TLDR:
- Investing in the US start-up ecosystem requires understanding key differences
- US venture capital landscape can be more investor-friendly with terms and structure
A comprehensive guide for foreign angel investors and venture funds looking to invest in US start-ups has been outlined in this article. Key elements include:
- Understanding the US Landscape: International VCs need to familiarize themselves with the National Venture Capital Association (NVCA) model documents, SAFEs, and Delaware corporate laws.
- Terms: US terms of investments have shifted to be more investor-friendly recently, with more governance control, veto rights, down-rounds, and cram-downs. Understanding these factors is crucial for international VCs.
- Relationships: Building relationships with reputable VCs and co-investing can lead to opportunities for follow-on funding for existing portfolio companies.
- Regulatory Considerations: Understanding CFIUS, currency controls, industry regulations, and data privacy laws in the US is essential to avoid any legal issues.
- Navigating US Tax Implications: International investors need to consider the complex US tax system and consult with tax advisors to ensure compliance.
- Conclusion: Despite cultural, legal, and regulatory differences, tapping into the US start-up ecosystem can be rewarding. With a sound understanding of the market, prevailing terms of investment, regulatory issues, and tax implications, international VCs can thrive in the US market.
This article serves as a valuable resource for foreign investors looking to navigate the US venture capital landscape and make informed decisions while investing in US start-ups.
