Internationalization of Brazilian Software Companies, the role of public financing and public and private venture capital

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1 Internationalization of Brazilian Software Companies, the role of public financing and public and private venture capital Fabio Marinho, Federal University of Rio de Janeiro Claudia Pavani, University of São Paulo

venture capital Fabio Marinho, Federal University of

2 The SOFTEX Project SOFTEX 2000 was a joint venture program between the Brazilian government and local software companies, created in February 1993 with the objective of promoting the export of software developed in Brazil

software companies, created in February 1993 with the

3 Action 1: promote the development of new software companies Two projects were envisioned to promote the creation of new companies: Softstart: aims including entrepreneurship teaching in computer science undergraduate programs of Brazilian universities since students at the time had no business disciplines in their curricula. Genesis: aims of creating incubators for new software start-ups companies around universities.

undergraduate programs of Brazilian universities since students at the time had no business disciplines

4 Action 2: financing the companies Another important step was to create conditions to finance these start-ups and others already existing software companies to grow and consolidate their position in the domestic IT market and also reach the international market. Government had to play this role since at that time there were not private venture capital companies in the country or lines of credit for these kind of companies. Software companies characteristics : small size, inappropriate collateral and guarantees, etc.

5 Financing the companies SOFTEX invited to join this effort three organizations: FINEP Financiadora de Estudos e Projetos an agency from the Ministry of Science and Technology BNDES - National Bank for Economic and Social Development SEBRAE - Brazilian Service of Support for Micro and Small Enterprises FINEP began to offer a new financing line with return based on the companies results. BNDES created a new a new line of credit for software companies - PROSOFT. The payment of the principal without any interest update plus a variable income equivalent to a certain percentage of the company actual revenue.

1997 FINEP began to offer a new financing line with return based on the companies results.

6 BNDES - PROSOFT Project objective Contribute to the development of national software industry and Information Technology (IT) services market through strengthening national companies - supporting productive investment, innovation, consolidation processes and business internationalization. Source:

strengthening national companies - supporting productive investment, innovation,

7 Source: Financial incentives to Brazilian software industry

8 PROSOFT results Since its conception in 1997 until September 2013, PROSOFT had a portfolio of R$ 5 billion (US$ 2.5 billion) for the 400 contracted operations. These operations included a number of internationalized software companies.

(US$ 2.5 billion) for the 400 contracted operations.

9 Private Venture Capital The venture capital industry starts in Brazil in 1970, from government initiatives. In the two decades that followed, these few initiatives languished because of the economic instability, marked by high inflation, high real interest rates and the debt crisis. In 1994, the industry began to show unprecedented growth rates due: The economic stability with low inflation rates and regulatory changes, Investment in dotcoms companies and their performance in the North American market; Major players such as BNDES and FINEP started financing software companies

10 Private Venture Capital In March 2000 was founded ABCR - Brazilian Venture Capital Association, with the objective of implementing the Venture Capital and Private Equity Industry. Several software companies received funding from private members of ABCR.

implementing the Venture Capital and Private Equity Industry.

11 Internationalization of Brazilian software companies Currently, several Brazilian software companies are internationalized. In 2013 seven IT companies were in the ranking of the 50 more internationalized Brazilian companies.

12 Internationalization Index The Internationalization Index prepared by the Brazilian Society of Transnational Corporations and Economic Globalization (SOBEET) follows the methodology defined by the United Nations Conference on Trade and Development. The internationalization index is devised using three components of operation abroad: jobs, assets, and total revenue.

defined by the United Nations Conference on Trade and Development.

15 CONCLUSION The partnership with government funding agencies to create solutions aimed capitalizing software companies have proved successful. The export of software is currently difficult to measure, should take into account the results obtained by the internationalized software companies. In Brazil, among the fifty most internationalized Brazilian companies, there are five software companies. BNDES: more than 400 contracted operations till 2013 equivalent to US$ 2.5 billion Private venture capital: the actions of BNDES and FINEP helped to strength the venture capital companies in Brazil

In Brazil, among the fifty most internationalized Brazilian companies, there are five software companies.

16 Thank you!

Deutsch Brasilianische Wirtschaftstage - 2009. 01. September 2009

Deutsch Brasilianische Wirtschaftstage - 2009 01. September 2009 Apex-Brasil The Brazilian Trade and Investment Promotion Agency was officially established in 2003 in partnership with national industry