Market Overview

Argentina has one of Latin America’s longest-standing start-up ecosystems, with roots stretching back to 1999. Despite facing economic ups and downs and a shortage of available capital, this ecosystem has shown remarkable staying power and promise for growth. If Argentina stabilises its economy, opens up to international markets, and reduces its tax burden, it could become a major venture capital hub in the region. The country has a large pool of skilled professionals and innovative talent that it could leverage for growth.

Current Trends in Venture Capital Investments

Over the past year, global economic pressures have reshaped venture capital activity in Argentina. Investors have faced a tough landscape with reduced liquidity, prompting more cautious deal-making and a wave of down rounds leading to fewer deals and lower valuations. This shift has pushed due diligence into sharper focus, with start-ups now judged more on solid revenue and traction rather than projections.

Financing has leaned heavily on SAFE (Simple Agreement for Future Equity) rounds, while traditional equity deals have been less common. Valuations, once inflated by a flood of US capital post-pandemic, have adjusted downward as American monetary policy tightened, hitting Latin America, one of the world’s least-funded regions, particularly hard. Many Argentine start-ups struggled to secure funding, resulting in staff cuts and valuation declines.

However, 2024 brought a modest upturn, especially in biotechnology, driven by venture funds and accelerators like SF500 and GridX. Foodtech and agritech companies also experienced growth.

Political changes have added another layer to these trends. Fundraising slowed before the 2024 US elections, but Argentina’s new government policies after the elections drew investor interest to the region. The country is gaining attention as a prime spot for investments in lithium, oil and gas, mining, and knowledge-driven sectors, with deal activity picking up sharply by early 2025 compared to late 2024, and increasing significantly in early 2025.

Leading Industries in Venture Capital

In 2024, foodtech and agtech topped Argentina’s venture capital scene, fuelled by a push for sustainable practices and origin-based food certification. Biotech also stood out, boosting efficiency and cutting chemical use in agriculture, a vital sector for Argentina and Brazil, both global food production leaders. The region’s early embrace of tech solutions, driven by climate pressures and tight agricultural timelines, has made it a hotspot for testing new ideas.

Market insights highlight the key sectors attracting funds in 2024: agtech; entertainment; foodtech; biotech; SaaS (software as a service); and AI.

Notable transactions from last year include:

• BRESH in entertainment;
• AgroToken in agtech with a SAFE round of USD12.5 million;
• Nera in agtech, with a capital injection of USD10 million;
• Kilimo in agtech with a Series A round of USD7.5 million;
• Debmedia/Numia in SaaS with a Series A round of USD3.5 million;
• Biomakers in biotech with a Series A round of USD3.5 million;
• DeepAgro in agtech with a SAFE round of USD2 million;
• Calice in biotech/AI with a SAFE round of USD2 million; and
• Teramot in AI with a SAFE round of USD1 million.

Investment in 2024 focused on growth and scaling rather than exits, with few significant liquidity events recorded. The emphasis remained on building stronger foundations for future expansion.

Venture Capital Fund Structures in Argentina

How funds are organised and structured

Argentina’s VC funds align with global standards, adapting their structures to maximise efficiency while complying with local and international regulations.

Venture capital funds in Argentina adapt their set-ups based on who is investing and the local rules they must follow. Two main approaches dominate. First, local trusts, known as fideicomisos, are popular for funds chasing tax advantages through the Incentivo al Capital Emprendedor (ICE) programme. These funds must register with the Registro de Instituciones de Capital Emprendedor (RICE), submitting details of their value proposition and ecosystem experience to the Registro Público de Comercio (Public Registry of Commerce) and tax authorities (AFIP/ARCA). Here, the general partner acts as the trustee, limited partners provide the capital, and a management team, supported by an investment committee, guides the strategy.

Second, many funds opt for international structures to ease cross-border investments, often setting up in jurisdictions like the Cayman Islands (22.12% of all estimated fund domicile registrations), Ireland (20.41%), Delaware (19.61%), Luxembourg (18.57%), British Virgin Islands (2.07%) or Canada (1.94%). Jurisdictions like Cayman Islands and British Virgin Islands typically follow a limited partnership model, governed by limited partnership agreements or trust agreements. Some funds blend both approaches, pairing an Argentine trust for local investors with an offshore entity for regional plays, sometimes adding special purpose vehicles (SPVs) for tax or strategy benefits. Whether a fund opts for a regulated or unregulated path depends on investor needs and legal demands.

Market Standard Terms for Fund Principals

As stated in 2.1 Fund Structure, Argentina’s VC funds align with global standards. Fund managers and key players in venture capital funds share in the financial upside through several channels. Management fees, usually around 2% of committed capital each year, provide steady income. Carried interest, often set at 20% of profits once investors recover their initial stakes, rewards strong performance. Principals might also co-invest their own money to align their goals with investors, while performance bonuses kick in for exceeding targets, and equity in the general partner entity, tied to vesting schedules, secures long-term commitment.

To protect investors and ensure good governance, funds include:

• preferred returns, often 8%, ensuring investors see gains before carried interest is paid;
• investment committees to vet deals and stick to the fund’s plan;
• veto rights for limited partners on big decisions like strategy shifts;
• rules requiring approval for changes in fund direction; and
• vesting timelines for carried interest and general partner shares.

These mechanisms balance risk and reward, keeping managers and investors on the same page.

Regulatory Landscape for Venture Capital Funds in Argentina

In Argentina, there is no specific regulation directly governing venture capital funds. However, a regulatory framework exists primarily for the Incentivo al Capital Emprendedor (ICE) programme, which provides a specific tax benefit for eligible funds. This framework, though, is not considered a regulation per se but rather a set of guidelines aimed at promoting entrepreneurship.

Venture capital funds in Argentina may operate under general commercial law, primarily governed by the Código Civil y Comercial (Civil and Commercial Code), and in some cases, by the Ley de Apoyo al Capital Emprendedor (Law of Support for Entrepreneurial Capital). The ICE programme’s legal provisions are mainly relevant when seeking tax benefits and require the fund to comply with a set of specific conditions.

Furthermore, the funds must operate as a fideicomiso (trust). They are subject to general commercial law and require the appointment of a trustee and the establishment of a governance structure.

Venture Capital Funds in Argentina

Argentina’s venture capital scene features a mix of private and corporate players, though government-backed efforts have decreased. Private funds like Newtopia, backed by family offices, athletes and entrepreneurs, focus on local start-ups, while The Yield Lab Latam, Xperiment, Innventure and Pampa Start target agtech. Other VC funds such as SHEFA Ventures, Alina VC, Cometa and BYX Ventures also play a fundamental role in the LATAM VC ecosystem.

Government support has shrunk, with initiatives like the Fondo Semilla (Seed Fund) and FONDCE (National Entrepreneur Capital Fund) fading under recent administrations. Some provinces, such as Córdoba, keep co-investment alive on a smaller scale. Meanwhile, corporate venture capital is on the rise, driven by tax incentives and firms like Nestlé and Bimbo reinvesting profits into innovation.

ESG principles now shape most funds in Argentina, blending impact with profit motives.

Also, with exits scarce, funds are stretching holding periods, sometimes to ten years, using secondary vehicles or helping start-ups land clients to boost short-term revenue.

Due Diligence and Financing Rounds

Key areas of focus in due diligence

When evaluating start-ups, venture capital investors in Argentina dig deep into legal, financial and operational details. They examine the cap table to confirm ownership aligns with the founding team and past investors. The company’s legal structure gets a detailed check for compliance with local rules, while founders’ vesting agreements are reviewed to ensure they’re locked in for the long term. Contracts with employees and contractors are examined for labour law adherence, and the equity incentive plan is evaluated to see if it motivates staff effectively.

Past financing rounds and agreements reveal the start-up’s capital history, while major commercial deals and partnerships clarify on operational strengths and risks. Non-compete clauses and information access agreements post-investment also are examined to limit potential pitfalls.

Timing and Dynamics of Financing Rounds

A new financing round for a growth company in Argentina typically spans from three to six months for SAFE deals, although delays can stretch this timeline. Equity rounds, requiring greater efforts to secure funding, often take six to nine months to close, depending on the deal’s scale and the parties involved.

Existing investors with convertible securities, new investors, founders and employees all play roles, with the lead investor, often in the Series A round, setting terms that others follow.

Separate legal counsel for the lead investor and the company maintains the separation of interests while the company’s lawyer typically handles SAFE holders and institutional investors, aligning founders and staff under one umbrella.

Types of Instruments in Early-Stage Financings

The majority of start-ups in Argentina use standard industry templates from YCombinator (YC) and National Venture Capital Association (NVCA). The YC template for SAFE agreements is commonly used, particularly in the early stages of investment, and adapted to the local context. Additionally, the NVCA templates for equity financing are also used, with necessary adaptations to reflect the realities of Latin American markets.

Various instruments other than common stock are frequently used in early-stage financings. These instruments often include SAFE and warrants, depending on the circumstances and the specific needs of the company.

SAFE is one of the most common instruments used in early-stage financings. It provides investors with the right to convert their investment into equity at a later financing round, typically with a discount, a target date and certain liquidation preferences.

• Discount: Investors typically receive a discount on the next financing round.
• Target date: The SAFE may have a target date, upon which it will convert to equity if certain conditions are met. This feature is often used due to the lack of liquidity in the industry, and to be able to resolve and give the investor the option to incorporate themselves into the company’s cap table and participate in the company’s future decisions. This is at the investor’s discretion.
• Liquidation preference: In the event of liquidation, SAFE holders may have a defined priority for repayment.

Investors also typically sign a side letter to the SAFE that acknowledges additional rights that will govern from the moment of their investment or from the moment they convert the SAFE, depending on the type of right.

• ROFR (right of first refusal): Investors may have the right to purchase shares before they are offered to third parties.
• Information rights: Investors often request regular updates on the company’s financials and operations.
• Anti-dilution: Protects investors from dilution in future rounds, often through weighted average or full ratchet mechanisms.
• Drag-along: In certain cases, minority shareholders may be required to sell their shares if the majority shareholder decides to sell the company.
• Director appointments: Investors in later rounds (such as Series A) often have the right to appoint a director to the company’s board.

While less common, warrants may occasionally be used in Argentina. This instrument gives the holder the right to purchase shares of the company at a predetermined price in the future, offering flexibility for both investors and companies.

Given the regulatory landscape in Argentina, particularly with currency restrictions, investors may find the need to engage in creative legal structures to ensure efficient investment flows into local companies. For instance, the investment framework agreement and irrevocable capital contribution agreements are used to adapt the funding structure in light of local legal and economic conditions.

Core Documents in Financing Rounds

One of the defining features of Argentina’s venture capital ecosystem is the lack of local investment rounds. The main reasons for this include legal uncertainty, excessive bureaucracy and complex regulations, and lengthy administrative processes, which are incompatible with the fast-paced nature of start-ups and lack of tax incentives.

Due to these factors, most Argentine start-ups seeking seed or pre-seed funding do so through a holding company in the US, United Kingdom, British Virgin Islands or Cayman Islands, which provides legal security and eliminates restrictions for foreign investors. While a foreign investor entering as a shareholder in Argentina faces regulatory barriers, VC-approved structures facilitate capital inflows and outflows, helping start-ups secure funding more efficiently.

Key documents in Argentine financing rounds are typically global and standard in the VC market. These documents vary depending on the type of round, such as a SAFE or an equity round. The core key documents that comprise a financing round in a growth company include the following.

• SAFE: The SAFE agreement, often based on the YCombinator (YC) template, is a popular instrument in early-stage financing rounds. It grants the investor the right to convert their investment into equity at a later round. In Argentina, the SAFE is commonly adapted with a discount and a target date to suit the local regulatory context and provide certainty to investors. Some companies may also use pre-money or post-money SAFE structures, with the latter being more common.
• Term sheet: The term sheet outlines the primary terms and conditions of the financing, including the investment amount, the type of securities issued (such as preferred or common stock), and key investor rights such as liquidation preferences or voting rights.
• Shareholders’ agreement: This agreement governs the relationship between the company’s shareholders and contains provisions like anti-dilution rights, tag-along rights, drag-along rights and exit clauses. It also specifies the governance structure of the company.
• Investment agreement: This formal agreement details the terms of the investment, confirming the investor’s commitment and the number of shares or securities to be issued, as well as any conditions precedent to the investment.
• Subscription agreement: The subscription agreement is used when an investor subscribes for shares in the company. It formalises the investment commitment and is typically executed alongside the investment agreement.
• Investment framework agreement: In some cases, an Acuerdo Marco de Inversión (Investment Framework Agreement) is used, especially when a holding company is involved, or when irrevocable capital contributions are required. This agreement sets out the general terms and conditions of the investment, and may also involve a swap mechanism or the issuance of preferred shares in the local operating company.

Safeguards in Downside Scenarios

The market has shifted significantly since the boom years of 2020–2021, when many start-ups raised large amounts of capital in a liquidity-driven market. However, after the “bubble” burst, valuations have deflated, leading to more cautious investment strategies. In this new environment, investors focus heavily on provisions that protect their positions in scenarios where future funding may be at lower valuations. The inclusion of anti-dilution clauses, MFN and pro-rata rights has become more prevalent as investors seek to protect their capital.

The down rounds have become more common due to these market shifts, and the increased caution and valuation adjustments reflect the industry’s response to this new reality.

The inclusion of a target date in investment agreements is another key tool used by investors, particularly due to the lack of liquidity in the industry. A target date allows the investor to eventually convert their investment, ensuring they have the option to participate in future decisions of the company. This is typically at the discretion of the investor and gives them the flexibility to incorporate themselves into the company’s decision-making process.

Strategic investors, particularly Corporate Venture Capital (CVC) funds, may also include observer rights in their agreements, allowing them to attend board meetings without having a formal seat. These investors often avoid appointing directors to retain a less intrusive role, but they seek to be involved in the company’s strategy and development. Such rights are commonly included in side letters, rather than in the main investment documents, to ensure they do not complicate the primary investment agreement.

In tough times, investors secure protections. Discounts tied to valuation caps ensure cheaper shares in future rounds. Anti-dilution clauses guard against value drops in down rounds, while pro rata rights let investors maintain their stake. “Most favoured nation” clauses lock in the best future terms, and put/call options offer exit flexibility. Target dates in agreements provide conversion options, which given the current landscape of restricted liquidity, it is especially critical.

As the market has evolved, these terms have become more prevalent and essential in the negotiation process.

Investor Influence on Management and Governance

Investors gain more control as the start-up matures. In early-stage ventures, the influence that investors have over management and the company’s affairs varies depending on the type of investor involved. However, there are some standard rights that typically apply, especially as the company matures and goes through rounds like Series A.

Before a company reaches a Series A financing round, investors may secure “observer rights”. This gives them the ability to attend board meetings and observe the company’s operations without having a formal vote or decision-making power. This is especially common for early-stage investors, like angel investors or smaller venture funds, which want to keep track of the company’s progress.

Once the company raises a Series A round, the lead investor typically negotiates for the right to appoint a director to the board of the company. This provides the investor with more direct influence over the company’s decisions, strategies and operations. The lead investor’s involvement can significantly impact governance, and often, their appointed director has a key say in major decisions.

Additionally, the inclusion of “protective provisions” in the investment agreement grants investors veto power or special rights pertaining to specific actions the company may take, including raising additional financing, selling the company, or implementing significant operational changes. Protective provisions are designed to safeguard the investors’ interests, ensuring they have a say in critical matters even if they do not have a controlling stake.

The influence of CVC investors is typically more pronounced due to their dual role as investors and strategic partners. CVCs often aim to create synergies with the start-up beyond mere financial investment, and they may engage in commercial agreements or strategic alliances that go beyond the typical investment contract. These strategic collaborations might include opening new business lines or providing operational support, thus becoming more deeply involved in the company’s operations.

Overall, the level of influence an investor has is directly correlated with their investment’s size, their role in the financing round (eg, lead investor) and the strategic value they bring to the table. The company’s founders also play a role in defining the relationship, as they may request specific support from investors in areas beyond just capital.

Representations, Warranties, Covenants and Recourse in a Financing Round

Financing deals include assurances from both sides. Companies confirm their structure, IP ownership, employee status and lack of legal disputes. Covenants limit structural or business shifts without approval. Breaches trigger arbitration, preferred for speed, especially under foreign law, or commercial court action, ensuring recourse aligns with the deal’s scope.

Representations and warranties typically include aspects such as:

• corporate structure – confirmation regarding the existence of subsidiaries, cap table distribution and the legal standing of the company;
• intellectual property (IP) – ensuring that intellectual property rights are properly registered and that there are no infringements;
• employees – confirmation regarding employment contracts, benefits and any ongoing disputes related to employees;
• litigation – verifying that there are no ongoing lawsuits or potential legal threats that could affect the company’s viability; and
• covenants – which include obligations of the company throughout the duration of the investment, such as: no changes to the corporate structure without investor approval; and protection against significant changes in the business, such as alterations in the business model or the sale of key assets.

Regarding financing rounds, SAFE agreements tend to have a lighter scope in terms of representations and warranties compared to equity rounds, where more detailed obligations and commitments are included. However, both types of instruments share a similar structure regarding the parties’ obligations.

In the event of a breach of these representations, warranties or covenants, remedy mechanisms or compensation provisions are typically set out, which generally involve:

• arbitration – in many cases, arbitration is preferred over ordinary courts, especially when the contracts are governed by foreign law. This mechanism allows for quicker and more efficient dispute resolution; and
• legal action – if arbitration is not viable or preferred, commercial courts may be used, either locally or internationally, depending on the circumstances.

Government Initiatives and Tax Considerations

Programmes supporting growth company financing

Argentina’s government offers slim support for equity financing. The Ley de Apoyo al Capital Emprendedor (Law of Support for Entrepreneurial Capital) once backed the Fondo Nacional de Capital Emprendedor (FONDCE), but recent cuts have axed this fund, leaving only the Incentivo al Capital Emprendedor (ICE) tax incentive for corporate income tax relief. Provinces like Buenos Aires City, Córdoba and Santa Fe provide smaller-scale tax breaks and incubator support, though these lean more toward guidance than cash. Private accelerators and angel investors often step in where public funding falls short.

Argentina has limited government support for equity financings in growth companies. However, there are a few programmes and initiatives aimed at fostering entrepreneurial capital and supporting early-stage companies.

• Ley de Apoyo al Capital Emprendedor (Law of Support for Entrepreneurial Capital): The 27.349 Law established the Fondo Nacional de Capital Emprendedor (FONDCE), aimed at promoting venture capital investments in early-stage companies. Although the law remains in effect, the current government has eliminated the fund, significantly reducing liquid capital support from the national government. The only remaining form of support is the tax incentive through the ICE, which provides fiscal benefits related to corporate income taxes.
• Local government programmes: Certain provinces like the Ciudad de Buenos Aires, Mendoza, Córdoba, Santa Fe and Entre Ríos, offer localised initiatives. However, these initiatives are relatively limited and are often more focused on support services rather than direct funding.
• Alternative government-backed programmes: While direct funding from the government has diminished, initiatives from private accelerators, incubators and angel investors often fill the gap in early-stage company support. These programmes are crucial for start-ups seeking mentorship and business development opportunities in the absence of substantial public financing.

In the current economic context, with the country facing significant macroeconomic challenges, government funding for start-ups is scarce. The lack of venture capital funds, coupled with the absence of a developed capital market or traditional financing tools (such as bank loans for start-ups or pension funds for VC investments), has led to Argentina’s entrepreneurial ecosystem competing on a regional scale with fewer resources compared to other countries. However, despite these challenges, Argentina continues to have one of the most dynamic entrepreneurial ecosystems in the world.

Tax Implications

Tax benefits for start-up investors are limited. The Ley de Apoyo al Capital Emprendedor (Law of Support for Entrepreneurial Capital) offers limited relief; while the deductibility of individual equity investments exists, the Argentine tax system presents less favourable conditions for investors compared to other jurisdictions.

The Ley de Economía del Conocimiento (Law of Knowledge Economy) aids tech start-ups with income tax exemptions and credits, but these mostly benefit companies, not investors directly.

With Fondo Nacional de Capital Emprendedor (FONDCE) gone, government support depends on Incentivo al Capital Emprendedor (ICE) and provincial efforts. The lack of available financial tools is holding back Argentina’s ecosystem, forcing it to rely on private capital.

The tax treatment of investments in growth, start-up and venture capital fund portfolio companies in Argentina has some key characteristics, with a focus on tax incentives and capital gains taxation. While there are limited benefits, some initiatives aim to stimulate investment in the entrepreneurial ecosystem, the details of which are as follows.

Individual investors may make personal investments in start-ups and potentially deduct these investments. This tax relief is available for individuals making direct equity investments, but the process remains relatively underdeveloped in comparison to other jurisdictions.

While there were plans to provide significant financial backing to entrepreneurs and growth companies, the elimination of FONDCE and macroeconomic challenges have led to a decrease in government-driven investment initiatives.

As a result, Argentina competes with other regional markets that have more developed financing tools, even though it maintains one of the most dynamic and innovative start-up ecosystems globally.

Efforts to Boost Equity Financing

Apart from the programmes already mentioned in this chapter, there are very few government or quasi-government initiatives in Argentina specifically designed to incentivise equity financing for growth companies. Most existing programmes provide limited fiscal benefits or non-financial support, without deploying significant capital.

However, the private sector and international VC funds are increasingly stepping in, recognising the potential and strong entrepreneurial talent emerging from Argentina’s ecosystem.

Founders and Key Employees

Ensuring long-term dedication

Keeping founders and key staff committed is vital in Argentina’s start-ups. Vesting agreements, typically for a period of four years with a one-year cliff, tie founders’ equity to their time and dedication with the company. Equity incentives like stock options or restricted stock units, motivate employees. Earn-outs in exits, performance bonuses, non-compete clauses and a shared company vision further build loyalty, mixing financial incentives with cultural connections.

Securing the long-term commitment of founders and key employees is crucial for the success of growth companies and start-ups. Several mechanisms are commonly employed to ensure that founders and key employees remain dedicated to the venture.

• Founder vesting agreement: A vesting agreement is the most widely used tool to ensure that founders stay committed over time. Typically, a four-year vesting schedule with a one-year cliff is implemented. This means the founder’s equity is earned gradually over a four-year period, and if they leave before the one-year mark, they forfeit any unvested equity. The vesting agreement is structured to prevent founders from leaving early and taking equity with them while encouraging them to contribute to the company’s long-term success.
• Equity incentive plans: Equity incentives are also used to reward and retain key employees, often in the form of stock options, restricted stock units or phantom stock. These options allow employees to buy shares at a discounted rate or grant them stock at a later date, which can significantly increase their motivation to contribute to the company’s success. Vesting schedules are similarly applied to these equity incentives, ensuring that employees remain with the company for a longer period before they can realise the full value of their compensation.
• Earn-out agreements: For founders or key employees, especially in cases of acquisitions or company exits, an earn-out structure may be used. This requires key individuals to meet performance milestones post-sale or acquisition in order to receive additional compensation. It aligns their interests with the long-term growth of the company, encouraging them to ensure the company’s continued success after a major event.
• Bonuses and performance-based incentives: In addition to equity-based incentives, cash bonuses or performance-linked incentives are frequently included in founders’ and key employees’ compensation packages. These bonuses are often tied to specific company milestones, such as revenue targets, successful funding rounds or operational goals. They serve as an immediate financial reward while promoting alignment with the company’s overall objectives.
• Non-compete and non-solicitation clauses: Founder’s and employee contracts often include non-compete and non-solicitation clauses, which prevent individuals from starting a competing business or soliciting employees after they leave the company. These clauses further ensure that the company’s key talents remain committed to its success in the long term.
• Cultural alignment: Beyond the financial and contractual tools, company culture and the vision for the future are crucial factors in ensuring long-term commitment. When founders and key employees share a common goal and feel a sense of ownership and purpose in the company, their dedication is often as strong as the financial incentives.

Tools and Terms for Incentives

In Argentina’s venture capital industry, equity drives incentives. Incentive units suit LLCs, while stock options and restricted stock awards fit corporations. Companies retain repurchase rights on unvested shares, sometimes vested ones too, priced by termination type. Incentives might apply to local or holding entities, balancing retention with structural needs.

In Argentina, start-ups and growth companies often use equity-based incentives to align the interests of key employees and founders with the company’s success. Similar to international practices, there are key instruments employed in these types of arrangements, such as incentive units, stock options and vesting periods.

Incentive Pool and Tax Considerations

In Argentina, the design of incentive plans for founders and employees is strongly influenced by labour laws and tax regulations. One of the main considerations is whether the plan could be considered as a “remuneratory” benefit, which would subject it to labour taxes upon the issuance of equity to employees. The labour law imposes limitations on payments in kind, capping them at 20% of total compensation, which can discourage companies from offering equity-based incentives to employees.

Given these constraints, many companies in Argentina structure their incentive plans in ways that minimise labour contingencies. This typically involves the use of innovative frameworks that allow founders to grant shares to employees while reducing the tax and labour-related risks. In recent years, there has been a trend of creating plans that are more favourable to both the company and employees by finding creative solutions to reduce the fiscal and labour burden.

While the incentive plans may not always take the same form as those in jurisdictions like Delaware (eg, stock options), Argentine founders and companies are increasingly exploring these alternatives to strike a balance between incentivising employees and managing tax risks.

Series A rounds often allocate 10% of equity for employee pools, demanded by investors to keep teams driven. Investors generally request this allocation, as they want to ensure that the key team (founders and employees) is incentivised to achieve future goals. This percentage may vary depending on the round and the specific agreement, but 10% is the most common.

The equity incentive pool is typically established before or within the framework of the investment round. During the investment round, the terms of the pool are negotiated, and it is crucial for investors to avoid dilution from this equity allocation. In this context, if the incentive plan is agreed upon before the investment round, Series A investors often request that the percentage be deducted from the pre-money valuation to ensure they are not diluted by the incentive programme. However, in the case of SAFEs, investors are not diluted because the equity percentage is set post-investment round.

On the other hand, if there are future investment rounds, the expansion of the employee pool may dilute both founders and existing investors, as these pools typically increase as the company grows and needs more incentives to attract and retain key talent.

Exit Strategies and Liquidity

Shareholder rights in exits

Exit terms in Argentina echo National Venture Capital Association (NVCA) norms, featuring tag-along and drag-along rights, plus first refusal on share transfers. Triggers like IPOs, trade sales or liquidations define exit paths, adjusted for Argentina’s rare liquidity events. For this reason, some adjustments may have been made to the market practice, but overall, the investor protections and exit rights tend to align with global standards in venture capital.

The standard transfer restrictions usually apply to ensure that shareholders cannot transfer their shares without offering the opportunity to the other shareholders to buy them first (right of first refusal). Exit triggers are commonly defined in terms of an IPO, a trade sale or a liquidation event, typically outlining the conditions under which these events can occur and the rights of investors and founders.

In Latin America, IPOs are very rare, and the number of IPOs and exits has decreased considerably in recent years. This is mainly due to economic instability, volatile markets and the lack of available capital.

The M&A sector and exits are seeing limited activity and IPOs are even less common, while the trend has been towards more early-stage exits rather than IPOs. For timeline considerations, early-stage and growth-stage exits are common, where companies are still scaling but have reached a point where an acquisition by a larger company can accelerate growth or provide strategic benefits. For example, large tech companies have previously acquired early-stage tech teams that implemented salesforce solutions. The need for rapid integration of technology teams has driven this trend, as companies sought to expand their global network, especially when the exchange rate was favourable.

When it comes to listing venues and offering structures, in Latin America, companies typically look for international exchanges, like the NYSE or NASDAQ for IPOs.

Secondary Market Trading and Liquidity Challenges in Argentina

Argentina needs secondary market for liquidity, but strict Comisión Nacional de Valores (CNV) rules, market volatility, and a risk-averse culture stall progress. Private funded companies offer an alternative, yet legal limits keep trading informal. Many start-ups target US listings or Brazil’s BOVESPA for better liquidity options.

In Argentina, there is a tangible need for a secondary market to facilitate liquidity, particularly for early-stage investors and employees. However, several challenges prevent this from becoming a reality.

• Regulation: The main hurdle is the regulation surrounding public offerings of securities. The CNV has stringent rules that prevent start-ups from offering shares publicly unless they go through a lengthy and bureaucratic process, which is not ideal for the fast-paced nature of start-ups.
• Volatility: The Argentine market is highly volatile, which further discourages secondary market trading. Investors are reluctant to participate in a market where liquidity is low and risk is high. Without a public offering, it is difficult to create a secondary market with enough volume to attract substantial investment.
• Cultural issues: There is a lack of investor culture in Argentina, with the public typically investing in low-risk ventures. The desire to gain substantial returns in a short period of time (eg, a small investment turning into millions) contributes to this issue.

A potential solution could be programmes like the Plataformas de Financiamiento Colectivo (PFCs), which are similar to trust-based portfolios. In this structure, the fund manager acts as the fiduciary, and it allows investors to sell their shares under certain conditions. While this could address some liquidity concerns, the legal restrictions around public offerings of securities make these secondary transactions informal and not part of a formal market.

Many Argentine start-ups aim to go public in the US market, where there is greater valuation potential and a more robust capital market. Brazil also has a more developed capital market with BOVESPA, making it easier for companies to provide liquidity options for their investors.

There is a clear demand for a secondary market in Argentina, but due to regulatory restrictions on public securities offerings, this market remains informal and underdeveloped. More facilitation of secondary liquidity programmes would help, but without changes in the regulatory framework, the market will continue to face significant barriers.

Legal and Regulatory Considerations

Rules governing venture capital offerings

The Comisión Nacional de Valores (CNV) oversees private securities offers, but Argentine start-ups rarely list locally. In practice, most entrepreneurs in Argentina do not list their companies on the local market. Instead, their IPOs are usually governed by SEC regulations from the United States, not by the CNV.

One of the biggest online marketplace and e-commerce platforms in Latin America went public but did not issue Argentine CEDEARs (Argentine depositary certificates). Instead, investors were required to open accounts with US brokers. This regulatory framework creates a significant opportunity for investors in Argentina. Given the lack of liquidity in the local market, the valuations of Argentine start-ups are very competitive, providing excellent price-quality relationships. Investors can acquire world-class teams for a relatively low cost.

Additionally, due to the favourable conditions in Argentina, Brazilian funds, which typically invest only within Brazil, have increasingly started to invest in Argentine start-ups. The lower cost of entry and the quality of teams available make Argentina an attractive destination for international venture capital.

Evolving Regulatory Landscape in Argentina

Foreign venture capital investments in Argentina are often discouraged by legal uncertainty, bureaucracy and difficulties repatriating profits.

Due to these factors, many start-ups in Argentina choose to raise capital through holding companies in jurisdictions like Delaware, which provide legal security, tax benefits and flexibility. In such cases, foreign investors do not face significant local regulatory restrictions.

While foreign investors can invest in Argentine start-ups through a local entity, the regulatory environment is restrictive, and such investments are typically structured via a holding company to avoid the burdens of local regulations. The key issue foreign investors face is the difficulty in repatriating funds from Argentina.

Over the past year, Argentina’s government has taken steps toward gradually relaxing currency and capital flow restrictions. The objective is to eliminate most of these limitations by October 2025, provided fiscal targets are met. These regulatory changes aim to facilitate capital movement, including dividend payments and transfers from local operations to holding companies abroad, further aligning Argentina with global investment standards.

It is important to note that early-stage venture capital investments are rarely affected by these restrictions, as dividend distributions are uncommon in the first years. Moreover, experienced teams and investors in Argentina are used to operating in complex environments, often utilising alternative mechanisms to efficiently repatriate funds at real exchange rates through well-structured financial strategies.

In this context, Argentina’s combination of exceptional talent, entrepreneurial drive and ongoing regulatory improvements is positioning the country as a key player in the regional venture capital ecosystem. The strengthening relationship with the US, both commercially and culturally, only amplifies these opportunities, making Argentina a market with enormous potential for forward-looking investors.