ABSTRACT
This chapter investigates the development of the venture capital (VC) market in Brazil in the context of an evolving domestic institutional environment. During the past few decades, government programs developed by federal actors such as the Brazilian Development Bank (BNDES) and Funding Agency for Innovation Research (FINEP) have created the main operational foundations of the industry and the regulatory framework for VC investments. While definitely improved, the overall institutional environment is still not entirely conducive to the healthy development of the domestic VC market. The main impediments include lack of liquidity (depth of the capital market for IPOs); a complex tax system; lack of coordination among the actors of the innovation system; a relatively ineffectual system for intellectual property protection (especially slow processing of patents); and the low quality of the business legal environment as reflected in the bureaucracy around starting, running, and closing a business. All these factors combined present a formidable challenge for the further development of the VC market in the country.
