The government of Minas Gerais will inject R$15mi ($6.2mi) in a startup acceleration program designed to retain talent and bring investments to the Brazilian state.
The Startups and Entrepreneurial Ecosystem Development (SEED) program will provide up to R$80,000 ($34,000) in equity-free funding to 40 early-stage startups led by up to three people. Three rounds of the program are expected to take place until the end of 2014.
The acceleration and mentoring program will last six months and during that time, the entrepreneurs will be based in Minas Gerais capital Belo Horizonte and be part of a tech cluster dubbed "San Pedro Valley." To start with, the initiative is not targeting any specific segments.
"We are open to any technology-based idea that is scalable and sustainable," says the chief executive at the Minas Gerais State Office for Strategic Priorities, André Barrence.
Local and international startups are encouraged to apply for the program and the application process will commence in late September. The best ideas will be selected in October and the first intake of entrepreneurs will start on the program in December.
A private sector consortium has been chosen through a tendering process to deliver the startup acceleration initiative. This group of companies includes coworking firm The Hub, which is where the entrepreneurs will be based during the six months of the program.
As well as the government investment, other partners will support SEED in ways other than hard cash, including Google and Amazon, with resources such as cloud storage.
The Minas government is also looking to attract investors to benefit from the startup ecosystem that it is working to create.
"While we will accelerate startups, we want investors who believe in those ideas too. We already have a group, albeit limited, of investors, angels and so on, but we want to turn Minas Gerais into a destination for any investor looking for digital enterprises," Barrence says.
"After a program like ours, those companies will had a 'seal of approval' of sorts. Of course, not all of them will be funded, but backers will be much more comfortable when choosing their investments among the ideas we will accelerate and mentor," he points out.
A paradigm shift
A six-month period saw Barrence's team maturing the idea for SEED and establishing the framework for the program. He says that there were limitations that had to be overcome, such as the inability for the government to support individuals financially for the development of a tech-based business idea. A bill was put forward to make those changes possible, which then became law.
"[The ability to fund individuals] is something that only the state of Minas Gerais has; we will not require that the entrepreneur has a formalized company to be part of the program. All we want is the ideas and the knowledge they will bring," Barrence says.
As well as fostering the creation of a center of innovation excellence in Minas Gerais, SEED is also intended to tackle a brain drain that has been affecting the state for decades.
"A major problem that bothers us a lot is the fact that we have talented people with very good educational backgrounds in Minas Gerais but end up leaving the state and going elsewhere. And we want to retain this human capital," Barrence says.
"We want to do that by bringing in companies that will create attractive jobs for these young people. At the same time, we will create an environment where they will create their own jobs by developing business ideas. The ideal scenario is to get people to think 'Why would I leave Belo Horizonte if there are plenty of interesting jobs here?'," he adds.
As the government will take no shares in the future companies, Barrence says the program's measure of success will be the creation of a whole new mindset when it comes to entrepreneurship and a thriving startup scene in Minas Gerais.
"We want Minas to become the birthplace of digital technology entrepreneurs in Latin America and develop a tradition of nurturing people who turn great ideas into reality."