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1/8 I’m going to tell you about silly mistakes I made that resulted in tons of headaches and eventually cost us over $100m USD for my startup in Latin America.
2/8 In the early days of a startup, its common to cut corners as money is tight. I originally created a California LLC (holding) for my company because that was the advice of my local accountant who had zero experience with venture or Latin America.
3/8 Later I hired a local law firm in my home town that wasn’t experienced in Venture Capital. They advised me to create a C-Corp instead which seemed like good advice at the time.
4/8 We later realized that since our business had no operations in the US we would be subject to US taxes upon an exit. We had raised some venture capital and at this point it became cost prohibitive to restructure.
5/8 Eventually we merged w/ r competitors. We retained top lawyers and accountants to help us manage our extremely complex deal. The deal took an unnecessarily crazy amount of time and effort due to our original structure, but we finally came up with a solution we thought worked
6/8 When we ended up selling our combined business to OLX Brasil, we signed a term sheet, but during the due diligence they opted to buy our local entities because they saw our restructuring as a huge risk. This again resulted in paying millions of dollars to lawyers & accountant
7/8 We finally completed the transaction, but over $100m was paid to the United States government despite our business having zero revenue in the US.
8/8 The lesson is to not go cheap on this kind of thing in the beginning. If you are starting something in LatAm and planning on raising venture, I’d be happy to share my 2 cents as it cost us a lot more than that!
Bonus: if you want to read more about trials and tribulations and some hard lessons I learned, I’m releasing my book next month. You can download the foreword and intro here https://latitud.com/en/content/book-viva-the-entrepreneur/
