As a rule, executives view the Brazilian bureaucracy as one of the biggest obstacles when it comes to starting a business in Brazil. Whether it’s time to launch an idea, attract investments, or sell a business, complex factors are present. Most of the time, it comes at a hefty cost.
American Brian Ryckarth felt this skin and pocket pain when then-CEO and co-founder of VivaReal sold his real estate classifieds business to OLX. “I spent months studying and trying to do the right thing when starting a company. Years later, I saw that I was wrong,” says the entrepreneur in an interview nifeed.
It wasn’t any error. He says that failure cost $100 million. The amount refers to the amount that could have been saved in taxes and legal costs to formalize the sale that occurred in 2020 for R$2.9 billion.
To prevent this from happening to new entrepreneurs, Rickart, along with partners Gina Gotthelf, who spearheaded the international expansion of Duolingo’s language app, and Russian Yuri Danilchenko, former chief technology officer of Escale, are expanding Latitud, a hub for virtual communication and entrepreneurship.
On Tuesday, February 1, the company launched Latitud Go, a technology-based solution to make it easier and lower the cost of opening a business, attracting investment, and exiting operations.
The idea is to help entrepreneurs in the correct drafting of all the necessary documents so that the company can save money when they need to pay taxes. All within the law. The expectation is that the service will reduce the cost to a fifth of what will be spent.
“We’re not reinventing the wheel. This whole process is already known, but it costs about US$30,000 to start with. We’ve been able to bring that cost down to nearly $6000 with the technology,” says Rickarth.
This is done through practices that involve lowering legal costs with partner law firms of Latitud Go primarily while opening up an external structure to collect taxes at lower rates.
This extraterritorial partnership is divided into three parts: an intermediate holding company in the state of Delaware in the United States; A holding company in the Cayman Islands, which is owned by the United Kingdom but has its own tax policy and is considered a tax haven; and operation in Latin America.
Without delving into taxes, these three parts make attracting and exiting investments cheaper, according to Rekward. And there is nothing illegal, he said, in this structuring.
Central Bank data revealed that more than 85.7 billion US dollars were sent from Brazil to the Cayman Islands in 2019, an increase of 27%, making the offshore Caribbean region the top recipient of the most Brazilian investment.
While investors invest capital in the operation based in the Cayman Islands, entrepreneurs leave the business in case of selling to another company, for example, through the United States. This practice tends to grow in the future, as Brazil increasingly attracts the attention of international investors.
In 2021, Brazilian startups received investments of $9.4 billion, a study by Distrito revealed. The value is 2.5 times higher than that recorded in 2020.
At the moment, Latitud Go is a service aimed only at companies that are starting their flights. Launched in test mode in August last year, the service already has 15 customers – all of whom are part of Latitud.
In the future, the scope of services will be expanded to facilitate the transformation of businesses that are already incorporated and need to “correct” their tax structures in order to avoid unnecessary expenses in the future. This would help the service increase its profitability. “It’s a very small fee (which is the fee the company charges to perform this service for new businesses),” says Rickarth.
According to Rekwarth, the idea is that Go will only complement Latitud’s strategy and “be a springboard for entrepreneurs building tech businesses in Brazil and Latin America.”
Latitud came into being in 2020 with the idea to help train early stage entrepreneurs in Latin America through a virtual call center.
Over time, it has evolved into other areas. The venture capital fund was set up by Brian and his partners to invest in early-stage startups with checks of up to $250,000. To date, she has made more than thirty investments, such as Argentinian Pomelo – who has since received three contributions.
At the end of last year, it also launched Latitud Launch, a tool that is a space for emerging tech companies in the region to present their products and establish relationships with potential clients and investors.
