A law that enhances the Venture Capital industry in Argentina

The law ''Ley de Emprendedores y Capital Emprendedor" was passed by unanimity (56 positive votes and no negative votes) on march the 29th in Argentina. The implementation of the law will be of importance for the creation of new Ventures, which will generate new highly skilled jobs in Argentina and will uncover news ways of creating value for society.

We feel that the existence of ARCAP has become more meaningful since, with the passing of the law Ley de Emprendedores y Capital Emprendedor by unanimity, we will have a friendlier ecosystem to enhance local investments and to attract foreign investments. Also, high impact entrepreneurs will find new instruments to finance their projects in our country''. Said Marta Cruz, ARCAP's President.

Some of the key aspects of the law that will enhance the Venture Capital industry in Argentina when fully implemented are:

  • The creation of the Venture Capital Institutions registry.
  • Tax Benefits for Venture Capital Institutions.
  • The creation of the Fiduciary Fund for the Development of Venture Capital (FONDCE).
  • Crowdfunding platforms.
  • Seed Fund program.

The creation of the Venture Capital Institutions registry

A registry for the Ventures Capital Institutions will be created where different institutions and investors will be able to register: Fund Managers, Private Investors, Funds and Trusts, wether they are public or private or if they manage their own Funds or other institutions or investors funds. These institutions will share the characteristic of investing in Ventures and Entrepreneurs, as considered by the law.

Tax Benefits for Venture Capital Institutions

Local investors will be able to make deductions from their income tax. More specifically, they will be able to deduct a percentage of the total investments they do in Venture Capital Institutions or Ventures. Regular investors will be able to deduct up to 75% of the total investment they do from their income tax contributions and, investors who invest in less developed areas or with lower access to capital, will be able to deduct up to 85%. They will be able to deduct a maximum of 10% of their net income. Finally, the total national deductions will have a limit of 0.02% of the nominal argentine GDP and they will be retroactive to July, 2016.

The creation of the Fiduciary Fund for the Development of Venture Capital (FONDCE)

The law creates the Fiduciary Fund for the Development of Venture Capital (FONDCE). This Fund will work as an Administration and Financial Trust that will have the objective of financing Ventures and Venture Capital Institutions.

The FONDCE will:

  • Provide credits for Ventures and Venture Capital Institutions.
  • Provide Non Reimbursable Contributions (ANR) for Ventures and Venture Capital Institutions and also for Incubators and Accelerators, as long as the Ventures or Institutions also provide a counterpart.
  • It will perform capital contributions in Ventures and Venture Capital Institutions.

During 2017, three Venture Capital Funds will be created in conjunction with the private sector. For these funds, the FONDCE will provide contributions of up to 40% of the total capital committed, which will have to be a minimum of US$18M from the private counterpart.

To sum up, the beneficiaries can be Ventures, Entrepreneurs or Venture Capital Institutions.

Crowdfunding platforms

The creation of Crowdfunding Web Platforms will be implemented. This initiative will connect Investors to Ventures in a simple and transparent way. Basically, companies will be able to obtain investments by selling equity or by offering convertible notes online and, also, they will be able to receive investments from Trusts. One interesting point here is that the creation of a secondary crowdfunding market will be implemented, where investors will be able to sell their equity and convertible notes, injecting liquidity to the market.

Seed Fund program

The Seed Fund Program will be created. This program will provide technical and financial assistance to Ventures channeled through Accelerators. The financial assistance will have the following vehicles.

  • Soft loans.
  • Non Reimbursable Contributions (ANR).
  • And the FONDCE as a source of contributions.

The main objective of the Seed Fund Program is to create Accelerators in Argentina in order to boost the quality of the entrepreneurs. During 2017, 10 accelerators will be co-created with the private sector.

To sum up, the investment and entrepreneurial ecosystem need each other and the law Ley de Emprendedores y Capital Emprendedor will contribute to enhance it, generating the creation of new Ventures that will contribute to the creation of new jobs that, at the end of the day, will create the triple outcome that we expect: social, environmental and economic.