In the southernmost tip of Brazil, the state of Rio Grande do Sul is investing in the evolution of its technology scene and positioning itself as the first point of entry for international investors interested in South American tech companies.
With a population of just over 11 million and key industries such as agriculture and manufacturing, the state has been developing its tech sector in its capital, Porto Alegre, as well other areas across its territory, over the last two decades. Now, the public and private sectors and academia are seeking to boost the number of local startups and develop the industry as a whole, aiming to become one of Brazil’s main tech hubs.
Unlike its neighbor, Santa Catarina, where the technology industry is thriving, Rio Grande do Sul has faced various structural hurdles in creating a growing tech innovation industry, including historically high unemployment and crime rates. These issues have meant that large companies have largely shied away from the state and many professionals have sought opportunities elsewhere.
Rio Grande do Sul’s startup scene is still in its infancy, with approximately 300 companies mapped, according to the RS Tech report, carried out by the government alongside Instituto Caldeira. Of these, 78% were established in the last five years, mostly focusing on areas such as health, agriculture, biotechnology, and education.
According to state governor Eduardo Leite, the focus has been on promoting change, first through investments in areas such as better policing and reducing public debt, then by adopting a strategic positioning for investments in technology and innovation, reinforcing public policies to support innovation, including increased funding through grants.
“We are changing the state’s own perception so that it can sell itself to the world,” Leite said in an interview with Forbes.
The government of Rio Grande do Sul is “fully cognizant” that fostering the tech sector is the only way to drive sustainable economic growth, Leite noted. “Even within traditional industries, if companies don’t incorporate a strong element of innovation and technology, they will not be able to compete globally.”
“Similarly, if we cannot steer our population towards the tech economy, we will be completely unable to develop ourselves as a state, so this agenda is urgent for us,” the governor added.
However, Leite noted that the state is not starting from scratch as far as developing a tech scene is concerned and that the local ecosystem has plenty to offer. Most tech ecosystems in Brazil are aiming for international exposure, and the governor argues Rio Grande do Sul can be a platform for those wanting to do business beyond Brazil.
“We have skilled [tech] labor at a lower cost than other large urban centers such as São Paulo. From a regional point of view, we are culturally and geographically closer to Argentina, Uruguay, and Chile, therefore offering investors and companies the opportunity to interact between Portuguese and Spanish-speaking economies,” Leite pointed out.
A mindset change
The innovation and technology environment in Rio Grande do Sul, particularly in Porto Alegre, has evolved over the past 20 years as scientific and technological parks connected to universities emerged, like Tecnopuc, Tecnosinos, Valetec, and others. The development of the innovation ecosystem then moved beyond the confines of these parks.
Around 2017-2018, movements like Pacto Alegre emerged, uniting major universities and technology parks to foster joint development actions within the territory of Porto Alegre and the surrounding region. This led to the creation of organizations like Instituto Caldeira, launched in 2022, and the development of innovative territories, with entrepreneurship and innovation hubs set up in favelas across the state capital.
The state government then requested a project similar to Pacto Alegre for the entire state, leading to the creation of Inova RS. Through partnerships with civil society, businesses, academia, and the government, the project aimed to enhance the innovation ecosystem across eight regions throughout the state.
Companies beyond the capital also started to engage with the pro-innovation wave, often within the same industry sector: “We started to share information about digital transformation and what startups could bring to the table, and learn how to orchestrate these elements,” said Daniel Randon, chief executive at transportation equipment and systems firm RandonCorp, headquartered in Caxias do Sul, 78 miles from the state capital.
“Leaders have started to realize it was not possible to evolve in isolation and that a mindset change was needed,” the executive noted.
As one of the main technological parks of Rio Grande do Sul, Tecnopuc is moving to a new strategic phase, in tandem with the new wave of the ecosystem’s development, according to the superintendent for innovation and development at the organization, Jorge Audy.
“In the past, the focus was on attracting large international R&D investments, but the current priority has shifted towards generating startups in strategic fields of development,” Audy noted, referring to areas such as artificial intelligence, health, education, agribusiness, finance, electric mobility, retail, and creative industries.
Home to 600 startups, Tecnopuc aims to create an additional 1,000 new technology-based ventures in the next decade. However, challenges lie ahead, particularly in the health and biotechnology sectors: “There is a need for more risk investments, faster public approval processes, and a stable legal framework,” Audy said.
Despite these hurdles, Audy highlighted a promising future in areas like green hydrogen, gene therapies, and semiconductors. The latter field is strategic for tech development in Rio Grande do Sul, as the state hosts CEITEC, the state-owned semiconductor company. This company, once deemed non-strategic by former president Jair Bolsonaro and slated for sale, is now resuming its activities and strategic plan under the current federal administration.
Creating success stories
Entrepreneurship and innovation center Instituto Caldeira emerged as a representative of Rio Grande do Sul’s new phase of tech development amid the Covid-19 pandemic, from a site that once housed Renner, then a textiles firm and currently a retail company. Named after the original energy-generating boilers (caldeiras) brought from Scotland, the institute aims to “inject new energy into the state through technology and innovation,” according to chief executive Pedro Valério.
“Caldeira has developed quite fast over the last couple of years since we launched, and we strongly believe in trust and collaboration among businesses, including those within the same sector, to foster innovation and community growth for Porto Alegre and the state as a whole,” Valério said.
The institute has rapidly grown, filling its 22,000 square meters in less than three years, and plans to expand further by acquiring an additional 33,000 square meters of old industrial space through new commitments from local family offices. “We aim to create an international festival atmosphere and serve as a permanent festival venue, fostering innovation through serendipitous connections,” Valério noted.
Located in the Fourth District area of Porto Alegre, the institute has started to impact the local economy, Valério said, with new restaurants and bars opening nearby and a significant reduction in petty crimes in the area. It has also facilitated partnerships between traditional institutions and the tech community, providing students from public schools with skills in tech and entrepreneurship, and connecting them with job opportunities within the institute’s network of companies.
Despite the recent wave of development Porto Alegre and the state as a whole have experienced, Valério acknowledges the challenges of being outside major economic hubs and the ongoing efforts to promote the institute and the region nationally and internationally. “We hope to share more success stories of transformed lives and the attraction of startups and traditional companies to our region in the future,” he said.
On the other hand, the intensification of the work organizations have undertaken in recent years is bearing fruit, particularly when it comes to investors. According to Valério, connections with relevant organizations from the Brazilian innovation scene, such as Cubo, the country’s oldest entrepreneurship hub, have yielded significant results.
“When Cubo connected us with folks like [corporate venture capital fund and accelerator focused on sustainability] Oxygea, and we were suddenly presented with the opportunity to have our startups showcase their work to them, you can tell things are really happening,” Caldeira’s head noted. “Not so long ago, that kind of interaction seemed unimaginable, unreachable even.”
For Oxygea’s chief executive, Artur Faria, there is a need to bring more investors to the region and create a structure that can support the growth of startups. “It’s not easy to do that, though. We aim to visit and be close to every innovation ecosystem in Brazil, but as a rule, investors rarely leave São Paulo to see what else is going on,” he noted.
“Build it, and they will come”
Having an event as an opportunity for networking and collaboration, bringing together decision-makers and influencers, was seen as a missing piece of the puzzle in building a tech environment attractive enough for both local and international investors and entrepreneurs.
Porto Alegre then became the stage for South Summit, a conference originally from Madrid brought to Brazil by a collaborative effort of local stakeholders led by Eduardo Lorea, chief executive of consulting firm Numerik. Previously, the group had tried to attract events like Web Summit, which ultimately chose Rio de Janeiro for its conference set to take place in April.
South Summit was then executed by José Renato Hopf, an entrepreneur from Rio Grande do Sul who became a local success story after selling his payments business GetNet to Santander for 1.1 billion reais in 2014.
“The event has a global nature, and its role is showcasing the innovation ecosystem in Brazil and the Latin American region,” Hopf pointed out about the gathering, which saw over 23,000 people flocking to Porto Alegre for a 3-day event. The conference takes place in the city’s old harbor site, which is set to be revitalized to become an entertainment and events area through a public-private partnership.
In total, some 3,000 startups, 900 investors, and 140 investment funds (the equivalent of $213 billion in funds under management) have participated in the event. However, Faria, from Oxygea, noted there is a need to qualify the event by focusing on the quality of attendees rather than on size.
“The event has already attracted players from Brazil and Latin America, but there is still a need to bring in more investors from other countries,” he noted. “Also, I could see a lot of Series A investors, but not a lot of funds signing growth-stage checks, which you need in an ecosystem to drive traction. But that’s a process: build it, and they will come,” he argued.
Despite the complexities facing an environment looking to stand out in the national innovation map and beyond, the general mood among local decision-makers is upbeat. “Like other companies in the state, I’m optimistic about the future and the potential for technological advancements to drive growth and create new opportunities,” said Daniel Randon.
“People here know the importance of staying ahead of the curve and embracing new technologies to remain competitive in the market—and that awareness will manifest in the developments we will see in the years to come,” he concluded.
