Innovation without borders

Technological solutions developed by Brazilian firms with support from FAPESP’s PIPE program are conquering markets in the US, Europe and China.

By Claudia Izique  |  FAPESP Research for Innovation – AB InBev will use a technology called Flowe supplied by I.Systems to increase production line efficiency in its US plants. The US Department of Defense (DoD) has chosen Griaule Biometrics to supply a biometric data storage and deduplication system covering more than 80 million citizens of Iraq and Afghanistan. General Motors in the US and Peugeot in Germany recently implemented an intelligent system developed by Autaza Tecnologia for the quality inspection of auto parts.

In addition to support from FAPESP’s Innovative Research in Small Business Program (PIPE), these firms share the same business vision: technological innovation should be without borders. “FAPESP expects and encourages PIPE-supported firms to have global targets, and this is taken into account in the selection of business plans for the most promising research projects. Breaking through the limits of the domestic market must be a permanent challenge for industry in Brazil, especially when benefited by taxpayer-funded grants,” says Carlos Henrique de Brito Cruz, FAPESP’s Scientific Director.

“At I.Systems, we began our internationalization process in 2016, when we introduced our product Leaf at BHP, the mining company, in Australia,” says Igor Santiago, CEO of the Campinas-based firm. Leaf was the first product marketed by I.Systems and uses artificial intelligence to control and stabilize industrial processes. As a startup, the firm was supported by PIPE and by the PIPE/PAPPE Grant Program, which combines funding from FAPESP and FINEP, the federal government’s innovation agency. I.Systems has filed for patents on Leaf in the US, Canada, India and Australia. The technology has been implemented by clients in industries from agribusiness to chemicals, pulp and paper, as well as mining and several others.

The firm’s second product, Flowe, which is based on machine learning, appealed so much to Ambev, that Latin America’s largest brewer recommended it to holding company Anheuser-Busch InBev. “Our first projects will be running in the US by mid-2019,” says Santiago.

He adds that Flowe differs from comparable products offered by competitors in two strategic ways. Implementation of Flowe takes only a month, compared to six months to two years for the competition. The other difference is the marketing method: “We use the software as a service (SaaS) model. The client pays a monthly subscription fee,” Santiago explains.

Having grown at an annual rate of 50% in the last five years, I.Systems has ambitious predictions for the next half-decade. “We plan to cover the South American market out of Brazil while also establishing a strong presence in the US,” he says.

Competitive innovation

The multimodal software design deployed by Griaule – its platform identifies individuals on the basis of fingerprints, palm prints, voice, face and the iris – brought the firm a US$75 million contract with the DoD in September 2018. In the following month, Griaule was picked by Arizona’s Department of Public Safety to assist in police investigations and supply criminal record and background checks for state employees.

Griaule won support from FAPESP’s PIPE program for three projects: refinement of its automated fingerprint identification system (AFIS), development of a face recognition system, and creation of a voice ID system. “Without the funding from FAPESP, we would never have gotten where we are now,” Iron Daher, Griaule’s CEO, told Pesquisa FAPESP magazine.

The innovative nature of its smart inspection system opened up the US and European markets to Autaza, which is based in São José dos Campos, São Paulo State. The firm’s history began in 2016, when three researchers at the Aeronautical Technology Institute (ITA) produced a prototype system using computer vision and artificial intelligence to detect car body defects, replacing visual inspection. The prototype was developed in partnership with General Motors (GM) in São Caetano do Sul, a city in metropolitan São Paulo.

GM tested the technology and gave the related intellectual property rights to the researchers, who were thereby able to found the firm Autaza. GM also implemented the system at plants in the US and Germany, where until 2017, it produced the Opel. The German unit was later sold to Peugeot and BNP Paribas, but is still a client of Autaza.

The smart inspection technology is also used to identify paint flaws on composites used by the aircraft industry, opening up another market that includes clients such as Embraer.

Autaza is establishing a subsidiary in Ann Arbor, Michigan, near Detroit, the cradle of the world automotive industry, and three hours from Chicago, Boeing’s home town. Sales operations will begin in April 2019. “The office is located in the SPARK business accelerator. Besides expanding markets, our goal is to have our systems certified by the world’s leading auto makers and win commercial agreements with local partners,” says Autaza co-founder and CEO Renan Padovani.

Autaza was supported by FAPESP while it was writing its car body defect classification algorithm and won funding for industrial and commercial development of the product. “We’re now creating the first Brazilian 3D scanner for the detection of defects and implementing robotics in our inspection system,” Padovani says.

USA: an expanding market

In addition to Autaza, several startups supported by FAPESP’s PIPE program have established a presence on the US market. An example is Finamac, which makes ice cream machines in São Paulo and has 60 employees. “We set up an office in the US and now we have an industrial shed and five employees responsible for assembling the machines,” says Finamac founder Marino Arpino.

The investment is justified: the US market accounts for 50% of the firm’s sales, and its share is growing. “We’re negotiating distribution with a company that services the fast-food segment. We want to expand from retail to wholesale,” he explains.

The firm is also confident of a positive reception by the market for two new product lines it is developing with PIPE’s support: a new industrial technology to produce ice popsicles, which is being patented, and a multifunctional robotic popsicle machine. “Both products were designed specifically for the US market and have only American-made components. Import costs would make manufacturing them in Brazil unviable,” he says.

Another example is Agrosmart, a Campinas-based integrated crop monitoring and pest management firm with clients in Mexico, Guatemala, Peru, Honduras, Colombia, and Israel. It recently established a US subsidiary. “Our foreign sales flagship is a set of weather monitoring technologies involving pest control and weather forecasting. We use artificial intelligence to make our solutions effective,” says Marcus Sato, an agronomist with the firm.

Agrosmart’s US subsidiary is more than a sales branch. It plays a strategic role in the firm’s supply chain as well as in prospecting for corporate clients and venture capital. “We started our internationalization process in 2018 and will intensify it in 2019. Our strategy is to establish the firm as the leading digital agriculture platform in Latin America,” says Mariana Vasconcelos, CEO of Agrosmart.

The firm is developing an automatic pest trap with support from the PIPE/PAPPE Grant program.

To China

Some of the firms supported by PIPE deliberately design innovations for the export market. Hoobox Robotics, which has developed Wheelie, a facial recognition platform that translates a wheelchair user’s expressions into control commands, formulated its business plan with a view to conquering the US market. It now has some 60 clients in 14 US states and “300 people on the waiting list”, according to Paulo Gurgel Pinheiro, CEO of Hoobox.

Since 2018, the firm has been part of Intel’s startup accelerator program “AI for Social Good” and plans to use this support to optimize the performance of its face recognition algorithms with the aid of Intel’s hardware and software. Hoobox’s platform was a highlight of Intel’s booth at CES 2019, the latest edition of the Consumer Electronics Show, held in Las Vegas in early January.

In Brazil, Hoobox is being supported by Eretz.bio, a healthcare startup incubator operated by the Albert Einstein Jewish-Brazilian Charitable Society (SBIBAE) in São Paulo, and in the US, it is supported by JLABS, Johnson & Johnson Innovation’s life science startup incubator at Texas Medical Center in Houston, Texas. Late last year, it began setting up a subsidiary in Suzhou, China, to offer facial recognition technology for security purposes. “Initially, we’ll be servicing clients in Shanghai, Qingdao, Nanjing and Shenzhen,” Pinheiro says (for more about Hoobox, see agencia.fapesp.br/23256).

Pinheiro has plans to bring Wheelie to Brazil but foresees obstacles unless the business model changes. “In the US, we don’t sell the kit itself. Users pay a monthly subscription fee of US$300, but this model doesn’t appear to work well in Brazil,” he says.

Hoobox won funding from FAPESP’s PIPE program for the technology testing phase and is again being supported by FAPESP for development of new product functionality. 

CFlex is also based in Campinas and currently has clients only abroad. The firm has developed a real-time rail traffic planning solution to manage train circulation, crossings, stop times and crew changeovers, among other items. The solution has been implemented by mining company Rio Tinto in Australia, Argentina’s Ferrosur Roca railroad, and Chile’s Empresa de los Ferrocarriles del Estado (EFE).

“Our first PIPE project, in 2004, focused on developing the solution via partnerships with Brazilian railroads. Following the initial plan, we’ve targeted railroads abroad for the past several years,” says Carlos Eduardo Carneiro, VP and CFO of CFlex. “The domestic market is small for this kind of solution.”

CFlex Movement Planner (CMP) was initially for freight trains, but in its PIPE Phase 2 and Phase 3 projects the firm included an algorithm manager called Meta Planning so the solution can be used to manage passenger trains and mixed operations. “Depending on the type of operation, the management software selects the right algorithm to produce optimal results,” Carneiro explains.

The firm is investing in Meta Planning to grow market share. “In the current PIPE phase, our strategy is to increase the visibility of CFlex, and of CMP and its Meta Planning component, by participating in rail trade shows with our own booth, and by advertising in trade journals and on the internet via YouTube and Google Adwords, aiming mainly at Australia, Europe and Canada, as well as the US,” he says.

All the projects, he stresses, were developed with FAPESP’s support, via PIPE Phase 1, Phase 2 and Phase 3.

Quality assurance

Certification is required for most high-tech products, and often for the manufacturer as well, before they can be marketed, both at home and abroad. Kryptus is an information security firm also based in Campinas. Its clients include Embraer subsidiary Savis, the Brazilian Army’s Communications and Electronic Warfare Center (CCOMGEX), and Mectron Comm, among others. It is accredited as a “strategic defense company” (Empresa Estratégica de Defesa, EED) by Brazil’s Defense Ministry, and some of its products have been awarded certification by ICP-Brasil, Brazil’s public key infrastructure (PKI), overseen by the National Information Technology Institute (ITI), an executive agency linked to the Brazilian Government's Executive Office.

These two certifications have opened the door to the market in both the public sector, where its clients include the Federal Revenue and the Electoral High Court (TSE), as well as the Army, and the private sector, where its clients include Valid Certificadora, Certisign, OKI, and several universities, such as the University of São Paulo (USP), for example.

Its foreign clientele began to grow in 2016, when a Swiss group invested in the firm. The group now owns 15% of the firm’s equity. “Today between 30% and 40% of our sales correspond to exports of the technology to South America (Colombia, Peru and Chile), Europe, and the US,” says Kryptus CEO Roberto Gallo.

The next challenge, he adds, is to win FIPS 140-2 certification from the US National Institute of Standards and Technology (NIST) for its product kNET. “The process is under way and we expect to win certification this year. After that we’ll be a firm without borders,” Gallo says.

With support from FAPESP’s PIPE program, the firm has developed a high-performance encryption solution known as a hardware security module (HSM) and tested the technical feasibility of its cloud-based application. It has also prepared the product for marketing in Brazil and abroad with support from the PIPE/PAPPE Grant program.