The Brazilian startup market presents a very promising investment scenario, offering numerous opportunities for entrepreneurs, especially in the technology and service sectors.
According to data collected by Folha de São Paulo, the startup market received an injection of US$ 9.4 billion (approximately R$ 53 billion) in 2021—almost 2.6 times higher than the US$ 3.5 billion recorded in 2020.
These figures show that the startup ecosystem is growing both in the number of businesses and in investment volume. Since 2011, the only downturn was in 2016, during the economic crisis triggered by the impeachment of former president Dilma Rousseff, which impacted the entire market.
Learn more about the Startup market in Brazil.
What Is a Startup?
A startup aims to achieve aggressive growth by providing innovative products and services that solve a specific problem or pain point. It’s also possible for a startup to enhance existing goods by improving their use.
Although it’s not a rule, startups generally operate in the digital technology sector. Well known in the U.S., the term gained popularity between 1996 and 2001 during the internet bubble.
Literally meaning “emerging company,” “startup” has no definitive translation in Portuguese. For some, a startup is characterized by low operational costs, small teams, and rapid, scalable growth.
The Startup Market in Brazil
As the 5th most populous country and the economic leader in South America, Brazil naturally becomes an attractive destination for foreign investments, showing excellent results in the tech and innovation sectors.
Brazil has already seen multimillion-dollar startup success stories, such as the acquisition of 91% of Buscapé, a price comparison platform, by Zoom, an e-commerce platform, for US$ 342 million. However, like all companies, startups must deal with the challenges imposed by government bureaucracy. In Brazil, the process of starting a business and registering trademarks can be slow.
A Major Obstacle: Taxation
In the Brazilian market, one of the main challenges is the high tax burden, the result of a complex legislative system composed of various laws, administrative rulings, and legal interpretations that must be strictly followed by investors—under penalty of fines or even criminal tax charges.
However, depending on their revenue and maturity level, startups may choose the Presumed Profit Regime (Lucro Presumido), which offers a more favorable tax structure for their business model, promoting lawful tax reduction (tax avoidance).
With Lucro Presumido, companies can calculate their taxes more easily compared to the Actual Profit Regime (Lucro Real), determining the amount payable for IRPJ and CSLL using a fixed rate table. Any company with annual revenue not exceeding R$ 78 million can opt for this regime.
Brazil as an Expansion Opportunity
Finally, as one of the world’s largest economies with a massive market, Brazil offers a highly favorable environment for startups across various industries. In addition to the vast consumer base, the country hosts numerous accelerators, cities full of successful business cases, and an ecosystem that inspires both expansion and growth.