.</p> <p>Entering early in the development of tech in the country positions SoftBank to be quite the power player in the coming decades, especially given their propensity to seek at least 20-percent stakes in their investments.&nbsp;</p> <hr class="wp-block-separator"/> <h2>Is Brazil ready for technological innovation?</h2> <p>According to the State of the Connected Consumer report by software company Salesforce, 94 percent of Brazilians feel that it is very important for businesses to treat them like an individual in order to close a deal. This is in line with the average for Latin America (93 percent) but much higher than European counterparts. Of the European countries surveyed, Germany is the one which most values individualized treatment, with 87 percent regarding it very important to closing a deal.&nbsp;</p> <p>In some ways, this isn’t surprising, as <a href="">Brazilians place a high value on interpersonal relationships in the workplace</a>. It does, however, raise questions about the use of technology in business, especially artificial intelligence, and machine learning. Though AI has improved dramatically in the last decade, the average system is unlikely to be able to pass itself off as human. Nothing proves this more than our obsession with the Turing test, developed by Alex Turing in 1950, which gauges computer intelligence by its ability to be indistinguishable from human interaction.</p> <p>With few exceptions, we know when we’re talking to bots. So where does this leave the use of AI in Brazil? Though it’s somewhat contradictory, the same report showed that Brazilian consumers are more likely than Europeans to believe that AI could make a positive impact. While only half of European respondents believe that AI could improve customer experience, 74 percent of Brazilians reckoned it could.</p> <p>It’s important to remember that hybrid systems exist. At this point, AI can effectively register user data and demographics, provide answers to basic questions, and redirect clients to the proper resources. These small but vital changes streamline the consumer experience but it doesn’t close the deal. Machine learning promises to develop affordable systems that adapt to tone of voice or the consumer’s age, but that level of individualization is currently best left to human talent.</p> <hr class="wp-block-separator"/> <h2>Uber update reveals challenges&nbsp;</h2> <p>Uber’s recent update warns users to verify that they are entering the correct vehicle. The notification, which pops up every time a ride is ordered, reads “Always confirm your trip information” and provides details on the name and license plate of the intended driver.</p> <p>There are a number of theories as to why this reminder is needed. The first that comes to mind is violence and kidnapping, but it seems a stretch to say the company—which has been operating since 2014 in the country home to 17 of the world’s 50 most dangerous cities (according to World Atlas)—would only just now think of this solution. A more likely scenario is a loss of revenue due to confusion and the infamous <em>jeitinho brasileiro</em>, or<a href=""> the &#8220;Brazilian way</a>.&#8221;</p> <p>Taxi drivers, especially those in big cities such as Rio de Janeiro, frequently protest Uber and harbor a general resentment towards the company and its user base. Anyone who has traveled through Rio’s airports knows that there are specially designated pick-up spots for those using the app. This facilitates the encounter between driver and rider, but it also serves to protect against<a href=""> attacks from frustrated taxis</a>. It also limits the practice of taxis or private cars tricking users into getting in the car in order to poach clientele from the competition.</p> <p>Brazil’s unemployment only <a href="">recently dropped to 12 percent</a>, signaling a slow recovery from a crisis that nearly doubled the unemployed population between 2014 and 2018. Many workers started working for Uber out of desperation, which drove down the cost of rides and devastated the taxi industry. The recent updates are an attempt to regulate an ecosystem that flourished in unstable conditions.</p> <p>Over the years, Uber has faced a number of challenges, from drivers offering their services offline to apps that <a href="">artificially prolong routes</a> to increase prices. With every issue comes a new update, superficial points system, or partnership with local authorities. But between ever-tightening regulations, skepticism from labor authorities, and demands from drivers, it is clear that the honeymoon period is ending, and eventually the startup will have to face the music.</p> <hr class="wp-block-separator"/> <h2>Jair Bolsonaro signs decree and creates loophole</h2> <p>President Jair Bolsonaro signed a decree eliminating a portion of a 2006 law that requires businesses to inform the Science, Technology, and Innovation Ministry about the development of technological research and innovation. While the obligation to report still stands, Bolsonaro neglected to provide a time frame in which an entity must send an electronic update, effectively leaving a loophole for businesses to delay reporting.&nbsp;</p> <hr class="wp-block-separator"/> <h2>Rio named the most Instagrammable UNESCO site</h2> <p>Rio de Janeiro, which will be UNESCO’s first World Capital of Architecture, also holds the title of the most Instagrammable site. This determination is based on the number of posts tagged in the location, with the Brazilian city coming in first by a wide margin, having nearly three times as many posts as the runner-up, the Hungarian capital of Budapest.&nbsp;</p> <p>The United Nations selects world heritage sites based on cultural, historical or scientific significance, and Rio has been a UNESCO world heritage site since 2012. Specific locations in the city have also gained this status, such as the <a href="">Valongo Wharf</a>, the world’s biggest slave port, which was rediscovered during renovations for the 2016 Olympics.&nbsp;</p> <hr class="wp-block-separator"/> <h2>Cloud water in schools</h2> <p>In partnership with the Health Ministry, the Science, Technology, and Innovation Ministry will launch a research program to evaluate the impact of clean water on health in public schools. The program will install Watergen machines, which liquidate particles in the air and filter them to produce drinkable water. Hydration affects several levels of both somatic and cognitive function, including energy and focus, making the expected outcome a positive one for public health. The project will last 18 months, with the additional aim to educate the population on water quality.&nbsp;

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Juliana Costa

Juliana is a growth strategist and contributor to The Brazilian Report