This is the fourth in a series of five interviews with entrepreneurs who attended the third annual Global Summit of Leaders this week at Royal Roads University in Victoria. Carlos Miranda joined leading CEOs and business owners from eight countries, moderated by school alumnus Dean Lindal.
After working for Ernst & Young for 23 years, in corporate finance and management, and strategic consulting, Mr. Miranda founded BR Opportunities in 2010. The private equity fund looks to invest in emerging companies in Brazil, accelerate their growth, and transform them into market leaders.
Question: What inspired you to start your own business after so many years at a corporation?
Answer: I worked for Ernst & Young for 23 years, I became partner in 1998. As soon as I became partner, I started to push the other partners on the entrepreneurship thing. At that time, most of our clients were big clients at big organizations, some referred clients from the U.S. and from other countries. But I realized there were lots of very, very interesting small and medium-sized enterprises in my country that were booming and probably in the near future all the big firms would be struggling to get them as clients.
Because of this I pushed my partners to start an entrepreneurs program in Brazil, and we brought the Entrepreneur of the Year program to Brazil and we started a new strategy that was strategic growth markets. The idea was kind of a mirror company of Ernst & Young that just focused on these high-growth organizations, companies run by exceptional entrepreneurs. This went very well and after 15 years I helped a lot of very good entrepreneurs, and I created a very strong relationship with these now successful entrepreneurs.
Having helped so many entrepreneurs during those years, on their acquisition strategies, or negotiating with private equity, or helping them fund their businesses, or helping them to grow, I looked at myself and I said 'I think I have some very good assets: a very good relationship with these successful entrepreneurs and their money, of course, very good deal flow, and some expertise to help these companies grow.
It was a natural decision to quit Ernst & Young and a stable position, good revenues, good salary, good distribution, and start my own business, a private equity firm. And the concept of my private equity firm is quite different from the rest because 100 per cent of the money we got came from successful entrepreneurs. This is what we call 'smart money' because, in any investment, what we want is not just to put in money, not just to swarm into the company, put in governance, and so on, but putting in those entrepreneurs' experience as well.
Because of that I think the companies get huge benefit, and also our investment decision is very easy because those guys want to vest the entrepreneurs as they were, and they are not just biased to not doing a deal, to not making a mistake, they are biased to invest in entrepreneurship.
So that's why I think we have created a very interesting ecosystem or environment of entrepreneurs and investing for entrepreneurs to entrepreneurs. And we are just in the middle of this, trying to put in some organization, management, governance and strategy.
Question: What types of companies are you looking to invest in, and what qualities are you looking for from them and from their management teams?
Answer: The first filter is exceptional entrepreneurs, and when I say exceptional, I say to all the entrepreneurs 'this is very important for Brazil.' Entrepreneurs that are 100 per cent inspired, entrepreneurs that are well educated, and the ones that know the benefits of having auditing in their firms or a board of directors, and have transparency in their businesses.
Second, as exceptional entrepreneurs, we are looking for guys or girls that have 100 per cent skin in the game, that somehow have transformed their business environment. And the next filter is that we are looking for companies that have already proven their business model, and they are growing fast, like Brazilian average, like 25 per cent or 30 per cent a year. And medium sized companies.
If you take these three variables, when a company like this had an exceptional entrepreneur, maybe revenues are bigger than $6-million or so, with 25 per cent or 35 per cent a year growth, these entrepreneurs became sad because they couldn't reach their dream.
They had to deal with other kinds of problems like management, governance, or financing, things they don't like or they don't know. And our idea is not just making money to leverage their growth, but to do these things that they don't like to do, they don't know how to do, and then they can focus on their business and they can focus on doing things that they really like or really know and things that add value to the company.
Question: Is Brazil a ripe market for Canadian entrepreneurs and if so, why?
Answer: First of all, when you look at the Brazilian environment compared with other BRIC countries, our culture is very similar to North American culture. We have social problems but we don't have different people fighting against each other, and because the business environment is so similar to the American business environment and a lot of business people speak English quite well, I think it's a good place to be and a good place to invest.
Second, I think, talking about Canada, you had not the same kind of colonization that we had because you had the royal family leaving Brazil, but you have this mix of different races, different cultures living together in a democratic country. Here, and in Canada, inclusiveness is not something that requires a specific law, it's just natural.
Question: If I'm a Canadian entrepreneur and I want to move into Brazil, what three pieces of advice would you give me?
Answer: Try Caipirinha, it's a very good drink, it's a sugarcane drink with lime and sugar. I'm just kidding, but try it on your first day. After that try the Brazilian barbeque. Culturally you're going to be 7 per cent Brazilian.
First, it's very important to find a local partner that you can trust. Second, be prepared for the Brazilian bureaucracy, it can be very tough sometimes to open a firm. It can take some time. And third, because Brazilians are so happy and so easy-going, people have been trained to think that we're not serious. But don't be prejudiced if people you're doing business with seem very happy or they make jokes. They are serious, it's just their way of doing business.
Question: You talked about the fact Brazil is fairly stable compared with some of the other BRIC countries but there's been some civic unrest leading up to the World Cup and the Olympics and it could continue over the next few years. Will that have any kind of impact on the business community?
Answer: There is a huge difference in Brazil between the private sector and the public sector. We have a lot of problems with corruption. It's not something people like to talk about but we do have it. The good news is that this is a problem we've had for years, it's not something new, but what is new is that there's more publicity. More people know that we have this problem because of democracy.
Because of that, people see all the scandals popping up; scandals that are not new but people just know now. People see all these scandals, they see the construction of the stadiums are costing double or triple what they should cost, and because of years and years of people seeing bad things and corruption, I think it was a phenomenon.
When it came to the bus fares, people over the Internet were saying 'let's protest, let's protest,' and people suddenly realized they weren't just protesting the bus fares but they were protesting the whole environment, all the problems, they were basically saying 'stop, I can't stand it any more.'
This was the good part of the protests. We had some violence, but I think the main protest was like that. The positive result was that the government and the senators started to hear the people's voices and they are trying to put some new laws together to respond to these people.
And the business environment is different from the public sector. They are pushing the government for enterprise, etc. All these things are going to change the business environment.
With the big events the main concern is the costs. The second is the legacy.
I'm not sure whether the government will be able to manage all the assets after the events end. They have to bring the private sector on board immediately to help guarantee this legacy. These are two big, big events one right after the other. One in 2014 and 2016. I think it's the first time this has ever happened in a country.
I'm very concerned to see how the government will manage it.