The campaign is global - the dollar ain't what it used to be
Switch a franc for a dollar, you get like 1.3
- Swiss France, Ryan Leslie
A decade ago, LATAM entrepreneurs seeking capital from international venture capital (VC) funds had few options other than establishing their holding companies in Delaware.
Despite being aware of Delaware’s tax inefficiencies, non-US founders viewed the "Delaware Flip" as a necessary compromise to attract investors.
This began to change after an unexpected result from a modest M&A transaction in Argentina.
One particular turning point was when a Y Combinator (YC) portfolio company from Argentina made a swift $2M exit after raising only $15,000 from the accelerator.
The Argentine founder, who had never visited the US and did not even possess a US visa, was stunned to learn that the company would be liable for over $600K in US taxes. This was because the European buyer opted to purchase their Mexican and Argentine operating subsidiaries, bypassing the Delaware holding company.
PAG Law took notice of this and took advantage of this situation to convince Kaszek Ventures, always founder-friendly, to allow one of their Mexican tech clients to establish a Cayman Islands holding company for their Series B round, which Kaszek was leading.
Kaszek proposed placing a Limited Liability Company (LLC) beneath the Cayman holding company to satisfy Mexican corporate regulations, thus creating the “Cayman/LLC sandwich.”
Once Kaszek validated this structure, other active VC funds in the region quickly followed suit. It now seems to be the default way to raise capital internationally for majority of the LATAM startups.
Here are few reasons why you should consider forming a Cayman Islands company.
Simple Administration: Incorporate with just one director and shareholder, with no residency requirements.
Streamlined Setup: Entire process is digital and can be completed online.
Flexible Ownership: No minimum capital or shareholder restrictions, and no nationality limitations, making it ideal for ESOPs and international investments.
Tax Benefits: No corporate, income, or capital gains tax on earnings outside the territory.
If you have any expansion plans for your business to LatAm, I would love to learn a little more and see if I maybe can help :)