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“Smart capital” for technology-based early-stage businesses in Brazil

Jan 15, 2015

The Multilateral Investment Fund (MIF), a member of the Inter-American Development Bank (IDB) Group, has recently approved an equity investment and technical cooperation grant totaling US$5.28 million to create the Capital Tech VC Fund, a fund that will invest in 12-15 technology-based early-stage businesses, in the form of seed and venture capital rounds, in order to ensure their long-term growth. These businesses will have high growth potential and will provide services in sectors with high developmental impact, including health, education, agribusiness, and clean technologiy. Capital Tech VC Fund will be administered by Invest Tech Participações e Investimentos Ltda, a Brazilian fund manager specializing in financing for technology-based businesses.

According to the High-Impact Entrepreneurship Global Report, early-stage businesses are important drivers of innovation, job creation, and economic activity. In Brazil, they represent 8% of private businesses and generate nearly 60% of net new jobs. Early-stage business face major obstacles, mainly involving managerial skills and financing. In addition, more than 90% of the private equity market in Brazil is dedicated to large and more established companies, often in preparation for a stock market listing, while less than 4% is allocated in the form of seed and venture capital financing for early-stage businesses. The MIF’s own research on its Early Stage portfolio confirms seed and venture capital can positively influence the survival rates and the growth trajectories of early-stage businesses.

The Capital Tech VC Fund will address this problem through “smart capital,” or seed and venture capital financing accompanied by hands-on involvement from fund managers in enhancing governance structures, securing new markets, and implementing growth strategies. The Fund will invest at the seed level in business generating between US$200,000 and $US 1.5 million in annual revenues, that are beyond a proof-of-concept stage, and are ready to establish technical, managerial, and governance platforms to move to a high-growth path. Also, the Fund will invest at the venture capital level in businesses generating up to US$6 million in annual revenues, that have more stable sources of revenue, and are ready to scale through existing or new markets.

In the long term, this fund will contribute to unlocking the talent and innovative ideas of dynamic entrepreneurs, which, together with other regional efforts, will help propel Latin America into an innovation-driven region.

The fund will have a total capitalization of US$31 million. Learn more about the financing of this project here


About the MIF


The Multilateral Investment Fund (MIF), a member of the Inter-American Development Bank Group, is funded by 39 donors and supports private sector-led development benefitting low-income populations and the poor - their businesses, their farms, and their households. The aim is to give them the tools to boost their incomes: access to markets and the skills to compete in those markets, access to finance, and access to basic services, including green technology. A core MIF mission is to act as a development laboratory - experimenting, pioneering, and taking risks in order to build and support successful micro and SME business models. More information at www.fomin.org.

About Invest Tech


Invest Tech Participações e Investimentos Ltda is an established management firm based in São Paulo. The firm has more than ten years of investment experience through two main funds focusing on technology-based Brazilian companies. Its first fund, Capital Tech I, reached a capitalization of US$15 million and invested in six early-stage businesses developing innovative technologies in sectors such as telecommunications, health care services, education, and management systems.

 
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