Brazil Crowdfunding Business Ecosystem Looks Promising
In 2017, the Brazilian Securities and Exchange Commission called Commissão de Valores Mobiláros (CVM) introduced the first Brazilian crowdfunding regulations, according to Crowdfund Insider.
The new regulation allowed businesses to raise 5 million BRL which is an equivalent of around $900,000 today.
The authorities wanted to facilitate the growth of the economy and believed that Fintechs and alternative finance platforms could bring positive changes to the underperforming financial market.
Despite being called the worst, the Brazilian economy was growing in 2017, 2018 and 2019, but was performing slower than Argentina and Mexico. According to Forbes, the economy was too much populated with debt, and the diversification of the public and private sector was mandatory.
Brazil’s diverse economy makes it a favorite spot for equity investors, and its generally high interest rates and transparent monetary policy make it a favorite among carry-traders and fixed income investors worldwide.
So, the decision to bring in crowdfunding makes perfect sense from the financial standpoint and may help to facilitate the growth of the economy further.
What you will learn in this post:
Overview of the Brazilian crowdfunding regulations
As mentioned earlier, startups can raise up to 5M BRL within 180 days, and if you want to have a second offering, you need to wait for 120 days after the previous campaign closing date.
Since only small businesses can raise, they need to match these criteria:
- 100,000 BRL paid in capital
- Less than 10 million BRL within a fiscal year prior to the crowdfunding offering
Startups that raise capital need to consider the advertising restrictions.
Both accredited and retail investors can take part in the offerings, but have different limits, including:
- 10,000 BRL a year for retail investors
- 10% of the annual revenue or net worth whichever is lesser for accredited ones
Unlike in other countries, where the refund is possible within 48 hours, in Brazil investors can request a refund within 7 days.
Crowdfunding platforms in Brazil
There are many crowdfunding platforms in Brazil that focus on different industry segments and asset classes including startups, real estate, green energy, agriculture and many more.
In 2020, at least 32 platforms have sent an annual report to the CVM. Let’s have a look at some of the Brazilian crowdfunding platforms and what services they offer.
Platta is a Brazilian equity crowdfunding platform for startups with deal sizes of around 250,000 – 500,000+ BRL, according to the listed projects in the portfolio.
Platta focuses on both accredited and non-accredited investors allowing them to enter the alternative investment market with ease. And it also discloses that offerings are not reviewed by the CVM and so the capital is at risk.
Ricardo Moraes is the CEO of the Platta Crowdfunding platform who is also the founder of Rodhium and Entrepreneurs’ Organization Chapter Curitiba. Being an angel investor and startup founder himself, he runs Platta that was designed by investors and developed by entrepreneurs.
Organismo seems to be a new equity crowdfunding platform for agriculture project financing. At the moment of writing this article, there’s only one displayed project in AgriTech, however with a relatively large minimum capital raising amount of 2,800,000 BRL and an intended target amount of 4,200,000 BRL compared to Platta, for example.
Primecap focuses both on startups and real estate crowdfunding in Brazilia which could make it a competitive market player. At this point, there aren’t any listed projects on the website.
Primecap says that it has a rigorous selection process and only Brazilian companies under 10M BRL can raise capital.
Bloxs is a versatile crowdfunding platform with the focus on real estate, agriculture, energy, private equity, etc. The deals are regulated by ICVM 588 rules.
According to the platform, Bloxs raised over 93M BRL on the platform and completed 49 projects. The website does look more alive compared to the above mentioned platforms and may easily compete with Platta.
House2Invest is a dedicated real estate investment platform in Brazil which closed around 4 projects that are visible on the website and currently has an active one. In order to see more details, you need to register, which is a common practice among crowdfunding platforms.
Before you register, the deal size is not visible on the website directly.
EqSeed is probably the largest equity crowdfunding platform in Brazil, operating since 2015. The deals in different industries range from 500,000 to 5,000,000 BRL. There are even a few projects where they raised for their own development, but others are focused on logistics, technology and consumer products.
The IRR for investors depends on the project with the currently active being at 7% equity. EqSeed platform looks good in terms of available projects as well as proven track record of the previously funded ones.
How to start a crowdfunding business in Brazil
If you want to launch your equity investment platform in Brazil, you need to follow certain rules which are listed on the CVM website. As always, there are several requirements regarding legal, business and technology aspects.
According to the published guidelines for online investment platforms in Brazil, to register your platform you need to:
- Sign the application for authorization
- Have a legally formal copy of your crowdfunding platform operations
- Prepare financial statements in accordance with the regulations
- Have an opinion about your platform of an independent technology auditor according to the requirements of Art. 13, II
- Provide identification documents of partners and platform administrators, as well as proof of residence for administrators
- Provide a written confirmation from partners and administrators that within the last 5 years they didn’t have troubles with CVM, that they understand the money laundering rules, ethics, etc
- Have a draft of terms of risk required in accordance with Art. 19, IV
- Provide a draft of the didactic material in accordance with Art. 25, etc
Crowdfunding software in Brazil
Once you’ve figured out the competition, niche and business model, you can start shopping for equity crowdfunding software in Brazil. And with that we can help you out.
LenderKit is white-label crowdfunding software for early-stage and established investment businesses that want to launch a SME financing or Real estate investing platform.
We work with different markets and provide an easy-to-set-up investment platform solution for businesses in Brazil.
Check our online tour of the LenderKit software or reach out to us directly and we’ll answer your questions and help you build a crowdfunding platform for private markets.