The e-commerce story in Brazil is one of tremendous opportunity, but with significant barriers to entry. While the country’s growing middle class and its ranking as the fifth most Internet-connected country would suggest a good fit for e-commerce, consumers still harbor skepticism about making purchases online. Brazilians generally do not believe that a product will actually be delivered, that it will be the correct item in good condition and that the credit card information they must provide to a third party will be secure. Bureaucracy and corruption further complicate the situation but amplify the rewards for entrepreneurs willing to take on these challenges. Consider baby.com.br, a leading Brazilian e-commerce baby-supply company, co-founded in October 2011 by Davis Smith and his cousin, Kimball Thomas.
Genesis of a Company
Already a successful entrepreneur — following the launch of pooltables.com, the largest independent retailer of pool tables in the U.S. — Smith arrived at Wharton knowing he wanted to start another business. During his first year, he sold the pool table company and worked closely with his cousin to compile 60 new business ideas. The following summer, they winnowed the list down to four ideas and eventually to one — a baby-products e-commerce website in Brazil. Smith said that he wanted to “build something in Brazil that is completely different than what you know.” He was changing the e-commerce experience and catering to a large and growing market.
With the idea in hand, Smith and Thomas moved quickly to make it a reality. Knowing that the more people who knew about his idea, the more likely he was to be connected to valuable resources, Smith asked his classmates for feedback. Before travelling to Brazil, he contacted 100 to 150 people via LinkedIn and other social networks, targeting investors who believed either in Brazil’s long-term economic growth or in the country’s market for baby products. These efforts proved successful when baby.com.br received US$4.4 million in Series A funding in February 2011 from Tiger Global, Monashees Capital and SV Angel. Asked to explain the motivation for investing in this new company, a representative from Monashees Capital — a Brazilian venture capital firm focused on the Internet and education — explained that the three main factors were the strength of the team, the large market and the weak competition. Other companies either focused strictly on retail baby apparel or were unfocused, offering much more than just baby products.
Originally published by Knowledge@Wharton January 2, 2013 as part of The Lauder Global Business Insight Report 2013: Building Blocks for the Global Economy.