38. Cross-Border Investing (Michael Goldberg)

The Full Ratchet Podcast on iTunesNick Moran Angel List

Michael Goldberg of The Bridge Investment Fund joins Nick to cover Cross-Border Investing. We will address questions including:

  • Goldberg Cross-Border InvestingCan you first touch on the specific countries where you’ve either made investments or worked to help facilitate fundraising?
  • What are the most significant challenges to cross-border, investing?
  • Can you discuss the primary legal challenges that you’ve encountered and any best practices for addressing them?
  • What are some of the financial issues and or audit issues that arise from cross-border investing and are there ways to mitigate them at the time of investment?
  • Have you ever encountered corruption in a cross-border deal? If so, what occurred and has that changed your approach?
  • OurCrowd, is based in Israel and features a number of Israeli companies..  Do you have a sense for the key things that Jon Medved and his team have done to facilitate cross-border equity crowdfunding in a safe, secure and streamlined manner?
  • Regarding the “Let P.J. Stay” movement that’s gotten some recent press.  What’s your position on P.J.’s case and how immigration law should be considered w/ regards to non-U.S. citizens trying to build great companies here?
  • Do you have any advice for stateside Angels and/or Groups that are exploring a strategy to invest in cross-border startups?”

Itunes:  http://apple.co/1MJu6yX

Direct-audio:  http://bit.ly/1MmVWA0

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Guest Links:

Key Takeaways:

 1- Looking for Leverage

Early-on in the show, Michael talked about the support that Israel’s government provides to startups and early-stage technologies. In this particular case, it’s not just a match. There are situations where the government will contribute 4x or 5x of the capital infused from private investors. This has been a significant catalyst for the ecosystem of the country and, over many years, has influenced many citizens to think about innovation from a young age. While government grants should not be required to create and nurture an ecosystem, it certainly provides enormous opportunity for entrepreneurs and tremendous leverage for early investors. If one is exploring a cross-border investment strategy, government contribution of risk-capital should be considered.

2- Challenges to Cross-Border Investing

The first item that Michael cited was confidence in the legal system. Are there similar protections, when it comes to the corporate entity, as there are here in the states? A foreign entity adds an additional element of risk to an already risky class of investing. Many cross-border investors will require that a foreign startup file their C-Corp here in the states, ideally in Delaware.

Michael went on to discuss corruption, transparency, administrative bureaucracy and investor exposure. On that last point, he mentioned there may be exposure that comes with having a board seat of a foreign corporation. As an investor w/ a board seat, one can be held legally accountable if there’s some impropriety, whether they are liable or not.

3- Local Syndicate Partners

Michael stressed the importance of finding in-region syndicate partners that you can trust. While one can attempt to learn and navigate the legal, audit and general business climate from thousands of miles away, it’s a major challenge w/ a lot of unknowns. When Michael identifies a region that is an attractive ecosystem, he will find an investor in that region, that understands the local climate, before making an investment. While this does not guarantee that issues won’t arise, I’d imagine a lot of the common pitfalls can be identified early and avoided by in-region experts.



Tip of the Week:   Mapping Your Ecosystem