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Finep Startup will have participation in the capital of nascent companies
Finep announced this Tuesday, 10/20, in Cuiabá, Mato Grosso, the Finep Startup, an initiative that aims to provide knowledge and financial resources through participation in the capital of innovative technology-based companies, at an initial stage, with annual revenues of up to R$ 3.6 million. This is the first action within a set of initiatives aimed at nascent companies that Finep intends to launch in the coming years, further expanding the support that the financier has given to startups through the Equity Investment Funds (FIPs).
One of the novelties is that the investment will take place through a stock option agreement and can reach R$ 1 million, based on the startup's business plan. This type of contract transforms the investor, in this case Finep, into a potential shareholder of the company. The option for Finep 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, Finep does not bear the liability, which guarantees greater security. The announcement was made during the 25th Anprotec Conference (National Association of Entities Promoting Innovative Enterprises). "We are introducing a new financing instrument in the innovation policy", said the president of Finep, Luis Fernandes. He explains that the unprecedented model in Brazil was inspired by programs from other countries, particularly the US, but incorporated new features.
Technology-based companies at this stage have great difficulty in financing their development, mainly due to the lack of guarantees and cash generation. The main objective of Finep Startup is precisely to leverage companies that are in the final stage of product development, to put on the market, or that need to gain production scale. Today, there is a space to be occupied between the first investment that a company receives, from the so-called angel investors, at an early stage, and that made through FIPs - which are divided into three types of funds, depending on the development of the company: Seed Capital; Venture Capital; and Private Equity.
By prioritizing this type of investment, it is intended to optimize the resources applied, reducing risk and increasing the possibility of return for society. This initiative does not intend to compete with the funds, on the contrary. It wants to take companies to a stage where access to these channels becomes viable. For the president of Anprotec, Francilene Garcia, Finep Startup represents an important alternative to create growth conditions for these companies. "This action fills a gap. Without this support, startups end up unable to grow at the opportune moment and, at the same time, do not become attractive to other types of investment, which can doom the business to failure", he highlights.
The first notice of Finep Startup will be launched in November. The forecast is to launch one more public notice in 2016 and two in 2017. Each public notice will have a value of R$ 20 million, totaling R$ 80 million. The expectation is that support will be concentrated on the technologies and priority sectors of Finep's Operational Policy, such as information and communication technologies (ICT), health complex, defense, energy, aerospace, assistive technologies, biotechnology, nanotechnology and new materials. The company that fits the criteria of the public notice, however, can participate in the selection regardless of the area of activity. Those selected will be able to receive a new contribution of up to R$ 1 million, as the business plan evolves. Traditional funds invest an average of 10 to 15 companies in four years. With Finep Startup, the financier intends to invest in 40 companies by 2016.
Partner with angel investors
Finep Startup will have an innovative mechanism to encourage entrepreneurs to seek private investment, which will prioritize 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 – who will also invest in the company through an option contract – will earn points in the selection made by Finep. The amount of points obtained will depend on the value of the private investment, which can range from R$ 50 thousand to R$ 350 thousand. In addition to the angel, the selection process for the public notice will take into account three dimensions: innovation and technology; market and business model; and team. According to Luis Fernandes, the characteristics of the public notice were defined based on the long-standing relationship that the lender maintains with investors. The option contract for both parties, he says, is the big differentiator of the call, as it reduces the risks for a smaller investor like the angel. “This is a new support model in which Finep puts public resources into the startup and at the same time leverages private investment in the company,” he says.
The angel investor who commits to invest in the company selected by the public notice will receive part of Finep's return, with the objective of provoking the private investor's engagement with the company's success. This percentage will be proportional to the angel's participation in the investment round. To foster this partnership between companies and private investors, Finep will sign an agreement with Anprotec and Anjos do Brasil, an entity that promotes angel investment that supports innovation entrepreneurship. This agreement includes actions such as workshops and road shows throughout the country with companies and investors to promote integration between them and facilitate possible partnerships. In a more advanced stage of the selection process, an evaluation panel formed by Finep, Anjos do Brasil and Anprotec will select the startups that will be invested.
One of the novelties is that the investment will take place through a stock option agreement and can reach R$ 1 million, based on the startup's business plan. This type of contract transforms the investor, in this case Finep, into a potential shareholder of the company. The option for Finep 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, Finep does not bear the liability, which guarantees greater security. The announcement was made during the 25th Anprotec Conference (National Association of Entities Promoting Innovative Enterprises). "We are introducing a new financing instrument in the innovation policy", said the president of Finep, Luis Fernandes. He explains that the unprecedented model in Brazil was inspired by programs from other countries, particularly the US, but incorporated new features.
Technology-based companies at this stage have great difficulty in financing their development, mainly due to the lack of guarantees and cash generation. The main objective of Finep Startup is precisely to leverage companies that are in the final stage of product development, to put on the market, or that need to gain production scale. Today, there is a space to be occupied between the first investment that a company receives, from the so-called angel investors, at an early stage, and that made through FIPs - which are divided into three types of funds, depending on the development of the company: Seed Capital; Venture Capital; and Private Equity.
By prioritizing this type of investment, it is intended to optimize the resources applied, reducing risk and increasing the possibility of return for society. This initiative does not intend to compete with the funds, on the contrary. It wants to take companies to a stage where access to these channels becomes viable. For the president of Anprotec, Francilene Garcia, Finep Startup represents an important alternative to create growth conditions for these companies. "This action fills a gap. Without this support, startups end up unable to grow at the opportune moment and, at the same time, do not become attractive to other types of investment, which can doom the business to failure", he highlights.
The first notice of Finep Startup will be launched in November. The forecast is to launch one more public notice in 2016 and two in 2017. Each public notice will have a value of R$ 20 million, totaling R$ 80 million. The expectation is that support will be concentrated on the technologies and priority sectors of Finep's Operational Policy, such as information and communication technologies (ICT), health complex, defense, energy, aerospace, assistive technologies, biotechnology, nanotechnology and new materials. The company that fits the criteria of the public notice, however, can participate in the selection regardless of the area of activity. Those selected will be able to receive a new contribution of up to R$ 1 million, as the business plan evolves. Traditional funds invest an average of 10 to 15 companies in four years. With Finep Startup, the financier intends to invest in 40 companies by 2016.
Partner with angel investors
Finep Startup will have an innovative mechanism to encourage entrepreneurs to seek private investment, which will prioritize 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 – who will also invest in the company through an option contract – will earn points in the selection made by Finep. The amount of points obtained will depend on the value of the private investment, which can range from R$ 50 thousand to R$ 350 thousand. In addition to the angel, the selection process for the public notice will take into account three dimensions: innovation and technology; market and business model; and team. According to Luis Fernandes, the characteristics of the public notice were defined based on the long-standing relationship that the lender maintains with investors. The option contract for both parties, he says, is the big differentiator of the call, as it reduces the risks for a smaller investor like the angel. “This is a new support model in which Finep puts public resources into the startup and at the same time leverages private investment in the company,” he says.
The angel investor who commits to invest in the company selected by the public notice will receive part of Finep's return, with the objective of provoking the private investor's engagement with the company's success. This percentage will be proportional to the angel's participation in the investment round. To foster this partnership between companies and private investors, Finep will sign an agreement with Anprotec and Anjos do Brasil, an entity that promotes angel investment that supports innovation entrepreneurship. This agreement includes actions such as workshops and road shows throughout the country with companies and investors to promote integration between them and facilitate possible partnerships. In a more advanced stage of the selection process, an evaluation panel formed by Finep, Anjos do Brasil and Anprotec will select the startups that will be invested.
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