Social Business in Brazil

7/29/2019 Social Business in Brazil

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Julias Prompt: We would like you to write about your perspective on social impact

entrepreneurship in Brazil in general, comparing us to other markets and then using

Murilo as an good example. Just a broad view from a perspective of someone who is not

emerged on Brazil's reality.

At First Glance: Social Business in Brazil

My interest in social business was born when I met a German in his twenties who was at

Yale University as a Global Justice Fellow. Manouchehr had previously been part of the

Yunus Brainpool, put together by the Grameen founder, and he presented the concept of

commercially successful enterprise that increased the standard of living in low-income

communities. The business he had in mind was microfinance and he shared many stories

of Bangladeshi women who found dignity and happiness from income they generated by

starting micro-loan funded small businesses. In the years since that conversation, Ive

found social enterprise to often dominate the culture and media around development andphilanthropy.

In a moment of indecision about how I could align this idea with my professional goals, I

took a year of leave from University. I joined Dalberg Global Development Advisors in

Mumbai a strategic advisory firm that specializes in international development. That

time enabled me to work within talented teams to discover opportunities for enterprise in

a range of sectors such as non-formal primary education in Bangladesh, low cost

healthcare delivery in India, and the off-grid lighting market across sub-Saharan Africa.

These experiences initiated me into gaining a macro-perspective of what these new social

markets look like in various geographies as well as the organizational models and

financing channels that support it.

To get first-hand, operational insight to these for-purpose companies, I enrolled myself

into a yearlong seminar on Social Enterprise in Developing Economies offered by Bo

Hopkins and the Jackson Institute at Yale. Later that semester, I applied to intern at

Endeavor in New York for the summer. My recruiters were receptive to my search for a

social business that two of my classmates and I could visit and write a case study on.

Soon enough, I was connected to Julia Dias and Camilla Junqueira at Endeavor Brasils

Projecto Viso de Sucesso that was leading training programs for entrepreneurs with apassion for changing the socioeconomic reality at the base of the pyramid while also

generating revenue for their company. My team had spent months looking for the right

enterprise worldwide but within a few conversations we were booked on a plane to Rio

de Janeiro.


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Our focus was on an early stage agri-business.Treebosenables users to plant virtual trees

online that represent actual fruit trees that Treebos plants in small farms in Brazil. Its a

little like Farmville, but a lot more meaningful. Brazilian agriculture and supply chains

are very inefficientup to 40% of the food gets lost in transport and the farmer gets only

around 7% of the final market price. The average Brazilian also consumes only 68 of the

400 grams of fruit that the WHO recommends we eat daily. Treebos users watch their

trees grow online and can buy subscriptions that deliver fruit, sourced from these trees or

local organic farms, to their homes and offices. This creates a new source of crowdfunded

capital that subsistence farmers use to rebuild their agri-businesses using sustainable

methods. It also creates an efficient supply chain and transport system. The bottom line is

that urban users get convenient access to nutrition while farmers double their income.

It sounded like a great idea. The problem was that it was still developing and in pre-

launch phase. In many ways, the Treebos case seemed to capture trends shared by social

businesses in Brazil and elsewhere.

A Variety of Entrepreneurial Histories

Our first striking observation was the founder himself. Murilo Ferraz, 34, had seen his

career take many not entirely related turns. As a teen, he made a small fortune

organizing concerts and parties. Later, he found himselfwith a gynecologists practice. A

few years pass and hes facing Guyanese bandits in the Amazon forest as an army doctor.

Then Treebos happened.

It made for a great life story but wasnt that surprisingsocial entrepreneurs, whether inBrazil or Kenya, often pursue vastly different careers before finding their channel for

impact. I had interviewed former management consultants who now used mobile

payment platforms to sell inexpensive solar lanterns in Uganda, or read about a former

boxing coach who now worked to makefavelas safer through education financed by the

sale of professional training equipment. Brazil, we realized, had a similar diversity of

stories in its more than 20,000 social enterprises and nonprofits that operate on sales of

products or services.

Advisory Capital

In anarticlein the Stanford Social Innovation Review, Sitawis Leonardo Leteliershared

a few insights from starting Brazils first social fund: advice is not enoughmany

consulting projects for for-profit or nonprofit clients dont yield impact; capital is not

enoughmany grants do not generate impact either. His emphasis on providing a

holistic approach to mentoring and funding social enterprise seems to be shared widely in
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the country but sometimes without the necessary emphasis on legitimacy. While I had

come across successful cases in which mentorship made the difference for a fledgling

social startup seeking scale, the sheer number and pervasiveness of accelerators and

incubators seemed unique to Brazil. On our first day in Rio, Murilo pointed to an entire

office building that mostly housed such incubators many of which were startups

themselves, sometimes even competing with their mentees for VC investment! It

underscored the importance of seeking mentorship from well-established organizations

that drew from pools of entrepreneurial experience in its own staff and institutional

history. Murilo speaks fondly of his time in Projecto Viso de Sucesso and the mentors

he gained there. Perhaps Brazilian startups need to overhaul the domination of equity

seeking incubators.

Inequality to Opportunity

The other interesting facet of social enterprise in Brazil appeared to be its conversion ofsocial inequality into opportunity. Most of the for-purpose companies I had previously

observed focused on delivering an essential product or service to a low-income customer,

thereby accessing the fortune at the base of the pyramid. Academia has seen much

debate about such orientation see for example, CK Prahalads 2005 proposal

encouraging businesses to see low-income communities as customers and his colleague

Aneel Karanis response that this fortune is a mirage and social missions would be

better served by framing these communities as producers rather than consumers. While

even social businesses that view the poor as customers at times experiment with cross-

subsidy and utilize differences in income of their customers to drive their purpose, in

Brazil Ive noticed most social entrepreneurship focus primarily on income generationopportunities and inclusive growth. Treebos itself is one of these: it capitalizes on the

inequality between the premium, organic eating urban consumer and the rural subsistence

farmer to provide value to both.

Engaging the Elephant in the Economy

Spending three weeks in Brazil afforded us the opportunity to watch what (social)

business as usual is like and it appeared that its success often came despite the state, not

because of it.

In Brazil, taxes seem to be more certain than death. The lack of appropriate legal

definitions in Brazil imposes challenges to companies that align business values and

organizational culture with social sector raison dtre. Treebos , for example, is required

to pay close to a staggering 42% of revenues in taxes across different cost heads. Getting

registered as a nonprofit is a procedural nightmare. Entrepreneurs must be hard pressed to
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think of creative ways in which to preserve their social mission from mandated

contributions to the state. I imagine that the recent success of B-corporation legislation in

the United States would be especially meaningful in the political economy of Brazil. But

its not just tax reform or legal identity that could make for important points of

interaction between government and social business.

While it is crucial for the poor to increase incomes (and this is often supported by state

sponsored welfare programs), development is ultimately driven by consumption of

better education, housing, nutrition, healthcare, or energy things that increase ones

capabilities. There is a strong argument to be made for promoting better markets at the

base of the pyramid to achieve development outcomes. The Brazilian states strong

commitments to welfare and government service delivery could have potential for much

greater innovation and efficiency by encouraging private for-purpose enterprises. In some

parts of the world (including higher education in Brazil), this has emerged in the form of

voucher delivery or benefit transfer. The state provides qualifying citizens withvouchers redeemable at private providers of essential services. A former classmate of

mine who now works at Nyaya Health celebrates the success Nyaya found in partnering

with the government and taking over operations of public hospitals and rural outposts in

Nepal. Developing rural and neglected urban markets, encouraging private, for-purpose

providers (while also enforcing their accountability) could be an important step forward

in improving efficacy of governmental welfare programs and the states development

agenda. One of the most straightforward ways to begin such partnerships could be the

establishment of the Brazilian states own impact investment and grant funds where

transparency and accountability would be key values but innovation and delivery

expertise would be freed from public policy deliberations.

The Personal Network

Entrepreneurs in emerging markets often decry the networks of patronage and lack of

transparency that plague them. Having been born and raised in India, this was all too

familiar to me. While most Brazilians I met shared similar resentment, I couldnt help

noticing how there also emerged an organic, people driven network of connections that

distributed pivotal opportunities to many of them. Word of mouth and informal networks

of acquaintance worked faster than broad, open announcements from media, industry

associations, orother institutions. Thats how lawyers in downtown Rio would come to

partner with a doctor in Guarapari upon being introduced by a professional business

coach the grapevine enabled creative partnerships between professionals from

dissimilar spaces as they pooled together a currency of contacts. Similarly, opportunities

to go to Silicon Valley sponsored by one entrepreneurial services firm would get shared

widely even by its competitor. The tendency to reach into personal networks rather than a


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formal, web based recruiting platform would help a startup in Espirito Santo to quickly

find an Art major in New Haven, Connecticut, willing to code pro-bono during a pre-

launch design emergency. Perhaps it was only mistranslation but Murilo always used the

word partner to refer to employees. The propensity to react promptly on proposals

made in casual conversation seemed very different from the culture of intensive

recruiting practices I had noticed in start ups elsewhere. Perhaps the personal nature of

business in Brazil is captured well in the convention of email signatures that end with

beijos orabraos.

Three weeks of exploring one startup isnt nearly enough experience to understand a

diverse and rapidly growing sector in an unfamiliar economy. But it does begin to shed

light on how a global idea of alleviating poverty through profits and capitalism gets

localized by particular social, professional, and political cultures. As social

entrepreneurship quickly gains audience in mainstream media, studying Treebos and the

social sector in Brazil brings us a little closer to separating the signal from the noise.

Abhinav Nayar is a student of Ethics, Politics & Economics at Yale University and a

Partner at Treebos.com. He may be reached at [email protected].

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Social Business in Brazil