Just over two years after the regulation by the Brazilian Securities and Exchange Commission (CVM), the equity crowdfunding, also known as “investment crowdfunding” in the country, jumped from BRL 8.4 million in contributions in 2016 to BRL 79 million ($18.6 million) in 2019. The estimates are from CapTable–one of the 26 platforms registered with the CVM–, which took into account information from rounds completed on 13 of the most active platforms in the country.
In the first half of last year alone, BRL 36.4 million was raised, a number that increased to BRL 43.3 million in the second half of the year. “If we compare the annual results for 2016 and 2019, we will see that we had an increase of 844% in four years. There was a discovery of the modality by the startups, and the trend is that the volumes to be raised will become larger,” says Paulo Deitos, one of the co-founders of CapTable.
One of the success factors of the platforms is that the Brazilians are betting more on collective investments. Between 2018 and 2019, there was an increase of 71.19% in the amount invested.
Giácomo Diniz, professor of finance at IBMEC, notes that, in 2016, there was practically no collective financing, and that, in 2017, the numbers were incipient. “There has been a huge growth in two years. What may have given an impulse was the discovery of this type of investment by people in general. There is a tendency to increase the volumes claimed, ”analyzes Diniz.
CapTable was created by Paulo Deitos and Guilherme Enck in July last year, with the Brazilian startups and innovation platform StartSe as one of the partners. In five months, it managed to raise BRL 4.25 million for five projects that went through its rounds. “We do a strict screening of all projects that want to raise funds with us in order to give more credibility to our investors. After all, we intend to get one of the next unicorns out of here”, bets Enck.
He points out that, after the CVM’s regulation, the market took a very strong turn. In 2018, there was an accelerated growth; in 2019, it didn’t grow that much, but it had a positive balance; and by 2020, Enck expects the market to explode. In his assessment, this is the result of a series of phenomena that are occurring at the same time.
The Brazilian is learning more about this investment alternative; the investor is looking more at the startups and innovation environment; and, with the reduction of Brazil’s benchmark interest rate to a record low, the investors already know that it is necessary to focus on the real economy and the companies.
We are going to have a huge flow from the debt market migrating to the equity market and so with private equity and venture capital funds they are benefiting from this scenario, crowdfunding will also benefit. Many people are considering crowdfunding as an option to diversify investments
Guilherme Enck, cofounder of captable.
How does equity crowdfunding works in Brazil
According to regulatory standards, companies that want to make a public offer of collective investments can raise up to BRL 5 million. On platforms like CapTable, it is possible for anyone to become an investor in startups with values starting at BRL 500.
The interest of newcomers is also growing: in 2017, they pleaded BRL 7.8 million, a number that jumped to BRL 69.5 million in 2018 and to BRL 124.8 million last year. The average value of the offers increased from BRL 650 thousand in 2017 to BRL 1.2 million in 2019.
“The profile of startups is that of entrepreneurs who already have a history. The companies have already passed the MVP (Minimum Viable Product) phase, are already going to the market with a finished product and now need capital to gain scale. They have a valuation starting at BRL 5 million ”, summarizes Enck.
An example is Trashin, a socialtech specialized in waste management–organic, hospital, hazardous–, which made its first collection last year with CapTable. The company serves companies and condominiums that have access to a dashboard with all information about their waste. Trashin has partnerships with recycling cooperatives that give the correct disposal of the waste according to the legislation.
The proposal to transform garbage into cash encouraged 460 people, who contributed a total of BRL 1.1 million for 10% of the company. According to Renan Vargas, sales and finance director at the startup, what weighed in choosing an investment crowdfunding platform, among the various options for seeking investments, was the ease and speed with which the money is raised.
“We had an angel investor, but the possibility of having a large number of partners is an advantage because they end up referring us to other clients. We got investors from 20 states in Brazil because a partner indicated. In addition, the amount obtained is much easier to be captured from several people than from a single investor, and the risk is diluted. We will use the resources to expand the team and invest in technologies such as artificial intelligence. Our goal is to reach a turnover of BRL 1.9 million ”, signals Vargas.
