Sofía Yagüe never imagined she would end up as an expert in Latin American startups and venture capital, and be splitting her time between New York and Miami. Originally from Spain, she completed her Business and Law studies in Madrid, moving to New York to do her Master’s degree at NYU, and passed the NY Bar becoming a dual licensed Spanish and New York lawyer.
An offer at a top law firm led her to Miami, where she recently started her own boutique law firm Next Legal, which specializes in venture capital in Latin America and Spain an the US. The idea for her firm came from observing the growing and changing startup ecosystem in Miami and from trying to cover the need for a bilingual lawyer that was licensed in the US but also understood the particularities of the regions.
In this episode, we cover the frequent legal mistakes that Latin American entrepreneurs make, the best structures for raising capital in the United States or abroad, as well as tips and tricks to keep startups on the right path. This episode is more nuts and bolts, with actionable stories and advice for Latin American founders. Listen to this episode to learn more about Sofía’s story and what it’s like working with investors and startups in Latin America from a legal perspective.
The growing presence of LatAm startups in Miami
The business culture in Florida can facilitate Latin American startups opening operatings in this ecosystem because of the shared Spanish language. Sofia believes that Miami is becoming a hub for entrepreneurs to meet with potential investors that don't find the right resources or the type of investor they’re looking for in their home country. Just by looking at her clientbase, Sofía knows that the reverse also happens, as more US angel investors look for opportunities in Latin America.
“US investors don’t want to invest directly in LatAm incorporated companies”
Most of Sofía’s clients are startup founders living in Latin America that are operating in the region. But investing in a foreign company can be a risky operation, especially if you’re not familiar with the laws of the country, so many US based funds require Latin American startups to have their holding company based in the US or elsewhere. Sofía and I go in depth into some of the most common legal structures that are most favorable for both operating in Latin America and attracting US funding.
Biggest mistakes made by LatAm companies
Although this advice could work for nearly any startup, we cover some of the biggest mistakes that LatAm founders make. The best part? Most of these are avoidable. From capitalization tables that haven’t be properly documented to understanding the importance of veto and pro-rata rights, Sofía has accumulated a series of tips to avoid making some of the biggest mistakes in the region. In this episode, she also provides tools to help entrepreneurs know when they are presented with unreasonable terms and how to negotiate for them to meet industry standard.
Show notes:
[3:02] - What are you working on today? [4:06] - How did you decide to get into VC? [5:21] - What business activity do you see running from Florida to Latam? [7:05] - Have you seen any changes in the Miami-Latam startup ecosystem? [8:08] - Reflexion about the ecosystem. [10:16] - What are the biggest things that happened in the last 12 months? What kind of legal structures should companies be looking at if they are operating only in Latam, but want to attract US funding? [13:19] - What are other places where companies should be looking? [16:23] - Misconceptions of tax evasion in Cayman Islands. [19:00] - What are some of the biggest mistakes that Latam companies make when they come to you? [21:03] - Advice on cap tables. [24:17] - Overview of some of the terms that are overused or unfair for entrepreneurs. [26:25] - Do you have any specifics you can share on veto rights or liquidation preferences? [30:03] - The importance of pro-rata rights for investors. Have you seen situations where Latam investors have been surprised by them? [33:43] - What are some of the first legal steps and documents someone starting a business in Latam should consider? [36:45] - If you could go back, what advice would you give yourself? [38:10] - Do you have any books, blogs, podcasts, documentaries that you like to recommend? [49:57] - Where can people find more about you and your business on the internet?Resources mentioned:
Next Legal Nathan Lustig blog Y Combinator Refresh Miami Miami Angels Angel Ventures Greg Mitchell Rappi Nubank Endeavor SeriesSeed National Venture Capital Association Techstars Venture Deals by Brad Feld (book and blog)