Venture debt arrives in Brazil

A pilot project has been launched which will see Brazilian investor BNDESPAR commit up to $25m to a fund – the manager of which will be selected in August.

BNDESPAR, the investment arm of the Brazilian Development Bank, will invest up to R80 million ($25 million; €23 million) to a credit fund that it is hoped will help stimulate the venture debt market in Brazil.

The fund, which has a target of up to R200 million, will back small and medium-sized companies with a maximum annual turnover of R90 million in the information technology, new materials, biotechnology, nanotechnology and audio-visual sectors.

BNDESPAR’s commitment is capped at 50 percent of the total equity of the fund, with commitments to be sought from other investors. The fund will be run by a private manager, expected to be announced in August.

The fund is a pilot project initiated by BNDESPAR, as it seeks to mirror the success of venture debt in other markets – notably the US – in providing debt to innovative companies. It is estimated by the organisation that venture debt has the potential to become a R$1 billion market in Brazil.

The fund will aim to increase the supply of finance to micro, small and medium-sized enterprises which have had difficulty accessing the traditional credit market and usually do not have sufficient assets to offer as collateral.

The securities backing the fund’s portfolio will be backed by 12-48 month maturities and flexible guarantees which may involve future receivables and intellectual property rights.

BNDESPAR is one of the largest investors in Brazilian private equity and venture capital, with R$3 billion committed to 42 funds and more than 170 companies in 15 sectors.