At the market doorway

Companies supported through the PIPE program can count upon Finep to consolidate their business


The Small Business Innovation Research (PIPE) program, funded by FAPESP, is beginning its third phase (Phase III). An agreement signed between the Foundation and the Financier of Studies and Projects (Finep) in April will allow that more or less forty PIPE companies to have access to the resources of the Support for Small Businesses Program (Pappe), of the Ministry of Science and Technology (MST), to initiate the process of the commercialization of products developed during phases I and II. The maximum value of the budget for each project will be R$ 500,000.00. The final date for company inscriptions onto the Pappe-Pipe III program ends on the 16th of November and the signing of the project contracts will be done during December 2004.

The Pappe, created by the federal government last year in order to support innovation in technology based companies, was inspired on the PIPE model. The resources destined to the federal program are passed on by Finep to the various Research Support Foundations of diverse States to finance research and development (R&D) within companies. For example, in Phase I of the PIPE program, the researcher must present a work plan and in Phase II define a business and research development plan.

In São Paulo, where FAPESP has already financed the first two phases of the process of entrepreneurial innovation, it was agreed that the Finep would support the third phase, or that is to say, the engineering of the product and the conquering of the market. “Finep accepted our proposal of making use of the Pape resources for financing phase III of the PIPE program. One needs to respect the specificity of regions of the country, without creating a strait jacket of a single model. It wouldn?t make any sense to duplicate the same program in Sao Paulo”, explains José Fernando Perez, the Foundation’s Scientific Director.

Finep resources, Perez recognizes, will be sufficient for the companies to position themselves in the market place. Nevertheless, they could function as initial capital for the development of the new business. “In order to gain a foothold in the market it would be necessary to have between R$ 3 million and R$ 5 million for each company”, he says, underlining that this capital cannot be obtained under the umbrella of the MST but through the Ministry of Development, Industry and Exterior Commerce (MDIC), more precisely, through the National Economic and Social Development Bank (BNDES). “In this case, the resources must not have the character of loans, but to be an investment in the form of participation in the company?s shares”, he suggests.

By way of the Pappe-Pipe III program, FAPESP and Finep will support, for a period of two years, PIPE companies that have already conducted or obtained approval of the final report on the conclusion of the first year of phase II. In the evaluation of the proposals of the stage of innovation development, the project for the product development and the business plan for the commercialization of the innovation, will be taken into consideration. “Let’s deal with market criteria”, observes Perez.

The partnership with Finep is the second to be carried out by FAPESP within the PIPE environment. The first, the PIPE Entrepreneur, signed with the Institute Empreender Endeavor and the Brazilian Service for the Support of Micro and Small Businesses of Sao Paulo (Sebrae-SP), offers tools for the promotion of a rapid entrepreneurial development by the program’s participants via a training course in administration.