Finep launched this Monday (7th) the second round of the 2018 notice of the Finep Startup program, which aims to leverage technology-based companies in the final stage of product development or that need to gain production scale, with proven commercial viability . The total resource cap for this round is R$ 30 million for 30 startups. The period for submitting proposals is open until the 28th of February.
The financier will invest up to R$ 1 million in each of the selected companies, which will still be able to receive a new contribution of up to R$ 1 million in the future, according to the evolution of the business plan. In addition, Finep will provide knowledge and financial resources via equity participation in companies with annual revenues of up to R$ 4.8 million. Competing startups need to have a prototype MVP (Minimum Viable Product or, in Portuguese, Minimum Viable Product), proof of concept or, preferably, already making their first sales. In other words: proposals in the idea or research phase do not fit.
As in the first round, the selection process will consist of three stages: business plan evaluation (elimination and qualifying); face-to-face evaluation panel (elimination and qualifying); and technical visit and evaluation of legal documentation (elimination). The final result is scheduled for July.
Startups that work in the following thematic areas will be selected: Agritech, Smart and Sustainable Cities, Construtech, Circular Economy, Defense, Creative Economy – Electronic Games, Education, Energy, Fintech/Insurtech, Healthtech, Mining, Oil & Gas, Chemistry and Bio Materials -based. Companies that develop solutions in the following enabling technologies can also compete: Biotechnology, Blockchain, Artificial Intelligence, Internet of Things (IoT), Advanced Manufacturing, Microelectronics, Nanotechnology and Augmented Reality, Virtual Reality and Mixed Reality.
Anyone who is an entrepreneur knows that the path between business idea and profit is usually long and full of obstacles. Finep's objective is to help Brazilian startups overcome the support gap known as “death valley”, a stage in which many of them are disrupted due to lack of resources. Companies at this stage have great difficulty in financing their development, mainly due to the absence of guarantees and cash generation.
Unprecedented investment model in Brazil
Finep Startup was created to fill the gap between the first investment that a startup receives – around R$ 100 thousand and carried out, for example, by angel investors – and the contribution made through a Seed Capital Fund – around R$ 3 million – depending on the company's maturity level.
The investment will be made through a stock option contract. This type of contract transforms the investor – in this case, Finep – into a potential shareholder of the company. The option to become a partner of the startup or not will have a total maturity term of up to three years, which can be extended for another two. If the company is successful, Finep can exercise this option. If the company fails, the lender does not bear the liability. The model, unprecedented in Brazil, is inspired by programs from other countries, particularly the United States, but has incorporated new features. The evaluation of the company (valuation), for example, will not be done at the entrance of the program.
public-private investment
Finep, however, does not intend to make Brazilian startups dependent on public resources. Therefore, it created a pioneering mechanism to encourage entrepreneurs to seek private investment: priority will be given to companies that are contributed by angel investors. The process will work as follows: the startup that signs up for the public notice with a letter of commitment from an angel investor will earn points in the selection. The amount of points obtained will depend on the value of the private investment, whose minimum value is R$ 50 thousand. With the minimum contribution to your business, the bidder guarantees 1 point, reaching a maximum of 5 points. In all, there are 20 possible points: 15 from the assessment of the startup's value proposition and 5 obtained if it receives private investments of R$ 250 thousand or more.
The angel investor who commits to invest in the company selected by the public notice will receive part of Finep's return (which exceeds IPCA + 10), with the aim of increasing their engagement with the company's success. This percentage will be proportional to the angel's participation in the investment round. In addition to leveraging resources, attracting private investors is essential for the success of the enterprise, as they also add knowledge to the business. Startups do not only need financial resources, but also assistance in matters that are extremely relevant to the future of the business, such as governance and management.
The financier will invest up to R$ 1 million in each of the selected companies, which will still be able to receive a new contribution of up to R$ 1 million in the future, according to the evolution of the business plan. In addition, Finep will provide knowledge and financial resources via equity participation in companies with annual revenues of up to R$ 4.8 million. Competing startups need to have a prototype MVP (Minimum Viable Product or, in Portuguese, Minimum Viable Product), proof of concept or, preferably, already making their first sales. In other words: proposals in the idea or research phase do not fit.
As in the first round, the selection process will consist of three stages: business plan evaluation (elimination and qualifying); face-to-face evaluation panel (elimination and qualifying); and technical visit and evaluation of legal documentation (elimination). The final result is scheduled for July.
Startups that work in the following thematic areas will be selected: Agritech, Smart and Sustainable Cities, Construtech, Circular Economy, Defense, Creative Economy – Electronic Games, Education, Energy, Fintech/Insurtech, Healthtech, Mining, Oil & Gas, Chemistry and Bio Materials -based. Companies that develop solutions in the following enabling technologies can also compete: Biotechnology, Blockchain, Artificial Intelligence, Internet of Things (IoT), Advanced Manufacturing, Microelectronics, Nanotechnology and Augmented Reality, Virtual Reality and Mixed Reality.
Anyone who is an entrepreneur knows that the path between business idea and profit is usually long and full of obstacles. Finep's objective is to help Brazilian startups overcome the support gap known as “death valley”, a stage in which many of them are disrupted due to lack of resources. Companies at this stage have great difficulty in financing their development, mainly due to the absence of guarantees and cash generation.
Unprecedented investment model in Brazil
Finep Startup was created to fill the gap between the first investment that a startup receives – around R$ 100 thousand and carried out, for example, by angel investors – and the contribution made through a Seed Capital Fund – around R$ 3 million – depending on the company's maturity level.
The investment will be made through a stock option contract. This type of contract transforms the investor – in this case, Finep – into a potential shareholder of the company. The option to become a partner of the startup or not will have a total maturity term of up to three years, which can be extended for another two. If the company is successful, Finep can exercise this option. If the company fails, the lender does not bear the liability. The model, unprecedented in Brazil, is inspired by programs from other countries, particularly the United States, but has incorporated new features. The evaluation of the company (valuation), for example, will not be done at the entrance of the program.
public-private investment
Finep, however, does not intend to make Brazilian startups dependent on public resources. Therefore, it created a pioneering mechanism to encourage entrepreneurs to seek private investment: priority will be given to companies that are contributed by angel investors. The process will work as follows: the startup that signs up for the public notice with a letter of commitment from an angel investor will earn points in the selection. The amount of points obtained will depend on the value of the private investment, whose minimum value is R$ 50 thousand. With the minimum contribution to your business, the bidder guarantees 1 point, reaching a maximum of 5 points. In all, there are 20 possible points: 15 from the assessment of the startup's value proposition and 5 obtained if it receives private investments of R$ 250 thousand or more.
The angel investor who commits to invest in the company selected by the public notice will receive part of Finep's return (which exceeds IPCA + 10), with the aim of increasing their engagement with the company's success. This percentage will be proportional to the angel's participation in the investment round. In addition to leveraging resources, attracting private investors is essential for the success of the enterprise, as they also add knowledge to the business. Startups do not only need financial resources, but also assistance in matters that are extremely relevant to the future of the business, such as governance and management.
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