One of the must-read blogs on startup tech companies and venture capital in the United States (and arguably the world) is www.avc.com, the blog of tech investor Fred Wilson. Possibly one of his most important posts was earlier this year, “The Darwinian Evolution of Startup Hubs.” I hadn’t seen it until now, but was directed to it in a Quora thread on how the New York City startup ecosystem formed, written by the estimable David Rose, also a VC in NYC.
Wilson wasn’t referring to Darwin necessarily (or principally) in the sense of “survival of the fittest” – though that certainly applies in business — but rather how those survivors “seeded” later startups:
If you study Silicon Valley, what you see is something that looks like a forest where trees grow tall, produce seeds that drop and start new trees, and eventually the older trees mature and stop growing or worse, die of disease and rot, but the new trees grow up even taller and stronger.
Mixing his metaphors somewhat, Wilson then goes on to provide the history of latter-day Silicon Valley like a passage in the Bible, with a lot of “begatting”…
In my mental model of Silicon Valley, the first “tree” was Fairchild Semiconductor (founded in 1957) which begat Intel (founded 1968) which begat Apple (1976) and Oracle (1977), which begat Sun (1982), Silicon Graphics (1981), and Cisco (1984) which begat Siebel (1993) and Netscape (1994), which begat Yahoo! (1995) and eBay (1995), which begat Google (1998) and PayPal (1998), which begat YouTube (2005), Facebook (2004), and LinkedIn (2003) which begat Twitter (2006) and Zynga (2007), which begat Square (2010), Dropbox (2008), and many more.
Wilson’s theory — that tech “hubs” tend to have certain “foundational” businesses from which later companies spring — got me thinking about whether we are witnessing some kind of foundational growth of startups in Latin America. There certainly is no Latin American Fairchild Semiconductor to point to that “begat” a series of startup companies; on the other hand, Rose’s examples (for New York City) also did not have an “elder statesman” — his foundational example was DoubleClick, started in 1995 — hardly a gray-haired patriarch of a company.
At this stage, most of the startup ecosystems in Latin America are still too young and relatively immature to have a “foundational” startup, but I think in Brazil we might be able to point to a few companies as foundational. The most obvious example is BuscaPe, which was founded “way back” in 1999. One of the original catch-all price comparison sites in the Brazilosphere, it could be said to have “begotten” other sites like and Compra3 (2004), women’s clothing sites like OQVestir (2009), Groupon clone Peixe Urbano (2010), ClickOn (2010), and vertical Baby.com.br (2011). Some argue that Brazil’s Internet scene has actually peaked and may be approaching one of the destructive periods (the down part of the cycle) that Wilson discusses in his post.
But is it even helpful to think in these terms? Ultimately, what lets startup ecosystems (or communities, or whatever euphemism you prefer) grow is the symbiotic relationship between people that think entrepreneurially and investors that are willing to take a risk on those entrepreneurs. Cycles aren’t controllable, and for the most part they are hard to observe, except in retrospect.
What may be most instructive about Wilson’s theory is that he acknowledges (or stipulates) that it is non-linear, cyclical, and geographically specific. For example, in the case of New York, he estimates there have been two cycles in 16 years, while in Silicon Valley’s 40 year history he estimates close to 10 cycles. So each ecosystem develops at its own pace based on local conditions. He also notes that the cycles are getting shorter.
That seems to be happening in Latin America; using Brazil as an example, we see how quickly companies were able to spring up, grow, and attract investment. All this despite Brazil’s stultifying legal and regulatory environment.
Toward the end of his article, Wilson shifts from Darwin to the famous American writer Mark Twain, who observed that history doesn’t repeat itself, “but it does rhyme.”
Which company will be the next foundational link, and where?