Brazil financing entity launches 2nd round of start-up program
Brazilian research financing entity Finep launched the second round of a program to finance startups working on the final phases of a product or which need to gain production scale and have already proven commercial viability.
In this new call, Finep Start-up will invest up to 1mn reais (US$270,000) in each selected project. The deadline is February 28. Finep aims to finance projects from another 30 startups.
Companies could receive additional funding of 1mn reais depending on the evolution of the business plan, Finep said.
Furthermore, Finep might offer knowledge and financial resources by helping in the capitalization of early-stage companies with annual revenues of up to 4.8mn reais, compared to the limit of 3.6mn reais in the first round.
The entity will select companies that have already developed a prototype, a minimum viable product, proof of concept or, preferably, have already made their first sales.
Finep Start-up was launched in June 2017, during the Temer administration.
The program focuses on projects for education, sustainable cities, fintechs, biotech, agritech, construtech, healthtech, IoT, creative economy, energy, defense, mining, oil & gas, advanced manufacturing, and more.
According to the company, the initiative wants to fill the gap between the first investment a startup receives – around 100,000 reais, often from angel investors – and the investment from a seed capital fund – around 3mn reais.
The format being used allows the government, through Finep, to buy participation in the companies with share purchase option contracts of up to 1mn reais, depending on the business plan of the startup.
Such contracts allow Finep to convert investments into shares within a period of up to three years, extendable for two more years.
If the company succeeds, Finep might execute its share conversion option, but if the start-up fails, Finep does not shoulder the losses.
Because the government wants to avoid making the startups too reliant on public resources, the program prioritizes projects and startups financed by angel investors.
Furthermore, angel investors who invest in a company selected to the program can receive part of Finep's future gains if the startup succeeds.
More details on the program can be found here.
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