Last Tuesday, Brazil‘s Securities and Exchange Commission (CVM) released an update to the country’s equity crowdfunding market rules. The limit for each offer has increased from BRL 5 million to BRL 15 million, and the annual gross revenue ceiling for startups that can raise funds in this way has grown fourfold to BRL 80 million annually. In practice, it is now possible to move from Serie A stage rounds in crowdfunding. Some say that the leap could be greater; even so, the growth potential of this market is enormous.
In 2021, the volume of funds raised via crowdfunding platforms more than doubled compared to 2020, reaching BRL 188 million, according to the CVM. And data by CapTable — the most active platform in Brazil, followed by SMU and EqSeed — indicated that more than 70 rounds were carried out last year.
Projects under CVM’s regulatory sandbox focused on creating a secondary market for equity crowdfunding also have great potential to further leverage primary offerings. Brazilian investors are increasingly open to taking risks, but they still don’t want to commit to such long terms for their investments. Being able to sell or increase positions, investors tend to be more interested in startups.
Currently, an investor in startups needs to wait for some liquidity event to be able to “withdraw” their investment. The so-called “exit” happens when the startup is sold to larger companies, raises new VC fundings, or even does an IPO.
Another significant change is that it is now possible to publicize the offers in any medium (not only within the platform itself), including through advertising, which also increases the possibility of attracting more investors and investments.
That means that startups in more advanced stages will be able to use crowdfunding platforms to complement rounds leveraged by large investors and attract users, suppliers, and partners as investors.
Other measures include increasing the platforms’ minimum share capital to BRL 200,000 and the need to hire a compliance professional through the platform from the year in which it reaches BRL 30 million in brokered public offerings.