Latin America’s entrepreneurship and innovation ecosystem Latitud is launching a platform to help startups raise from global funds.
Each year the participation of renowned international venture capitalists such as Tiger, Sequoia, and DST in Latin America grows. According to LAVCA (Association for Private Capital Investment in Latin America) in 2019, 21% of investments in the region included at least one global investor. In 2020, this percentage rose to 23% and in the first half of last year alone, this international participation reached 31%.
When they invest in the region, these funds usually do so through a c-corp entity, a company model in the United States allowed for foreigners. However, this model makes Latin American companies pay US taxes that can reach more than 20% of the investment. LLCs (Limited Liability Company), on the other hand, are not accepted by institutional venture capital funds.
While US-based startups can form the corporation model in a week and close an investment round, for Brazilian companies that want an international structure it can take up to a month to open the company, validate signatures in the US and send documents back to Brazil.
“We know that a lot of foreign money is coming into Brazil and Latin America and we have a lot of startups that are already worth a lot of money. But one very painful thing is when you are starting the business and you don’t know what structure you should have, if a limited liability, if a company in Delaware. It’s very complicated to navigate that whole legal process,” explains Brian Requarth, co-founder of Latitud.
Created in 2020 by Requarth (co-founder of Brazil’s real estate marketplace VivaReal), Gina Gotthilf (a Brazilian entrepreneur experienced at Tumblr and Duolingo), and Yuri Danilchenko (former CTO of Escale), Latitud started as a mentorship and networking program for entrepreneurs in the region. Added to the educational part of the business - which has celebrity mentors such as David Vélez from Nubank and Sergio Furio from Creditas - Latitud relies on a network of angels to invest in startups.
Latitud Go is the first infrastructure solution of the community’s digital products unit. The platform pledges to prepare early-stage startups with the necessary legal and tax structure for global markets twice as fast and five times cheaper than traditional law firms, which can charge around $25,000 to open the structure of a new startup to foreign venture capital.
Paving the way for LatAm startups to the world
At the time of company opening, Latitud Go provides an offshore structure for startups in three parts: an intermediate holding company in Delaware, a holding company in the Cayman Islands, and a local operation in Latin America.
Requarth says he had a bad experience when he sold his VivaReal business to OLX for R$ 2.9 billion in 2020. “I ended up doing a type of business that was a Delaware c-corp, and when we sold the company we paid $100 million in a lot of unnecessary taxes,” he says. “When you’re a founder, it’s a waste of time having to learn legal issues. Founders need to focus on the product, so Latitud Go was born.”
Yan Mendes, Latitud’s product manager, explains that founders can sign up for the platform through a 15-minute form. Then, they go through a digital authentication and the app collects signatures. Finally, the process proceeds automatically.
“It’s like if today the founder went in a mechanic to have them build a custom car for him. What we do is deliver the car ready for him to drive,” says Mendes.
Latitud Go has partnerships with Brazilian early-stage investor funds such as Canary and Maya Capital. “They are quite happy with the platform because it makes it easier for them to close deals as well. They are sending potential clients to us. If Canary is going to invest $1 million, they would prefer that $30,000 not go straight to paying lawyers, but to hiring people and developing products,” Requarth explains.
The platform has partnerships with law firms in Brazil and the United States and guarantees startups tools and services such as bank accounts, management software, accounting, and legal partners, besides the process of opening and regulating the business.
So far, Latitud Go has operated in a closed beta for members of the community and already has 15 clients in Brazil, but the idea is that the service will soon be available for all of Latin America.