Tax 101 for startups in Peru

Tax implications are low on the list of investment criteria for angel and seed stage investors in Peru (as they should be). However, as the probability of a successful exit increases, tax considerations come to the forefront. Venture capital investors will seek to optimize returns and avoid startups that have inefficient tax structures. Continue reading “Tax 101 for startups in Peru”

3 key moments to examine your cap table

A cap table is the list of owners (equity holders) and how their ownership percentage is distributed. In high-growth startups, proper distribution of equity is key for keeping founders and investors aligned over time. Here are some points to consider: Accelerator programs often take equity in startups Startups typically share 10%-20% of equity in each … Continue reading “3 key moments to examine your cap table”

A cap table is the list of owners (equity holders) and how their ownership percentage is distributed. In high-growth startups, proper distribution of equity is key for keeping founders and investors aligned over time.

Here are some points to consider:

  • Accelerator programs often take equity in startups
  • Startups typically share 10%-20% of equity in each financing round
  • Founding teams in Latin America often seek to reach a Series A round with at least 50% of the company

Below is a graph of how a cap table can change over time.  

Cap tables are re-organized at financing rounds so these are the moments to make sure you are set up for optimization.

Three key moments to review your cap table:

1. Founding: This is the most important part of the cap table and founders are benefited from having tough conversations up front. It often seems fair to divide ownership equally between three or four people, but it may not be optimal for the startup. The more founders a startup has, the less equity each individual will have and equal amounts spread across many people can make decision-making slower. I believe one or two founders should have significant share of the equity of a startup.

Founder vesting is a tool that can help align and incentivize founders as well as avoid “dead equity” left by members of the team who decide to leave, but retain equity stakes. Many future investors will require this term.

2. Angel, Acceleration, Seed Rounds: According to PECAP the median seed round in Peru is for 15% of the startup. Often, this 15% is split among more than one accelerator program or angel investor, leaving a cap table atomized without one investor or investor group having a significant share of the startup. This can make it hard for investors to dedicate time to add value and improve corporate governance. Founders want pick accelerator programs and investors that can add the most value by helping the startup achieve operating milestones and raise the Series A round.

3. Series A: Preparing for Series A can put a startup in a position to succeed long term. Series A investors will be keen to make sure that a founding team has enough incentives following the round – a good goal is 50% of the company going into the round. Investors should be aware that Series A investors may require a 10% Employee Stock Option Pool (ESOP) and ask that it is included in the pre-money valuation.

  • Ragi Burhum of AmigoCloud recommends that founders should up an employee pool much earlier that prior to a Series A round
  •  Facundo Turconi of Solven, pointed out to me that for single founder startup it may make sense to consider a larger ESOP, of perhaps 15%. 

Takeaway and Cap Table Example:

Founders and investors should seek to maintain a cap table that leaves enough incentives for founders and flexibility to add the right investors at the right time. You can find a template example for a cap table in Excel here.

When is the right time to set up an International HoldCo?

Members of Peru’s startup community have collaborated with advisors outside Peru to develop a report outlining considerations for startups evaluating creating international holding companies.

When should a startup evaluate creating an international holding company?

Continue reading “When is the right time to set up an International HoldCo?”

Just don’t call it ‘Corporate Governance’

I don’t like the term corporate governance much, but I am a huge fan of what it represents and how much it can help startups. It should just be called “getting the best people together to support a startup”.  Good corporate governance can help founders achieve their goals, both by building trust with investors and pointing founders in the right direction. Continue reading “Just don’t call it ‘Corporate Governance’”

Free legal documents for seed rounds!

PECAP has recently shared templates for legal documents for seed rounds in Peru.  The documents are a great starting point for discussing general terms with early stage investors and making seed rounds less costly for both founders and investors. The Swiss Entrepreneurship Program provided a key role in supporting this initiative. Montezuma & Porto law offices led a collaborative effort that included input from founders, investors and other lawyers. Continue reading “Free legal documents for seed rounds!”

Startup investor pitfalls

I recently spoke to Fernando Langschwager about his startup, Aprendiendo.la.  After a short time, he looked at me and told me I was asking the wrong questions. For novice startup investors like me, it is easy to fall into the trap of evaluating startups from the wrong perspective.  I spent the rest of the chat with Fernando listening to his views on where I was getting off track and he helped me come up with three pitfalls startup investors fall into: Continue reading “Startup investor pitfalls”

Valuation Benchmarks

Comparable transactions are a great benchmark for founders and investors and one way to get comfortable with a startup’s valuation as it is raising capital. There are many ways arrive at valuation and a range of values using multiple methodologies often provides more comfort than a fixed number extended out to various decimal places. Continue reading “Valuation Benchmarks”

Análisis Cohorte

Yo uso mucho el análisis cohorte para entender comportamiento de usuarios en una startup. En etapas tempranas es la mejor forma de llegar a un estimado de LTV (lifetime total value) verdadero de un cliente. Es una métrica importante para entender los unit economics y estabilidad del negocio. A mi me ayuda a entender el compartameinto natural del usuario. Adjunto un template sencillo y ágil que uso y que me permite muy rápido entender la dinámica de las startups que evaluamos.
Análisis Cohorte