La digital transformation It has radically modified the research and development processes for products and services in the world. This has generated a great impact in the entrepreneurial sector related mainly to the development of technologies, web design or web development, internet portals and mobile applications, which has given way to the creation of countless StartUps that are considered in the business world. , as companies of venture capital or Venture Capital, this last term is used to refer to the financing of StartUps in the growth phase and that have a high potential and risk.

Currently, due to the rise of technology and StartUps around the world, legislation is adapting to this change, since it is essential to provide protection to innovations that seek to be born, grow and remain over time; which will be achieved if the necessary legal and financial environment is in place. Some countries in the region already have legislation that encourages entrepreneurs by providing them with a safe space with growth potential, as well as offering tax incentives.

Under the start-up model, new forms of financing were created, among which the most used are:[1]

1. FFF or Family, Friends and Fools – is an Anglo-Saxon term that designates the closest and most accessible source when looking for financing to start a business.

 2. Angel Investors. – Their way of working consists of contributing capital to companies in the formation or consolidation stage, precisely during the organization stage and, if necessary, offering their business experience to support those who are leading the projects they are financing.

3. Crowdfunding or collective financing – consists of using the capital of numerous individuals through small contributions. 

4. Investment funds (Venture Capital) – Venture Capital can be translated as venture capital and is a type of financial operation in which capital is provided to startups and companies with high growth potential and high levels of risk in exchange for a percentage of the company.

It is important that the entrepreneur is informed and knows in his personal and financial reality of the country, which is the most convenient form of financing for his type of business and that is applicable to him.

At the same time, all legal aspects that are developed from the conception of the idea must be taken into account, before the first financing and after the formalization of the second and subsequent ones, if any, among them we can find[2]:

1. Formalization of individual or social merchant

2. Protection of the basic creation of the business, through Intellectual Property.

3. Confidentiality Agreements

4. Trade Secrets.

5. Terms Sheets.

6. Convertible notes.

7. Convertible notes with discount. KISS (Keep it simple security).

8. SAFE (Simple agreement for Equity)

9. Inspection; among others that could occur depending on the purpose of each StartUp and the stage in which they are.

StartUps contribute to a national economy of growth, job creation, creation of new markets and knowledge development. El Salvador is not far behind in terms of the development of enterprises, however, not all are innovations in the technological field nor are they created based on an effective globalized market, starting only in the local market, generally it is about entrepreneurs who start with the use of ICTs for the trade and marketing of their products. Every merchant has a vision of expansion and StartUps give them that possibility, so it is important that they stay informed regarding the financing and legal impulses that may exist around their growth.

There are cases of successful StartUps, which were born in the Central American region despite little or no legal and financial support, currently some of them have already carried out financing rounds for their growth with the contribution of recognized national and foreign investors. Some successful examples are:

  • HUGO - The mobile application for transportation services for different products such as food and beverages started in El Salvador with plans to expand in Latin America and the Caribbean.
  • MODJO STUDIOS - is an audiovisual production company that has worked on important projects. We share your video reel from last year here
  • APPLAUDO STUDIOS –Software and Mobile Applications developer company, recognized by Forbes magazine.

It is therefore important to know all the corporate, intellectual property and financial legal aspects that can promote the creation of a StartUp or its expansion.

If you need more information about the aforementioned aspects, you can contact us at la@latinalliance.co


[1] https://www.eleconomista.es/gestion-franquicias/noticias/7641813/06/16/Como-financiar-una-startup-en-cuatro-fases-desde-los-familiares-al-capital-riesgo.html

[2] http://www.mujeresdeempresa.com/aspectos-legales-para-lanzar-un-start-up-de-internet/