Sai do Papel launches its fourth venture capital fund with US$3.7 million under management

Sai do Papel announced the launch of its fourth venture capital fund, bringing assets under management to R$20 million (US$3.7 million). The Brazilian firm, which also operates an innovation hub in Rio de Janeiro, has incorporated an investment model that combines equity and venture debt to offer investors greater liquidity and support startups as they grow into more advanced stages.

The new strategy reflects the firm's evolution since the launch of its first vehicle in 2017 and aims to strengthen the financial sustainability of both the fund and its portfolio companies.

A new model combining equity and venture debt

Carlos Junior, CEO of Sai do Papel and co-founder of Rio Innovation Week (RIW), explained that the fourth fund marks a shift in the firm's investment thesis.

According to the executive, incorporating venture debt structures will complement traditional equity investments with instruments that offer greater flexibility to both investors and entrepreneurs.

"Our thesis is multisectoral, but the entrepreneur must agree with this model, which works like a kind of venture debt with a kicker," said Carlos Junior.

The structure designed by the firm involves a convertible loan with a return higher than the CDI but lower than that offered by traditional bank loans. It also gives investors the option to redeem their capital starting in the first year.

For startups, the proposal includes grace periods of between one and five years, financing costs below market rates, and no real collateral, setting it apart from conventional financing arrangements.

Portfolio experience drove the strategy shift

The decision to adopt a mixed model came after analyzing the performance of investments made since the first fund was established in 2017, with an initial R$2 million (US$370,000).

Since then, Sai do Papel has invested in nearly 30 startups. According to Carlos Junior, fewer than 10% of the portfolio companies recorded total losses (write-offs), although approximately half did not generate significant returns for the fund because they grew without becoming attractive acquisition targets or distributing dividends.

As a result of this experience, the firm decided to focus its new investments on companies that have already achieved commercial validation.

"Today, we invest in companies that already generate between R$1 million (US$185,000) and R$2 million (US$370,000) in annual revenue and grow between 50% and 100% annually. The capital we provide is intended to scale the business, not validate it," the CEO said.

A multisectoral thesis with room for club deals

Although its investment strategy is multisectoral, Sai do Papel also remains open to companies in the real economy, in addition to technology startups.

Kuba, a Brazilian headphone manufacturer, is among the companies in its portfolio.

For startups that do not fully fit the fund's thesis but represent attractive opportunities, the firm can also structure investments through club deals.

Carlos Junior explained that while investments made directly by the fund use contracts defined by the firm, club deals are structured according to terms set by the startup itself.

Arca Hub opens a new location in Rio de Janeiro

In addition to its investment activities, Sai do Papel operates Arca Hub, one of the leading spaces for entrepreneurship in Rio de Janeiro.

The hub recently moved its operations to a new location in Copacabana, inside Shopping Cassino Atlântico.

The new facilities span 700 square meters, with more than 70 workstations, meeting rooms, and an event space twice the size of the previous location.

With this expansion, the company continues to strengthen its presence in Brazil's innovation ecosystem, combining its investment activities with spaces dedicated to fostering entrepreneurship and the development of new businesses.