SOME NOTES ON ENTREPRENEURSHIP IN BRAZIL

4th Quarter – October 2010

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NewsletterCleantech Healthcare IT

Editorial

Joaquim Sérvulo RodriguesCEOEspírito Santo Ventures

Innovative companies create wealth.

Portugal is just one of the many countries

that have been experiencing significant

challenges in terms of competitiveness. These

challenges are exacerbated with stagnant

economic growth and sizable unemployment.

Although the way out of these situations

encompasses many dimensions, one is

unavoidable: the growing importance of

innovative companies in both jobs and wealth

creation.

Wealth cannot be distributed if it is not first

created.

Innovative companies create wealth.

Innovative companies are the ones that find

new and better ways to address significant

problems and, in the process, can grow

at breathtaking speeds, increasing sales,

creating value and employing not only

significant numbers of people but also highly

qualified people. This is of tremendous value

to society as a whole and, in particular, to the

regions in which these companies operate.

The media, politicians and economic

commentators are increasingly conscious

of that fact and, through them, so is society

at large. Venture capital investing is, in this

regard, a two-sided coin.

On one side, we strive to identify, invest in

and support the most promising companies

in order to maximize the return on our

investments. This is the visible side of our

activity.

On the flip side, we know that by doing that

well we are contributing significantly to

structural economic recovery by helping

foster the most innovative companies.

In this edition of our quarterly newsletter,

we introduce you to one of our Portuguese

portfolio companies which is proof of that

development. Outsystems, a Portuguese IT

company, founded by Paulo Rosado some

eight years ago, revolutionizes the way IT

projects are dealt with at mid- and large-sized

corporations. It has been considered one of

the most visionary IT companies in the world

by Gartner and other IT gurus.

Clients from different parts of the world are

increasingly adopting Outsystems’ “Agile”

platform as a means to be able to deliver IT

projects on budget and on time and, at the

same time, getting rid of the obsolescence

problem, which is an inherent characteristic

of the way IT systems are deployed and

maintained nowadays. This very positive

development has turned Outsystems into a

company that, today, employs over 100 highly

qualified professionals, and generates almost

half of its relevant sales volume from abroad.

Across the Atlantic, Brazil is a market which

we also believe is likely to produce many

investment opportunities in the near future.

To give us a glimpse of those opportunities,

we invited René Fernandes from the

“Centro de Empreendedorismo Getúlio

Vargas” to share his experience as to how

the entrepreneurial mind-set is evolving in

modern Brazil.

02 Espírito Santo Ventures - Newsletter - 4th Quarter - October 2010

4th Quarter - October 2010 - Newsletter - Espírito Santo Ventures 03

The statement we commonly hear

is “I like what you are telling me, but

it sounds too good to be true!” We often

find in our sales process that people cannot

understand how a company like OutSystems

has managed to create such a broad and

unique product, display so many success cases

and solve, in one go, a myriad of pervasive

problems that have plagued the $800 billion IT

industry for years.

The bottom line, it just sounds

“too good to be true.”

The Big Idea

OutSystems’ founders had previously worked

in building and delivering web applications for

enterprises in intranet and extranet contexts.

More often than not, those projects did not

go well. We discovered it was a rare occasion

when we could deliver any project on time

and on budget. Projects tended to drag on

through many months and when they were

finally delivered, the business had moved on

and the application no longer fulfilled their core

needs. After many unsuccessful attempts to

improve the requirements gathering process,

we decided to look into the problem from a

different perspective.

Our assumption was that enterprise

processes supported by web applications are

constantly changing. So when building such

an application we needed to be extremely

fast and we needed to be flexible enough to

correct any bad assumptions made during the

requirements gathering phase. In order to

do that we looked into what it would take to

make changing software fast and inexpensive,

effectively removing the cost of “feature creep”.

At OutSystems we are changing the way companies look at custom enterprise software development and are providing a new business dynamic where IT takes a strategic role in driving business innovation.

Paulo RosadoCEO OutSystems


OutSystems Introduces

the Agile Platform

The result was the construction of a

development platform that could automate

the process of software change in an easy,

inexpensive, robust and fast way. The first

version of the Agile Platform was released

in 2002 and paved the way for today’s very

robust application delivery and management

platform.

Our customers use the Agile Platform to

address common information technology

challenges such as:

• Implementation of front-end applications

(web sites, intranets, portals, CRMs, etc) that

integrate with existing systems

• Deployment of complex business processes

that link multiple departments

• Replacement of old legacy software systems

that have reached the end of life

• Modernization of old software by refreshing

what they have with a fresh new web 2.0

User Interface

• Companion to SAP implementations

avoiding the need to customize SAP

and assuring that upgrades can still be

performed

• The platform is specially suited

OutSystems Agile Platform

for enterprise projects using Agile

methodologies where constant interaction

between IT and Business is desired.

Today the Agile Platform has over

12,540 installations worldwide and

in 2009 was recognized with a

Codie Award for the Best Software

Development Solution and a

Jolt Award for Enterprise Tools

Productivity Award. This year SD

Times recognized OutSystems and

the Agile Platform in their Top 100

software companies.

The Platform has also been reviewed across

analyst and end user communities. Gartner

recognized OutSystems as the most visionary

company in Magic Quadrant for Application

Infrastructure for SOA Composite Application

projects. Numerous industry experts

have reviewed the platform. Justin James

of TechRepublic titled his second, in depth

review, the “IDE of my Dreams”. Just recently,

OutSystems’ Dutch customer VanAmeyde

was recognized as having the best example

of a SOA BPM solution by the OMG and other

industry veterans – all built with the Agile

Platform.

First Customers

In the first years, OutSystems focused on

Mobile Telecoms in Europe. At the time,

the telecom industry was very competitive

and IT departments were subject to an

unusual amount of pressure to provide

constant innovation and change. These early

customers brought with them high scalability

and availability requirements and a zoo of

legacy systems that required fast integration

requirements. From 2001 to 2004, the Agile

Platform was enhanced with new capabilities

to address the needs of these early customers

and now is used to deliver extremely high

performance web applications such as

TravelZoo’s Fly.com and Via Verde’s Customer

Portal.

Today our customers cite the following seven

reasons as to why they selected and continue

to use the Agile Platform:

1 Fast release time – our customers

experience projects delivered 5 times faster

than when using traditional .Net or Java

development.


2 Predictable outcome – delivery is not only

fast but on-time and on-budget even in

adverse situations.

3 Keeping the business and IT aligned – our

customers deliver exactly what the business

wants and respond fast to change requests

4 High Productivity – results in a decreased

project backlog

5 Architecture Fit – simplify the reuse of

legacy systems (e.g. ERPs)

6 Full control and management - more

visibility and control over the money you are

spending and the return on your investment

7 Easy to learn and operate – it is easy

to adopt by IT and provides flexibility in

team allocation and knowledge retention

/ transfer. It takes 2 weeks for a new staff

member to get added to an OutSystems

team when compared to 6 months for Java

or .Net team.

Serving Customers Worldwide,

in an Agile Way

To effectively support a growing worldwide

customer base, OutSystems’ has addressed

the challenge of delivering applications using

offshore development teams. Today we are

able to deliver fast and predictable solutions

using our unique process based approach

that applies a combination of near-shore and

off-shore resources supported by our Agile

collaboration and management tools. These

processes and tools provide a scalable delivery

capability without having to incur large upfront

offshore setup costs while overcoming the

problem of knowledge transfer and team

turnover.

With 155 customers across 16

different industries OutSystems has

continued to grow and expand its

customer base around the world. To

support the growing customer base

in 2008 OutSystems revamped its

channel partner program and today

has 59 channel partners that provide

a range of services to support the

expanding customer base.

Expansion and Growth

OutSystems has aggressively embraced

the Web 2.0 world and invested in scaling

the business through providing prospective

customers the ability to self educate and

prefer the Agile Platform using OutSystems’

web site. Part of this strategy included the

development of our Agile Professional Center

to file requests and streamline the buying

process. These investments are proving to be

successful with OutSystems receiving more

and more incoming requests from all over the

world.

To support our growing community

OutSystems continues to invest in programs

to nurture developers and today has an active

network of users discussing topics online. In

addition, the OutSystems Academy provides

access to a complete set of training courses to

master our development tools and approach.

There are over 550 certified agile professionals

supporting our growing customer base. With

increased market reach, streamlined sales

processes and strong partner community the

company is poised to continue growing and

capturing market share around the globe.

Some of OutSystems clientsAgile Platform Interface


According to data from the 2008 Global

Entrepreneurship Monitor (GEM),

released by SEBRAE (a Brazilian Service to

Support Micro and Small Businesses), Brazil

ranks 13th in terms of entrepreneurship out

of a total of 37 countries. The GEM report

also mentions that the rate of “total early-

stage entrepreneurial activity” (TEA) in Brazil

was 12.02, which means that for every 100

Brazilians, 12 held some kind of entrepreneurial

activity. Ahead of Brazil in this ranking are

countries like the Dominican Republic (20.4%),

Peru (25.6%), Mexico (13.1%), Chile (13.1%) and

Argentina (16, 5%), where a large amount of

informal economic activity may be found.

Also according to data from SEBRAE,

Brazil has over fifteen million

entrepreneurs that launched their

own businesses either driven by

opportunity or by necessity. Until

2008, the latter was the most

frequent.

In 1934, the Austrian economist Joseph

Schumpeter identified the “Entrepreneur”

as the central character of economic

development and introduced him as a

disruptor of the existing economic order, by

Since colonial times, Brazil has always produced entrepreneurs. Brazilians have a long tradition of proactively seeking solutions to their problems and continue to do so today. Since the 80’s, large companies have been drastically reducing employee numbers and entrepreneurship has emerged as a means of people re-entering the job market and creating opportunities for many to come every day to the productive age.

SOME NOTES ON ENTREPRENEURSHIP IN BRAZIL

René FernandesCentro de Empreendedorismo Getúlio Vargas

introducing new products and services, new

organizational systems, and utilization of new

resources and material. In 2009, the number

of opportunity driven ventures surpassed those

that were necessity driven. Brazil entered a

new era characterized by a higher degree of

technological innovation and greater growth

potential, as can be witnessed by recent

examples.

In 2007, “Entrepreneur” magazine published

a report about businessmen that were born

as a result of business plan competition

programmes. Among them stands Rodrigo

Veloso, the winner of a business plan

competition at FGV, called the “Latin Moot

Corp” (www.latinmootcorp.org). Rodrigo was

later able to implement his plan thanks to

contacts that he made initially at the São

Paulo leg of the competition and then at the

global final at the University of Texas at Austin.

Soon after arriving at the contest, Rodrigo met

several investors that subsequently introduced

him to other venture capitalists and angel

investors. After a little more than two years

in business, his company O.N.E. - One Natural

Experience, was already making several million

dollars exporting coconut water, açaí juice and

a few other natural products to the USA, and

was eventually sold to PEPSI.

Another example is the world renowned

“Buscapé”, a leading shopping comparison

website in Latin America, founded in 1999, that

received venture capital investment, bought

other companies and was sold to the South

African media group Naspers in 2009 for

US$374M.

In summary, over the past years there have

been many cases of successful companies

created through opportunity. These companies

will help Brazil to evolve, thus stimulating the

right environment fostering entrepreneurship:

incubators are being developed,

schools are changing their curricula,

many venture capital funds are

starting to operate in the country,

the IPO market is growing and

large companies are looking at new

investment opportunities.

There are still some regulatory issues,

but these are being addressed and thus

the country is now better equipped to

accommodate this new generation eager to

become entrepreneurs.


YDreams

(July 23, 2010)

YDreams announced

the availability of YVision Closed-Beta, a

general purpose programming framework,

to enable fast prototyping and development

of multimedia applications using image

processing, rendering, physics, augmented

reality, artificial intelligence and others.

YVision Closed-Beta integrates the knowledge

that YDreams has been acquiring for almost

a decade. Currently reserved for a number of

restricted users, the platform will be made

available to the developer community very

soon.

Multiwave

(September 01, 2010)

Multiwave announced the opening of its new

North American headquarters, in San Jose,

California. This office will improve Multiwave’s

ability to support its fast growing customer

base, and will be reinforced by the presence

of the company’s Vice-President for Sales and

Engineering Directors.

Recent News

Coreworks


Coreworks and Xilinx recently announced

at the IBC2000 conference, the launch of

a range of audio codecs supporting Dolby

Digital, AAC+ for multimedia distribution

infrastructure to the home and mobile, Dolby

E for content providers and an MPEG-1 Layer

II for professional distribution and in-Field

Programmable Gate Arrays (FPGAs).

Coreworks technology allows these codecs to

be implemented in a single FPGA, eliminating

the need for DSP farms and reducing power

consumption, costs and increasing the device

density.

The codecs have been available since October

1st, 2010.

Nanosolar

(June 24, 2010)

The Nanosolar Utility Panel (the industry’s

first solar power panel specifically designed

for utility-scale deployment) made its first

public debut in June at Intersolar Europe 2010

in Munich, Germany. Enjoying a premier display

area in Blitzstrom’s exhibit booth, Nanosolar

showcased its utility-scale panel as well as a

new video depicting footage of a Nanosolar

Utility Panel installation in Germany.


Outsystems

(August 05, 2010)

The OutSystems Agile

Platform was selected as a Top 20 corporate

application in August 2010 by GetApp.com, the

business software search engine.

The Agile Platform is a complete solution to

develop, deploy, manage and change enterprise

web applications. Thousands of corporate

IT professionals have already downloaded

the free Community Edition to speed-up

and simplify the delivery of new enterprise

applications.

This month, the Agile Platform ranked #4 as

the most downloaded corporate software

application. In 2009, the Agile Platform won the

Codie Award for Best Software Development

Solution, and the Dr.Dobbs Jolt Productivity

Award for Enterprise Tools.

Safety-Pay


SafetyPay was featured in the August 2010

issue of The Nilson Report, the world’s most

renowned source of news and proprietary

research on consumer payment systems.

The article in the Nilson Report entitled

“SafetyPay Web Merchant Payments” explains

how SafetyPay facilitates transactions

between suppliers and banks through an

online banking platform. With a leader article

on the front page, The Nilson Report directs

the reader to the main article which, among

other information, announces the launch of

SafetyPay’s first supplier pilot test in the U.S.

Spectrum Bridge

(July 12, 2010)

Spectrum Bridge

announced a relationship with GE Energy to

offer a new industrial data networking solution

for use in mission critical applications in the

Utility, Oil & Gas, Water/Wastewater and Heavy

Industrial markets.

Deployment will be based on GE’s state-of-

the-art MDS SD2 radio, using the licensed

218-219 MHz Interactive Video & Data Service

(IVDS) spectrum, auctioned in 1994. The users

of these applications have been struggling to

fulfill their growing spectrum requirements

and having the option to utilize 218-219 MHz

spectrum provides an ideal solution.

Multiple 218-219 MHz licenses are currently

available for immediate purchase or lease

on SpecEx.com (the spectrum database

managed by Spectrum Bridge) and cover 20%

of the USA’s population in 6 of the top 10 NFL

markets, including Chicago, Washington DC,

Philadelphia and Miami. Furthermore, SpecEx.

com also has AMTS spectrum and 220 MHz

spectrum listed for near nationwide spectrum

coverage for the 217-222 MHz range.

A123 Systems


A123 Systems announced

the grand opening of

the largest lithium-ion automotive battery

production facility in North America. The

new plant in Livonia, Michigan, is expected

to expand A123’s manufacturing capabilities

by up to 600MW. hours per year when fully

operational, contributing to the company’s plan

to expand global final cell annual assembly

capacity to more than 760MW. hours by the

end of 2011. The opening of the Livonia factory

comes just over a year after A123 was awarded

a $249 million grant from the U.S. Department

of Energy (DOE) as part of the American

Recovery and Reinvestment Act to help the

company execute its strategy to ramp up U.S.

manufacturing capabilities to meet increasing,

market-driven demand for its innovative

technologies.

Petra Solar

(September 09,

2010)

Sandia National Laboratories, a government-

owned/contractor operated (GOCO) facility,

has awarded a contract to Petra Solar’s Solar

Energy Grid Integration Systems (SEGIS) as

part of a program from the U.S. Department

of Solar Energy Technologies. As a result,

federal funding granted to this cleantech

company that pioneered the smart solar-on-a-

pole technology, now amounts to $5.8 million.

With this contract, Petra Solar will extend

its development of electric-grid stabilization,

micro-grid and smart grid technologies thereby

enabling utilities to manage the massive

increase in renewable energy deployment

which is forecast due to the increasing need for

alternatives to fossil fuels.

Economy & Finance

SOME NOTES ON ENTREPRENEURSHIP IN BRAZIL