Building a startup requires following a specific order: identifying a real problem, validating demand with customers, creating an MVP, measuring traction, formalizing the company at the right time, and only then seeking scale or investment. In Brazil, the legal definition of a startup considers criteria such as... R$ 16 million in annual gross revenue, up to 10 years of CNPJ (Brazilian tax ID) and an innovative business model. This care is important because approximately 90% of startups fail, This is usually due to a lack of validation, poor timing in fundraising, and execution without a market focus.
In this guide, you will understand what a startup is, how to create a startup from scratch, when to formalize it, how much it costs to start, and how to know if the business is ready to raise capital.
Key points
- Starting a startup isn't just about opening a company: it's about validating the problem, the demand, and the business model before scaling.
- In Brazil, a startup can have up to R$ 16 million in annual gross revenue and up to 10 years of CNPJ (Brazilian company registration number)., provided it has an innovative character.
- MVP is not just any incomplete product: it's the smallest experiment capable of generating real learning from users.
- Seeking investment too early is usually a mistake. Investors want evidence, not just an idea.
- The safest sequence is: problem → validation → MVP → traction → formalization → fundraising → scale.
What is a startup?
A startup is a company created to solve a problem in an innovative way, with a repeatable and scalable model, operating in an environment of uncertainty. This is the most useful definition for anyone who wants to understand how to set up a startup without making the mistake of confusing a startup with just any new company.
Simple and straightforward definition
A startup is a business searching for a model that operates predictably and can grow without increasing costs proportionally. Therefore, the initial focus is not on a large structure, but on rapid learning.
In practice, a startup tests hypotheses. It wants to discover if there is a real pain point, if someone will pay for the solution, and if the acquisition channel is sustainable. The concept connects directly to the method. Lean Startup, based on the build, measure and learn cycle.
What differentiates a startup from a traditional company?
The key difference lies in uncertainty and scalability. A traditional company usually starts with a more predictable operation, local demand, and linear growth. A startup, on the other hand, is born to find a replicable model on a larger scale.
Does a startup have to be a technology startup?
No. A startup doesn't necessarily have to be a software company. What needs to exist is innovation in the business model, the product, the service, or the delivery method.
In practice, technology often emerges because it helps with scaling. But a startup can operate in education, healthcare, logistics, agriculture, finance, or retail, as long as it has an innovative proposition and the potential for scalability.
What does it mean to be scalable, repeatable, and innovative?
Being scalable means growing revenue without increasing costs proportionally. Being repeatable means being able to deliver the same solution to many customers with a standardized process. Being innovative means proposing a new or significantly better way to solve a problem.
These three elements are crucial for anyone researching how to start a startup in Brazil. Without them, the business might be great, but it's likely to be better suited as a traditional small business than a startup.
How to start a startup from scratch: step by step
Building a startup from scratch requires following logical steps and avoiding starting with formalization or a complete product. The most efficient order is to validate the problem, define the value proposition, test the model, launch an MVP, and measure market signals before scaling up.
1. Identify a real market problem.
The first step is to find a relevant, frequent, and costly pain point that justifies a solution. Sebrae Minas recommends starting with an idea linked to a real pain point and evaluating market potential and scalability instead of relying solely on intuition.
How to find relevant pain points
Look for problems that have at least three characteristics:
- They happen frequently.
- They result in a loss of time, money, or revenue.
- They are already leading people to improvise solutions.
Positive signs include manual spreadsheets, excessive WhatsApp use, rework, queues, operational errors, and recurring complaints.
How to interview potential clients
Validation interviews aren't for selling ideas. They're for understanding real behavior. Conduct 10 to 20 initial interviews with the same customer profile.
Useful questions:
- How will you resolve this today?
- How much time or money does this problem cost per month?
- What have you already tried to do to solve it?
- What happens if nothing changes?
Avoid asking “would you use my product?”. Ask about facts, not opinions.
2. Define a clear value proposition.
The value proposition is the objective promise of what problem the startup solves, for whom it solves it, and why its solution is better than the current alternative. Without it, product, marketing, and sales become confused.
What problem does your product solve?
Describe the transformation in one sentence. Example: "reduce the financial reconciliation time for small clinics by 70%". The more specific, the better.
A good value proposition needs to answer:
- which pain solves
- what result does it deliver
- Why is it different?
- why is it worth paying
For whom does he solve problems?
A good startup doesn't begin by trying to serve everyone. It starts with a clear niche. Choose a specific segment, company size, or customer profile.
If you still don't know who to sell to, you haven't validated the problem enough.
3. Choose a business model.
A business model is the logic behind how a startup creates, delivers, and captures value. Business Model Canvas It helps to organize this definition clearly.
B2B
B2B means selling to businesses. The sales cycle is usually longer, but the average order value tends to be higher and retention rates can be better.
B2C
B2C means selling to the end consumer. The market may be larger, but acquisition usually requires volume, branding, and efficient channels.
B2B2C
B2B2C combines an intermediary company and an end consumer. It is common in healthtech, edtech, and fintech companies that distribute solutions through partners.
B2G
B2G means selling to the government. It can be interesting in govtech, but it requires attention to public processes, compliance, and longer cycles.
How to choose the ideal model
Use three criteria: where is the most relevant pain point, who pays for the solution, and which sales channel can the startup operate efficiently?.
4. Structure the idea using a Canvas.
The Canvas organizes business hypotheses into visual blocks and facilitates quick adjustments. For those who want to understand how to create a startup, it's a simple tool for aligning proposition, customer, channels, revenue, and costs.
What to put in each block
The main building blocks of the Canvas include:
- customer segment
- value proposition
- channels
- relationship
- revenue sources
- key features
- key activities
- key partnerships
- cost structure
The goal is not to "get it right the first time." The goal is to make hypotheses explicit in order to test them in the market.
Common mistakes when filling out the Canvas.
The most common mistakes are:
- write generic sentences
- trying to cater to many audiences
- ignore acquisition cost
- Do not set primary channel.
- confusing functionality with value proposition
5. Create an MVP
MVP is the smallest viable product capable of testing the central business hypothesis with real users. Sebrae (Brazilian Micro and Small Business Support Service) uses this concept as an essential step for learning quickly and reducing waste, including in content about... MVP and in the material of Sebrae/SC.
What is MVP in practice?
An MVP doesn't have to be a complete software program. It can be a landing page, a form, a clickable prototype, a manual operation, or even a service provided via WhatsApp.
The right test depends on the hypothesis. If the question is about interest, a landing page is enough. If the question is about recurring usage, you need to test real-world behavior.
Simple MVP examples
Common examples:
- landing page with waiting list
- form to capture demand
- prototype in Figma
- manual operation via WhatsApp
- MVP concierge with human support.
- Pre-order before full development.
What is not an MVP?
He is not an MVP.
- A product full of features but without users.
- Expensive app developed before validating demand.
- "Almost final" version, created over months in secrecy.
6. Validate hypotheses with customers and the market.
Validation means obtaining evidence of behavior, not praise. The startup should only move forward when customers demonstrate concrete interest, recurring use, or willingness to pay.
Signs of genuine validation
The best signs are:
- customer pays
- customer uses frequently
- The customer recommends it to others.
- customer returns without incentive
- Low churn in the initial group.
- Interviews confirm urgent pain.
If nobody pays, nobody uses it, or nobody returns, there is still not enough validation.
When to pivot
Pivoting makes sense when the central hypothesis fails, but learning reveals another promising direction. This might involve changing the audience, channel, value proposition, or revenue model.
Pivoting isn't giving up. It's correcting course based on data.
7. Formalize the startup.
Formalizing the startup is important when the business begins to require issuing invoices, hiring employees, opening a business bank account, complying with client requirements, or obtaining corporate protection. In many cases, the MVP can start in a lean form before the official launch, as long as it respects legal and operational limits.
Possible types of companies
The most common formats are:
- Limited Liability Company (LTDA)
- Public Limited Company (SA)
A limited liability company (LTDA) is usually simpler and cheaper to start with. A corporation (SA) may make sense in operations with a more sophisticated corporate structure or the prospect of complex funding rounds.
Legal requirements for qualifying as a startup.
According to Gov.br and DREI, The company needs:
- have annual gross revenue of up to R$ 16,000,000.00
- have been registered with the CNPJ (Brazilian National Registry of Legal Entities) for up to 10 years.
- declare the use of an innovative business model
- or qualify for the Inova Simples regime
For companies less than 12 months old, the limit is... R$ 1,333,334.00 multiplied by the number of months of activity.
When is it worth considering Inova Simples?
The Inova Simples program can be useful for innovative early-stage businesses seeking to simplify the startup process. The analysis should consider the nature of the operation, regulatory needs, and accounting or legal support.
THE Archiving the framing is free., and the government provides official reference model e practical example of a statement.
8. Assemble the starting team.
The initial team should be small, complementary, and quick to execute. In startups, hiring too early increases burn rate and reduces runway.
Essential profiles for beginners
The most common profiles at the beginning are:
- product
- technology
- commercial
- operations
Not every startup needs four people from day one, but they do need to fill those roles.
Priority hard skills and soft skills
Important hard skills:
- user research
- product
- technology
- sales
- Metrics analysis
Important soft skills:
- adaptability
- resilience
- communication
- prioritization
- execution under uncertainty
How to choose partners
Choose partners based on complementarity, trust, and long-term alignment. Avoid partnerships based solely on friendship.
Critical points:
- clear division of roles
- dedication criteria
- shareholders' agreement
- vesting
- exit rules
- decision on equity
What are the stages of a startup?
The phases of a startup help define goals, metrics, and priorities. The most useful division for practical operation is: ideation, operation, traction, and scale.
Ideation
In the ideation phase, the priority is to discover the problem, the target audience, and the value proposition. The focus is not on growth, but on learning.
Useful metrics:
- number of interviews
- interest rate
- response rate
- recurring problem identified
Operation
In this operation, the startup has already launched an MVP and is beginning to test delivery, channel, and usage. The goal is to transform the hypothesis into concrete evidence.
Useful metrics:
- activation
- recurring use
- qualitative feedback
- first paying customers
Traction
In terms of traction, the startup demonstrates that it can acquire customers in a more predictable way. The business is not yet at scale, but it already shows signs of repeat business.
Useful metrics:
- revenue growth
- CAC
- LTV
- retention
- churn
- payback
Scale
At scale, the startup expands an already validated model. Growing without retention only inflates operations. Scaling requires efficiency.
A frequently cited reference associates scale with growth of 20% for three consecutive years in revenue or staff, but the practical point is different: there is only scale when the growth engine has already been proven.
How do you know if your startup has the potential to scale?
A startup has scaling potential when it combines real demand, retention, a replicable channel, and healthy unit economics. Without these four elements, growth tends to destroy cash instead of creating value.
Product, market and acquisition indicators
Note:
- retention cohort a cohort
- repurchase rate or recurring usage
- CAC by channel
- payback
- gross margin
- NPS or contextualized satisfaction
- organic indication
If the product solves a significant pain point, users will return. If the channel works, the cost of acquisition becomes predictable.
Signs that it's still too early to climb.
The clearest signs are:
- churn alto
- expensive acquisition
- Founder dependency for sales
- unstable product
- excessive support to function
- low retention
- Unpredictable revenue
Difference between growing and scaling
Growth means increasing revenue along with infrastructure. Scaling means increasing revenue while also improving operational efficiency.
If each new customer requires more people, more customization, and a proportionally higher cost, the business is growing, not scaling.
Legal aspects of starting a startup in Brazil
The legal aspects of starting a startup in Brazil revolve around the framework established by Complementary Law No. 182/2021, the corporate structure, and the formal declaration of innovation. These criteria are important because they affect legal security, access to programs, and corporate organization.
Criteria of Complementary Law No. 182/2021
The official base is in Gov.br portal. The company must meet the criteria regarding revenue, CNPJ (Brazilian tax ID) age, and innovative character.
Revenue limit and CNPJ (Brazilian tax ID) registration period
The official limits are:
- up to R$ 16 million in annual gross revenue
- up to 10 years of registration with the CNPJ (Brazilian National Registry of Legal Entities)
For companies with less than 12 months of operation, the monthly proportionality stipulated by DREI applies.
Statement of compliance
Classification depends on a formal declaration in the articles of incorporation or registration under the Inova Simples program. This means that it is not enough to "consider yourself a startup" informally.
Cases of incorporation, merger and spin-off
Cases involving incorporation, merger, and spin-off require attention because they can affect the calculation of deadlines and classification. In this situation, the best course of action is to follow the official guidance from DREI (Department of Business Registration and Integration) and validate it with an accountant and corporate lawyer.
Incubator, accelerator, or support program: which one to choose?
Incubators, accelerators, and support programs serve different stages of the journey. The best choice depends on the startup's stage, level of validation, and the type of support needed.
What does an incubator do?
Business incubators support early-stage businesses by providing structure, mentorship, academic connections, and business model development. They typically make the most sense during the ideation and validation phases.
What does an accelerator do?
Accelerators seek businesses showing signs of traction and offer intensive mentorship, networking, visibility, and sometimes capital. The focus is usually on faster growth.
How to decide according to the stage.
If you're still validating your pain points and proposition, an incubator tends to make more sense. If you already have an MVP, customers, and initial metrics, an accelerator can generate more value.
In Santa Catarina, for example, the Startup SC It lasts 5 months, selects 60 startups per year, and operates in Florianópolis, Blumenau, Chapecó, Criciúma, and Joinville. The program... ALI from Sebrae/SC It has been operating for over 15 years and has already served more than 21,000 small businesses and rural producers in the state.
Key mistakes when starting a startup
The main mistakes when starting a startup are predictable: starting with the solution, building too much before validating, raising capital too early, and neglecting corporate agreements. Avoiding these mistakes greatly increases the chance of survival.
Start with the solution, not the problem.
This is the most common mistake. Founders passionate about the idea ignore whether the pain point is real, urgent, and frequent.
Without a significant problem, there is no sustainable traction.
Building too much before validating
Months of development without real users often lead to waste. MVPs exist precisely to test with low cost and high speed.
Seeking investment too early.
Investors want evidence. The incubator of UECE This reinforces the idea that validation comes before fundraising because investors analyze data, not just narrative.
Ignoring corporate structure and agreements between partners
Without a shareholders' agreement, vesting terms, and clear roles, conflicts arise early. Many promising businesses stall due to shareholder disputes, not a lack of market.
Confusing growth with traction
One-off revenue, promotional campaigns, or isolated customers do not signify traction. Traction is about repeat business with predictable retention and acquisition.
How much does it cost to start a startup?
How much it costs to start a startup depends on the type of MVP, the industry, and the desired speed, but the initial phase can begin lean. The mistake is spending like a scaling company before proving demand.
A very lean startup can validate with just a few thousand reais. However, a startup that develops custom software, hires a team early, and invests in branding can burn through tens or hundreds of thousands before validating.
As a rule, preserve cash. A practical guideline cited in market guides suggests maintaining reserves for at least 12 months of operation, although this varies by stage and risk profile.
How to secure startup investment at the right time?
Securing investment for a startup depends less on storytelling and more on market evidence. The right moment arrives when the startup can demonstrate a validated problem, a functional product, some level of traction, and clarity on how the capital will be used.
Friends & family
It's initial capital coming from close friends and family. It serves to validate the transaction quickly, but requires minimal formalization and transparency to avoid personal conflict.
Angel investor
Angel investors enter the market at an early stage and can contribute their network, experience, and guidance. Ideally, fundraising should occur when there is already validated learning and a clear execution plan.
Seed
Seed funding rounds typically finance team expansion, product development, and acquisitions after more concrete signs of traction emerge.
Venture capital
Venture capital seeks businesses with significant scaling potential. At this stage, metrics, governance, and market narrative need to be much more mature.
Corporate venture capital
Corporate venture capital can make sense when there is strategic synergy with large companies, channel access, or a commercial partnership.
Venture builder
A venture builder helps build an operation with closer support. This can be useful when the founding team still needs additional structure.
How to know if your startup is ready to raise capital.
Objective checklist:
- problem validated
- MVP in use
- paying customers or strong evidence of demand
- organized basic metrics
- clear pitch
- organized cap table
- minimally structured corporate agreement
- capital use plan
- Basic data room with documents.
FAQ — Frequently asked questions about starting a startup
How to start a startup without initial investment?
It's possible to start a startup without external investment if you begin with inexpensive validation: interviews, prototype, landing page, pre-sales, and manual operation. The focus should be on learning quickly before spending on full-fledged technology.
How to create a startup from scratch on your own?
It's possible to create a startup alone in the beginning, especially to validate the problem and develop an MVP. The critical point is to cover essential skills and avoid becoming dependent on a single person for product, sales, and operations for too long.
Can a startup be a MEI (Individual Microentrepreneur)?
In some cases, the activity may even formally fall under another regime at the beginning, but MEI (Individual Microentrepreneur) is usually limited for the startup logic, especially due to restrictions on revenue, permitted activities, and corporate structure. If the thesis involves scale, investment, or partnership, MEI is usually not the best path.
How long does it take to validate a startup?
Initial validation can take anywhere from a few weeks to a few months, depending on the market and the buying cycle. The important thing is not speed alone, but rather gathering sufficient evidence of pain points, usage, and willingness to pay.
Does every startup need investment?
No. Many startups can grow with their own revenue, complementary services, or lean operations. Investment makes sense when it accelerates an already validated model, not when it tries to compensate for a lack of demand.
When should a startup register for a CNPJ (Brazilian business registration number)?
The best time to proceed is usually when you need to formally sell, issue invoices, hire employees, open a business bank account, or organize a partnership and manage legal risks. Before that, the priority is typically validating the demand at the lowest possible cost.
How do you truly validate a startup idea?
Validate with interviews, interest tests, MVP, and real usage or payment behavior. Likes, praise, and positive reviews are not a substitute for retention, conversion, and revenue.
How do I know if my startup is scalable?
Your startup is scalable when it can grow revenue with a repeatable process, a predictable channel, and a healthy customer acquisition cost. If each new customer requires a lot of manual effort or customization, it's not yet scalable.
How can a startup secure investment?
The most common path is to start with your own capital, friends and family, grants, support programs, and angel investors. To increase your chances of success, organize your pitch, metrics, documents, and market evidence before speaking with investors.
When does a company stop being a startup?
In practice, a company ceases to operate as a startup when it has found a stable, predictable, and less uncertain business model, or when it surpasses the legal criteria applicable to its classification in Brazil. The operational concept changes even before the legal classification in many cases.