We are pleased to announce that W7 Brazil Capital and Atomico have invested $10m into Bebê Store – the leading online baby and children’s goods website in Brazil with over $20m of annualised revenue, and $18m of total capital raised.

Bebê Store is an example of the second generation of emerging market ecommerce players. The first generation simply needed more capital than their competitors, as once a business was clearly ahead from a capital standpoint it became difficult for the other players to raise funds. This became a self-fulfilling prophecy where the best-funded got stronger, and the others struggled. However it is now much more capital efficient to start an ecommerce company, with open source back-ends, and high quality 3rd party logistics providers, that the battle has shifted to front-end innovation – i.e. the core strength of the product itself.

The first generation also saw many ex-pats returning to their home countries, however in a number of markets, including Brazil, it was too early for ecommerce to thrive, as payments and logistics did not have the necessary maturity. We are now in the middle of the next generation, where the combination of capital efficiency, and also the ever-increasing flow of open information and know how, means that local entrepreneurs are no longer at a disadvantage. Quite the contrary, as they tend to have a deeper understanding of the local dynamics of the market.

Founded by Leonardo Simao in 2009, Bebê Store was bootstrapped for almost two years before Atomico initially invested in December 2011. We tend to back local entrepreneurs who have used their own steam to get their business off the ground, an approach that we are confident works well for this second generation of companies, where the quality of your product and your ability to build a brand is the determining factor in who ultimately wins the market. We believe Brazil is a great market due to the rapidly expanding middle class, and fast growth in broadband penetration driven by significant public and private investment.

Bebê Store’s performance has been strong, with revenue more than quadrupling since we originally invested, in just over a year. They have expanded their offering to over 45,000 items, and we believe they have the largest online range in their category. They are also proven innovators, recently being named by Facebook as the 5th most engaged audience in Brazil, driven by Bebê Store’s innovative social marketing campaigns.

W7 Brazil Capital bring a wealth of local entrepreneurial experience and success, and when we first met it was clear that our beliefs were aligned about which approach was most likely to win the market. Henrique Iwamoto, Founding Partner at W7 Brazil Capital, explained to us that their decision to invest was made when they realised that Bebê Store was already the foremost online children’s store with the strongest growth potential.

We look forward to working with Henrique and his team, alongside Bebê Store’s management, to build the winning company in their sector.