The Entrepreneurs Act or the so-called "Law of Entrepreneurs", enacted by Law 27349 by Argentine Congress on March 29th, 2017, represents Argentina´s strong commitment to support entrepreneurs. The Entrepreneurs Law seeks to generate the conditions to foster and develop the Argentine ideas, talent and creativity.
The new law establishes a new type of business entity called the “Simplified Joint-Stock Companies" (SAS in the Spanish acronym). Under this new legal framework, entrepreneurs can in just 24 hours create a new company online, open a bank account and register it before the Federal Taxation Organism.
In order to support entrepreneurs giving them more tools and opportunities, the Law creates the Venture Capital Institutions Registry, where investors, institutions and managers will be able to take some for those investments they make. This incentive will contribute to federalize Venture Capital investments in Argentina by giving more benefits to less developed Argentinean regions.
Capital investment contributions made by venture capital investors may be deducted from income tax, under the conditions and in the amounts set forth in relevant regulations, which shall exceed neither seventy-five percent (75%) of such contributions nor ten percent (10%) of the net taxable income for the fiscal year or its proportional amount based on the number of months in operation.
Additionally, it establishes a Fiduciary Fund for Venture Capital Development (FONDCE for its Spanish acronym), which will offer different financing programs for entrepreneurs and startups, such as Seed Fund Program, Accelerator Fund Program, Expansion Fund Program and Crowdfunding System Regulation.
SEED FUND PROGRAM
The objective of the “Seed Fund” is to promote the development of ideas or early stage startups (less than 1 year for startups or less than 4 years for social impact ones). To accomplish this objective the FONDCE gives them a zero interest loan with 5 years repayment term.
This program s supported by a large number of Argentinian registered Incubators across the country, which help startups to elaborate their Business Plan and prepare a pitch video to apply.
Each Incubator receives a nonrefundable contribution to help startups to transform their ideas and projects into national and/or global competitive businesses by giving them mentorship, resources, knowledge and access to business networks.
ACCELERATOR FUND PROGRAM
The objective of the “Accelerator Fund” is to promote the development of early stage (less than 5 years) technological or scientific based startups. To achieve this goal the program will select accelerators by constituting a Jury formed by experts in Venture Capital. Once the Accelerators are selected, the FONDCE will co-invest in the selected startups for the period of 4 years.
Besides, each Accelerator receive a non refundable contribution to help startups to transform their projects into globally competitive businesses by giving them mentorship, funding, resources, knowledge and access to business networks.
EXPANSION FUND PROGRAM
The objective of the “Expansion Fund” is to promote the development of technological or science-based startups which are in the early stage (less than 7 years).
To reach this purpose, the program selects Venture Capital Trusts via a deliberation of a jury formed by experts in Venture Capital. Once those Trusts are selected the FONDCE gives them 40% of the total amount required (30 million USD each) to complete the investment.
In addition, each Trust will receive a non refundable contribution to help startups to transform their projects into globally competitive businesses by giving them mentorship, funding, resources, knowledge and access to business networks.
CROWDFUNDING SYSTEM REGULATION
The Entrepreneurs Act created the first regulation in a Latin American country for Crowdfunding platforms to promote the investment in startups through that tool.
The Crowdfunding System will encompass crowdfunding projects submitted on a crowdfunding platform authorized by the Argentine Securities and Exchange Commission and aimed at investors, through any of the forms of participation in crowdfunding projects set forth in section 24.
Secretariat of Entrepreneurs and SMEs, Ministry of Production.
Startup: Is a newly emerged entrepreneurial and productive venture which challenge is to search for a respectable and scalable business model.
Scaleup: development-stage business that is looking to grow in terms of market access, revenues, and number of employees, adding value by identifying and realizing win-win opportunities for collaboration with established companies. As with any capital-intensive company, the financing goal for a scaleup is to reward its investors, either by being acquired via an M&A or via an IPO.
In the Entrepreneurs Act we define "Venture" as any for-profit or non-profit activity performed in the Argentine Republic by a newly established legal entity or an entity which has existed for not more than seven (7) years.
Each programme (Seed, Accelerator and Expansion Funds) has a time limitation (up to 1 year old, up to 5 and up to 7 years old) but there is no specific reference on the growth of them. If your company has become a "scale-up" company in less than 5 years you can get funds from the accelerator fund programme and also from the expansion fund.
Generally speaking, the amount of investments accelerators does for companies fits more for a startup and the amount of money a scale-up company may look for fits more with a VC.
In conclusion, if we divide "ventures" into startups and scale-ups we can place our seed and Accelerator Fund Programme for startups and our Expansion Fund Programme for scale-ups.
Mariano Mayer, Secretary of Entrepreneurs and SMEs, Ministry of Production.