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June 28, 2021Make and receive foreign investment in my Startup
Foreign direct investment is a term that seems beyond our reach, an activity that only multinationals do, perhaps in companies with considerable traction. This is not the case, you and your startup can not only receive foreign investment, but you can do it even without money!!
Here's how your startup can benefit from foreign investment, no matter what stage it is at.
Conoce aquí el panorama de la Inversión Extranjera Directa en México!
Advantages and Disadvantages of Startups in terms of Foreign Investment
As we know, startups are companies characterized by innovation, mainly based on technology. These companies have two advantages.
The first is that they are global from their conception, so they can be hosted anywhere. The second is that they require less infrastructure, unlike conventional companies.
However, the challenges for startups lie in their long incubation periods and their need for constant funding means that they cannot make foreign direct investment early in their life.
Alternative Foreign Investment Types for Startups
Just like us and our startups, there are companies with similar characteristics that are facing the same challenges and seeking the same opportunities. In this context, according to the Inter-American Development Bank, technology companies have know-how or licenses that can be capitalized in the following ways:
1. Technology Licensing
It allows the startup to capitalize on its knowledge without incurring any risk of doing business in a foreign market. The startup will receive a royalty fee. Such investment can be made by the domestic partner or even by a third party.
2. Reciprocal Arrangements
Where one party performs activities on behalf of the other party. For example, distributing the other party's products in your startup's market and having the other party do the same. This way you acquire distribution and marketing channels that would otherwise take considerable capital and effort.
3. Hybrid strategy
Alliances through which you have quick access to proven technology that would otherwise take a lot of time and money to develop.
Other aspects to take into account
The basis of these three methods is cooperation, so it is important to always keep in mind the importance of creating strategic alliances. Remember that in order to do any of these processes, you will need legal advice to prevent any misunderstandings.
Another aspect to be emphasized is whether the transmission of data is agreed, since there is an increasingly regulated activity, especially under the framework of the European Union's GDPR,which covers the transmission of data internationally between collectors and processors.
We recommend you read the post, GDPR: how the EU can fine your startup to learn more about its extraterritorial reach.
Last but not least, do not forget to contact us for any questions or comments regarding this post, as well as to share it with acquaintances who may be interested in it. Remember that at exoap we are open to any kind of cooperation!