*By Cassio Spina
As investors adjust to a global environment of economic and political uncertainty, the startup investment scenario is experiencing some obstacles, especially in Brazil. In the first quarter of the year alone, the country saw a drop of 86% in new contributions, compared to the same period in 2022, which generated US$ 247.02 million compared to US$ 1.7 billion in investments, according to a report from the Distrito platform. Still, there is great entrepreneurial and innovative potential here. The light at the end of the tunnel is precisely the creation of promising public policies that include startups so that we no longer remain stuck in time and below what we should already be.
In fact, our country lost global positions in terms of competitiveness for the third consecutive year, according to the yearbook produced by the International Institute for Management Development (IMD), which assesses the degree of attractiveness and business generation capacity. In 2023, it reached 60th position, ahead of only South Africa (61st), Mongolia (62nd), Argentina (63rd) and Venezuela (64th).
Only angel investment in startups in Brazil has the capacity to go from R$ 984 million/year to R$ 3 billion/year in the short term and up to R$ 10 billion annually in the medium term. According to a study by the OECD (Organization for Economic Co-operation and Development), angel investors play an essential role in financing start-up companies. In fact, big techs like Apple and Google were able to count on this support so that they could impact not only the market as a whole, but also the world.
Carried out by entrepreneurs, executives and independent professionals with their own resources in high-potential start-up companies, angel investment adds not only capital, but all the experience, knowledge and relationship network of investors, significantly increasing the chances of success and accelerating growth of business.
Towards stimulating Brazilian progression
Given this context, there is no denying that the way for the country to encourage investment in startups is to encourage the promotion of public policies. Therefore, it is necessary to continue the fight to achieve equality in tax treatment, such as tax exemption granted to companies listed on the stock exchange with a value of less than R$ 700 million and compensation for part of the investment in Income Tax. Actions that do not affect revenue and contribute to the country's economic competitiveness, generating more jobs and income, as demonstrated by a study prepared jointly by Anjos do Brasil and the international consultancy Grant Thornton.
Achievements and new Bill by Senator Carlos Viana
Complementary Law 155/2018 and the Legal Framework, approved in 2021, today reflect more legal certainty to favor the process, but are still insufficient to encourage more investments in startups. Now it is necessary to make efforts to approve Bill No. 3922/2023, by Senator Carlos Viana (Podemos/MG), in the National Congress. The PL aims to change the Income Tax legislation for individuals to allow capital contributions made to startups to be deducted from the IR calculation base.
In justifying the matter, the parliamentarian highlights that the proposal is not a “jabuti” or a Brazilian invention, but rather constitutes another step of utmost importance to align national legislation with what exists in the most modern world around, in terms of promoting a fertile business environment for startups. Viana also highlights that, “this is an initiative fully consistent with the provisions of art. 218 of the Federal Constitution, according to which it is up to the State to promote and encourage scientific development, research, scientific and technological training and innovation”.
International scene
To get an idea of how this whole issue is going abroad, a survey by the University of New Hampshire shows that, in the United States, there are 298 thousand angel investors, who invest US$ 21.3 billion in companies with high growth potential. In Europe, there are 304 thousand angel investors, responsible for €6.1 billion.
In Brazil, the amount invested represents only 0.9% of the world average. This happens because in the United States there is an Income Tax deduction of 10% to 100% of the amount, depending on the state. In France, there is 25% exemption. The United Kingdom, in addition to providing tax exemption, allows compensation of up to 50% of the investment in taxes owed. In Portugal, they are 20%. In the last two countries and in Italy, there is also an exemption on capital gains.
Therefore, equalization in tax treatment, improving the regulatory environment, training and connecting investors and entrepreneurs and raising awareness about the benefits of investing in startups are fundamental steps to boost entrepreneurship and innovation in the country.
*By Cassio Spina, founder and president of Anjos do Brasile Leader of the ABES Startups Committee
Notice: The opinion presented in this article is the responsibility of its author and not of ABES - Brazilian Association of Software Companies
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