VC Market in Brazil

Brazil flag

Brazil flag

Venture Capital Firms like Effi Enterprises have long existed inside and outside the US. As the global market is expanding and undeveloped countries are beginning to enter the technological age, investment opportunities are opening up around the world. As an entrepreneur, Efraim Landa understands the need for capital to help an emerging business get off the ground, or make expansions. VC firms have been watching the global economy in search of regions that were previously not conducive to investment opportunities and waiting patiently for them to open up. Sometimes venture capital firms are hampered by high interest rates or various regulations that make VC funding impossible or unprofitable. However, Brazil has the 6th leading economy in the world and is quickly becoming an ideal location in which to invest.

History of Brazilian VC

Brazil witnessed the rise of the first venture capital firms in the 1980s. At that time, the high interest rates hampered VC endeavors as did the very high rate of inflation. There were many challenges for those who invested in entrepreneurships during this time as there was not much of a guarantee that there would be a ROI. VC began to improve in Brazil in the mid 90s partly due to the formation of the Real Plan which was intended to reduce inflation and lower interest rates. During that time, there was also more privatization of public enterprises. The Brazilian Venture Capital and Private Equity Association was formed in 2000. It was instrumental in bringing together several industry players and the environment began to be much more conducive to entrepreneurial endeavors. This in turn created more investment opportunities and helped to strengthen the PE and VC funds.

Current VC in Brazil

Brazil is experiencing a much more opportunistic outlook than before. The currency has appreciated, interest rates are reduced, there are large infrastructure projects, investments in the gas and oil industries, and a real estate boom which includes a government housing program. These are all helping to build the economic environment. When this type of growth is experienced, there are also increased opportunities for VC funding. Investors are more likely to risk funding development in a region that is now capable of hosting the World Cup and the Olympics since these attract even more resources. Most of the major investors are still local. These investments come from the Brazilian National Development Bank, pension funds and a variety of institutional investors. Foreign venture capital firms do not yet have a strong presence in the industry.

Future of Brazilian VC

VC firms are looking globally for opportunities of investment. Brazil is still maturing and exit opportunities are slowly increasing. Most of the venture capital investors are opting for PE investments since there are more options for exiting and larger deals occur. Typically international funds have very high standards regarding their allowable investments and it really takes about the same effort to create value for small companies as it does for large companies. With the latest developments of younger companies in Brazil, it is highly likely that there will be more venture capital firms looking at the Brazilian market for investment opportunities. VC investors must have the opportunity to sell to private equity firms among their exit strategies. AS the Brazilian private equity industry continues to expand, it is highly likely that foreign venture capital firms will be much more interested in investing in the Brazilian market. In Brazil it usually takes about 5 to 7 years for investments to mature. Because these are longer periods of maturation, the internal rate of return is reduced. However, this average has quickly been decreasing and once it reaches international standards, VC investments are expected to increase.

 

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About Efraim Landa

My name is Efraim Landa I am an entrepreneur and an expert in venture capital. I am the co founder of Effi Enterprises, a venture capital firm as well as the co founder and CEO of Gluco Vista, a company that is in the process of developing a non invasive glucose meter for those with diabetes.

Posted on February 5, 2013, in Business financing, economics, financial history, VC financing, Venture Capital and tagged , , . Bookmark the permalink. 1 Comment.

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