Considering the official database of the Brazilian startup ecosystem, StartupBase, a service linked to the Brazilian Startup Association (Abstartups), reports that the country reached the beginning of 2021 registering a total of 13,747 startups. Some of them even reveal modest and long-term goals, but modesty aside, the truth is that practically all of them aim to reach the 'unicorn' condition as soon as possible.
Currently, only 11 Brazilian startups among this entire universe of competitors have crossed the finish line in this race. Meanwhile, the competition remains heated and moving a lot of money. Proof of this is that in the first three months of 2021 alone, Brazilian startups received US$ 1.9 billion in funding. This volume represents more than half (54%) of the total raised throughout 2020 according to data provided by Inside Venture Capital, a report published by Distrito Dataminer, the market intelligence arm of open innovation platform Distrito.
A quick analysis of the plans of the startups to seek the top positions reveals a focus mainly on aspects such as the consolidation of the innovative idea, marketing, and topics related to creativity. Despite this, many of them end up not being able to achieve their goals because they have not managed to structure themselves in an adequate manner with regard to the accounting aspect, which is certainly one of the most analyzed by potential investors.
In this sense, the definitive steps to accelerate the journey are:
1) Evaluation of the tax aspects in the Business Plan
A more careful look at the profitability of the business in the early stages of planning makes all the difference. Many times the enthusiasm for an innovative idea prevents the investigation of fundamental issues such as the possibility of double taxation on the provision of services or the geolocation that prevents the entrepreneur from taking advantage of advantages offered by municipalities that practice lower tax rates in relation to large centers. The sooner these factors are evaluated, the better the chances of avoiding a reduction in profit margins and ensuring the financial sustainability of the startup.
2) Total separation between company and partner resources
Another major cause of problems that lead to the closure of promising projects is the confusion that is usually made when it comes to using financial resources. For lack of clarity on this issue, many times the partners use the company's money for their personal needs and vice versa. This kind of attitude is usually even worse when the startup receives some kind of external investment. Most entrepreneurs confuse contribution with acquisition, and when this happens they spend the money as if they had sold the company, when in fact this resource should stay in the company to subsidize its growth. To avoid this situation, the separation of the financial structure must already be established in the accounting structure of the company.
3) Mutual convertible into equity
It is nothing more than a loan from the investor with the objective of promoting the startup and, in the future, becoming a partner in the company.
Many aspects need to be carefully studied before signing the contract and accepting the contribution, since there may be a dilution of the entrepreneur's equity stake. There are tools and ways to convert the loan into equity that can protect the entrepreneur from the dilution of his percentage in the company, so have a proper legal advice "before" accepting the contribution of investors.
4) Unpreparedness for investor audits
No startup can reach the level dreamed of by its creators if it does not receive external investments to support its growth. Despite this, few entrepreneurs really worry about leaving the company's accounting structure prepared to receive these contributions. Every day investors of all kinds are more demanding as to the real information about the situation and potential of the startups in which they are interested in applying their resources. That is why they perform the most demanding audits, and at the slightest sign that something is wrong or some information is missing, an often insurmountable barrier is created between the resource and the startups. Thus, the higher the quality of the startup's accounting structure, the greater its chances of attracting investments and growing.
The preparation for startups to ensure the adoption of these four steps safely towards a successful journey is the structural part of the work developed by GAAP Auditores & Consultoresa company that throughout its history is proud to have been responsible for the accounting structuring of some of the most successful startups in the Brazilian market.
Its comprehensive vision of the innovation universe and deep knowledge of the challenges that surround the activity of entrepreneurs have consolidated the company as a reference and strategic support provider for the Founder Institute São Paulothe world's largest program for launching startups at the ideation stage. Through this initiative, entrepreneurs and early-stage teams build their businesses alongside a critical support network of local startup experts who share in their success and, through a structured and challenging business-building process, have helped former students raise more than $950 million.
GAAP's managing partner Henrique Macedois a Founder's mentor, open enrollment and enrollment is open for the next class. Take the opportunity and get ahead of the competition.
