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In 2021, the buzz around new tech investing in Brazil was so loud, it appeared the country was awash in venture capital – and undergoing an economic transformation akin to the phenomenal growth of the Asian Tigers.
On the surface, that appearance seems to be reality. But take a closer look, and the cracks begin to show. Many of the projects receiving funding are large-scale glamour ventures. Fine, in theory. But it’s the broad base of small-scale entrepreneurial projects that will give Brazil a solid economic foundation and higher standard of living. And it’s these projects that are being left behind. In other words – while a dozen well-funded hero projects look good on paper, a thousand well-funded smaller projects do good in the world.
Brazil doesn’t need a Warren Buffett type putting $500 million into one company. It needs a mechanism that allows for adequate funding to be directed to numerous new early-stage ventures. And that’s what tokenized global equity crowdfunding will provide.
Brazil’s current venture capital market
Right now, Brazil is seen as a darling of venture capital. As Forbes reports, “During the first six months of 2021, a total of $5.2 billion was invested in startups based in Brazil. Four new unicorns emerged, digital products firm Hotmart, crypto exchange Mercado Bitcoin, online retailer Madeira, and digital bank C6Bank.”
But look closely, and you’ll notice a common thread; these are all very large-scale projects. Each soaks up enormous amounts of funding from large-scale investors. Helping the rich get richer does very little for a country whose development is hamstrung by a historically entrenched dualist economy.
So, where does the funding for smaller-scale projects come from? Brazil’s Banco Nacional de Desenvolvimento Econômico e Social (National Bank for Economic and Social Development, also known as BNDES) is the single most important source of finance for SMEs in Brazil. BNDES has promoted new venture growth for the past 20 years, mainly using credit subsidies. 2018 OECD figures showed that small enterprises, including micro-enterprises, accounted for 48.6% of BNDES business – up from 30.6% in 2016.
So far, so good. But the BNDES model has its limitations. One key issue is that there’s very little due diligence done on the businesses being given credit. This has led …
Full story available on Benzinga.com