Receiving a round from international investors is already a reality for several Latin American startups. The process, which can be somewhat bureaucratic, still leads to many doubts for founders and leaders who intend to raise funds or are already doing so. Understand how it is possible to move the amount raised to Brazil safely and capitalize on your operation.
Foreign investments represent an important part of the Brazilian companies growth and the entire Latin American region. In 2022, foreign investors participated in 39% of the rounds that took place from January to April for startups founded in Brazil, according to Distrito data.
Recently, we have seen that despite a drop in investments, venture capital funds have not slowed down their fundraising pace, and by July 2022, the amount raised was $137.5 billion, a positive sign for startups seeking investments from international funds.
In an exclusive statement to Trace, Mercedes Bent, Partner at Lightspeed, stated that: “At Lightspeed, we believe that Latin America is one of the most attractive and least invested regions in the world.”
Seeking foreign capital contribution
There are several reasons to seek investments beyond the national territory. For startups, for example, it is possible to find more options for venture capital funds, many of them focused on specific verticals, in addition to having access to more capital. In 2021, the value of investments made by American VCs totaled approximately $300 billion, almost double the previous year.
For investors, the advantages include finding good business opportunities in a region that has gained global prominence, especially when it comes to the innovation ecosystem.
American VCs usually offer several advantages and attract Brazilian companies, which seek to approach these investors to raise funds. To do this, many choose to set up a legal structure and receive the round in the US.
Even though investors are interested in the Brazilian innovation market, the instability experienced in the country still represents an obstacle, so having an international structure prepared to receive investments is the best option.
A very common structural model for this type of operation is to create a holding company in the Cayman Islands, with another company in the United States and, below, the Brazilian operation. In addition, it is necessary to create an international bank account, part of the process that can take several months due to bureaucracy.
How to transfer your round from the US to Brazil
Once the round is received in the United States, or any other foreign country, it will be necessary to bring it to Brazil, where your company’s operation is located.
With an international account , the transfer could be made to traditional Brazilian banking structures, but in practice, this may not be the best option for startups.
This is because banks are not usually prepared for this type of transaction and, in addition to the founder falling into a large bureaucracy, which may even include requesting documents from their investors, fees can reach 4% of the transfer value.
Foreign banks that allow this type of transfer, on the other hand, are not intuitive and offer a user experience that is not very friendly to their customers, especially for those who are dealing with this process for the first time.
Additionally, after the transfer, it is necessary to take care of the paralegal area, which includes mandatory declarations for the use of the amount raised on national territory.
Currently, however, there are solutions, such as Trace’s, that facilitate this type of transaction. If this was a time-consuming and expensive process, today it is possible to do it in up to one day and with fees lower than 0.5%.
International remittance with Trace
Trace offers solutions for international remittance at the lowest cost in the market and in record time. You can receive your transfer on the same day and count on the support of experts who advise on best practices and the ideal time to bring your investment, according to currency variations.
In addition, after the transfer, Trace clients have access to free legal support for declarations such as RDE-IED, RED-ROF, CDNR, and periodic statements.
Ana Zucato, CEO of Noh and a Trace client, talks about her experience with international transfers: “I am impressed with how much better Trace’s experience is compared to the market. I was able to locate my seed round in a single day, with an excellent exchange rate and a personalized user experience.” Learn more about Noh’s experience with international transfers.
