Campbells had a busy 12-month period where it advised on the following:
The Cayman Islands continues to see significant growth in the venture capital industry, with the number of private funds registered with the Cayman Islands Monetary Authority at an all-time high with the total number of funds registered reaching over 30,000 by the end of 2024.
Notable trends included a rise in venture capital funds investing in cryptocurrencies, blockchain, Web3, and decentralised finance (DeFi) and a continued focus on credit, infrastructure, real estate, private debt, and technology sectors.
In the venture capital equity financing space, 2024 saw more down rounds, convertible note financings, and series round extensions. However, the market is hopeful for an increase in equity rounds in the second half of 2025, with Q1 already showing an increase in activity compared to Q1 2024.
We have seen the Cayman Islands increasingly become a hub for venture capital investments in the blockchain space. Enhancements to the Cayman Islands Virtual Asset Service Providers Act have encouraged the establishment of funds investing in tokenised assets, NFTs, DAOs, and other blockchain-based projects. Cayman Enterprise City and Tech Cayman initiatives have further strengthened the fintech ecosystem by providing infrastructure and regulatory support. Beyond blockchain and fintech, venture capital activity has also focused on broader technology sectors such as software development, mobile gaming, and AI-driven solutions.
Latin American markets still favour the Cayman Islands for venture capital activity for various reasons, including investor familiarity, liability certainty, tax neutrality and legal certainty. While 2021-2024 saw primarily fintech companies using the Cayman structure, 2024-2025 is starting to see an increase in healthtech and education tech companies seeking funding through the offshore structure. In more recent times, we have seen a trend for some LatAm operating companies with holding structures in the USA to consider continuing out of the USA and into the Cayman Islands, in some cases to mitigate against regulatory risk borne out of the US nexus, in preparation for transactional activity.
Industries with high exit activities included financial services driven by strategic sales and PE-backed IPOs and technology (reflecting demand for mature software and enterprise tech companies). Industries attracting financing rounds included fintech and blockchain (each receiving early-stage/seed financing). Emerging areas like AI-driven solutions also drew seed funding during 2024.
The typical structure for a venture capital fund is the Cayman Islands-exempted limited partnership, which provides flexibility in capital commitments and distributions while offering limited liability protection for limited partners. One or more of the partners is a general partner who has legal responsibility for the operation of the partnership and management of its business, together with unlimited liability for the debts of the partnership. These are invariably Cayman Islands companies or foreign companies registered to do business in the Cayman Islands which have very few assets, to avoid serious financial loss pursuant to the general partner’s unlimited liability for the debts of the partnership. The remaining partners are limited partners, who are restricted from participating in the management of the partnership’s business, but who have liability for the debts of the partnership limited to the extent of their investment. Various activities may be carried out by limited partners without limited partners becoming liable as general partners by virtue of participating in the management of the partnership. Such funds are regulated under the Cayman Islands Private Funds Act (as revised) (for closed-ended funds).
The main governing document is the limited partnership agreement.
Fund principals (initiators, managers, or general partners) can participate in the economics of a venture capital fund through several mechanisms. These are designed to align their financial interests with the fund’s performance and incentivise long-term value creation. Typically this will be by way of (i) management fees (ie, an annual fee charged to limited partners (LPs) to cover operational expenses such as salaries, office costs, and travel typically set at 2% of the fund’s assets under management (AUM), following the “2/20 rule” and (ii) carried interest (“carry”) which is a share of the fund’s profits earned by general partners after surpassing a predefined hurdle rate (eg, 8%) distributed after portfolio companies exit successfully, typically in later years of the fund’s life (seven to ten years). It is generally set at 20% of profits, although this can vary based on fund size and structure.
Fund principals may also invest their own capital alongside LPs in portfolio companies, giving them direct exposure to potential upside.
2023/24 saw the introduction of CIMA’s enhanced corporate governance framework requiring funds to adopt risk-based governance structures, including independent directors for oversight, audit committees for larger funds and clear conflict-of-interest policies (much of which has already been adopted by venture-capital funds). The Beneficial Ownership Transparency Act (as revised), effective July 2024, also saw an expansion of scope to exempted limited partnerships (albeit funds registered with CIMA are able to avail themselves of an alternate route to compliance and provide a contact name for the reporting of beneficial ownership at the request of the Competent Authority as opposed to maintaining a beneficial ownership register).
A venture capital fund that is established in the Cayman Islands will usually be regulated as a Cayman Islands private fund in accordance with the Private Funds Act (as revised). A private fund is any company, unit trust or partnership (wherever established) that offers or issues or has issued investment interests, the purpose or effect of which is the pooling of investor funds with the aim of enabling investors to receive profits or gains from such entity’s acquisition, holding, management or disposal of investments, where:
The general partner of the fund will typically be a Cayman Islands-exempted company. If the fund is managed by a fund manager, the fund manager may be registered in the Cayman Islands under the Securities Investment Business Act (as revised) or (as is usually the case) can be established elsewhere. No Cayman Islands laws or regulations will apply to a fund manager based in a jurisdiction other than the Cayman Islands.
The SIBA regulates “securities investment business”, which includes managing securities, dealing in securities, arranging deals in securities and advising on deals in securities. The SIBA defines the term “securities” widely and includes a list of instruments that are common in today’s financial markets (shares in the capital of a company, interests in a limited partnership, units of participation in a unit trust, debt instruments, warrants, certificates, options, futures and contracts for differences).
The SIBA designates certain persons as “Registered Persons” to whom the full licensing provisions of the SIBA do not apply. Entities that are eligible to become Registered Persons include, in summary, persons providing securities investment business on an intra-group basis, persons providing securities investment business to defined “high net worth” and “sophisticated” clients and persons regulated by a recognised overseas regulator in an overseas jurisdiction in which such securities investment business is being conducted.
The Cayman Islands’ venture capital landscape has evolved significantly over the past year, driven by regulatory innovation, market trends, and investor demand. Below are critical observations across impact funds, fund-of-funds activity, continuation funds, and broader sector dynamics.
Fund-of-Funds Activity
Continuation Funds
Impact and ESG Integration
Digital Asset Dominance
Exit Environment
Fund Strategies for Extended Average Holding Periods
To accommodate extended average holding periods, venture capital and private equity funds employ several strategies that align with long-term investment goals. These strategies focus on maximising returns over longer horizons while managing risks and capital efficiently. One approach involves structuring funds with longer lifespans, providing additional time to realise value from investments. Another strategy is the use of continuation funds, which allow fund managers to extend the holding period of existing assets, enabling further growth and value realisation without the pressure of an immediate exit. Buy-and-hold strategies emphasise holding investments for extended periods to benefit from compounding returns and reduced transaction costs; by avoiding frequent buying and selling, funds minimise the impact of market volatility and timing risks.
Due diligence with respect to Cayman Islands entities will typically include a review of:
The timeline for completing a financing round in a growth-stage company with new anchor investors can vary depending on factors such as the company’s maturity, market conditions, and investor readiness. New anchor investors may require additional time for negotiation and due diligence compared to existing investors familiar with the company. Economic uncertainty or competitive fundraising environments can extend timelines.
Below is an analysis of the relationships of the various parties in one round.
Existing v New Investors
Majority Requirements v Unanimous Consent
The above factors ensure balanced governance while protecting stakeholder interests in evolving venture capital landscapes.
In the Cayman Islands, venture capital financings often involve instruments beyond common stock equity issuances, particularly in early-stage investments, as outlined below.
Preference Shares
Convertible Notes
Redeemable Preference Shares
Warrants
SAFEs (Simple Agreements for Future Equity)
A typical financing round in a growth company in the Cayman Islands involves core documents such as a term sheet, subscription agreement, shareholders’ agreements, amended M&AA, PPM (if required), board resolutions, legal opinions, and updated statutory registers. The exact documentation may vary depending on the instruments issued (eg, preference shares v convertible notes) and specific investor requirements. These documents ensure clarity in governance, compliance with Cayman law, and protection for all parties involved in the transaction.
Frequently used templates in Cayman Islands financing rounds include NVCA model documents, adapted for use in the context of Cayman targets, which streamline transactions while maintaining compliance with local regulations and global best practices. Key templates include:
Venture capital (VC) investors in the Cayman Islands typically secure critical rights to protect their investments in downside scenarios, such as company liquidation. These terms prioritise their financial recovery over other stakeholders like ordinary shareholders, founders, and employees. Below are the key terms and their implications.
Liquidation Preferences
Redemption Rights
Contractual Safeguards
Governance Controls
Anti-Dilution Protections
Anti-dilution protections are widely used in Cayman Islands VC financings, particularly for preferred shareholders, as they safeguard investors against both percentage and economic dilution in subsequent funding rounds.
The forms are as follows:
These provisions are typically included in the company’s memorandum and articles of association (M&AA), ensuring enforceability in future rounds.
Pre-Emption/Subscription Rights
Prevalence: Pre-emption rights are frequently incorporated into financing agreements to allow existing shareholders (including VC investors) to subscribe for new shares before they are offered to external parties.
The forms are as follows:
Such rights protect against percentage dilution by enabling investors to maintain their ownership stakes and ensure alignment between existing shareholders and incoming investors during equity raises.
Neither anti-dilution nor pre-emption rights are statutory under Cayman Islands law. Instead, they must be expressly agreed upon in governing documents (eg, M&AA, subscription agreements or the shareholders agreements).
Recent shifts in market conditions have led to more favourable terms for investors in venture capital and private equity financings in the Cayman Islands, particularly in light of economic uncertainty and increased competition for capital. These terms are designed to enhance investor protections and returns, especially in downside scenarios. Below are the key developments.
Participating Liquidation Preferences
Compounding Preferred Returns
Pay-to-Play Provisions
Enhanced Redemption Rights
Stricter Anti-Dilution Protections
Investors in Cayman Islands ventures typically secure significant influence over management and corporate governance through a combination of contractual rights, share class structures, and regulatory frameworks. Below are the key mechanisms and market-standard rights.
Governance Influence
Information Rights
Market Standard Rights
CIMA’s 2023 updates mandate robust governance frameworks, including conflict-of-interest policies, risk management systems, and transparency in decision-making. Operators (eg, boards) must act in the fund’s best interests, enhancing investor protections.
In venture capital and private equity financings in the Cayman Islands, representations, warranties, covenants, and undertakings are tailored to mitigate risks and ensure compliance with local laws. Below is a summary of market-standard terms and recourse mechanisms for breaches.
Representations and Warranties
Common Representations by a Cayman target as well as a VC investor, in the context of a VC financing:
Investor Representations
Covenants and Undertakings
Affirmative covenants
Negative covenants
Recourse for Breaches
Contractual remedies
Enforcement actions
Security enforcement
The Cayman Islands government and quasi-government entities have introduced several initiatives to support equity financing in growth companies, particularly in technology, innovation, and financial services. While direct equity investment programmes are limited, the jurisdiction’s regulatory framework and strategic economic policies create an attractive environment for venture capital and private equity activity.
Cayman Enterprise City (CEC) is a quasi-government special economic zone (SEZ) designed to attract global tech companies, start-ups, and innovation-driven businesses. Key incentives include:
The Cayman Islands have no direct taxes of any kind. There are no corporation, capital gains, income, profits or withholding taxes. There are no inheritance taxes or death duties. Upon application to the government, Cayman companies, limited partnerships, trusts and SPCs can expect to obtain a written undertaking that they will be exempted from taxes for a minimum of 20 years (companies and SPCs) and 50 years (limited partnerships and trusts). Accordingly, any income or capital gains (whether accumulated or distributed) will not be subject to tax in Cayman. However, this may be taxable in the home jurisdiction of investors and any manager. The Cayman Islands does not have any double taxation treaties, and there are no exchange control or currency restrictions in the Cayman Islands. The Cayman Islands do not have any double taxation treaties.
Please see 4.1 Subsidy Programmes.
To secure the long-term commitment of founders and key employees, ventures in the Cayman Islands utilise a combination of equity-based incentives, contractual obligations, and governance mechanisms. These approaches align the interests of key stakeholders with the company’s growth objectives while ensuring retention and performance.
Equity or Quasi-Equity Based Incentives
Employee stock option plans (ESOPs)
Restricted stock units (RSUs) or restricted ordinary share grants
Share appreciation rights or phantom stock units
Co-Investment Opportunities
Employee co-investment schemes
Employment agreements with restrictive covenants
Founder lock-up agreements/share restriction agreements
Governance Mechanisms to Retain Control
Please see 5.1 General.
Please see 4.2 Tax Treatment.
The implementation of an investment round and the set-up of an employee incentive programme (eg, stock option pools) are closely linked processes, with overlapping impacts on company ownership and dilution. Below is a breakdown of their relationship.
Process Interrelation
Investment round triggers ESOP creation/expansion
Valuation and equity allocation
Legal documentation
Post-Funding Hiring
Dilution dynamics
Dual Dilution sources
Cumulative impact
Valuation v dilution trade-off
In terms of anti-dilution protections, investors may secure weighted-average anti-dilution rights, but employees rarely receive similar protections. Alternative structures include the use of phantom equity or RSUs to incentivise employees without immediate share issuance. In terms of the vesting schedule, it is recommended to implement four-year vesting with a one-year cliff to ensure employee retention aligns with company milestones.
In the Cayman Islands, shareholders’ rights during liquidity events such as trade sales or IPOs are typically governed by a combination of contractual provisions and corporate law. Below are the key exit-related provisions that regulate shareholders’ interactions.
Drag-Along Rights
Tag-Along Rights
Pre-Emption Rights
Lock-Up Agreements
Redemption Rights
Exit-Related Governance Provisions
In addition to tag-along and drag-along rights, transfer restrictions include a right of first refusal whereby investors often hold a contractual right to purchase shares before they are offered to third parties. This ensures continuity and allows current stakeholders to retain ownership influence. A company’s memorandum and articles of association may restrict transfers unless approved by the board or shareholders. Transferors must also adhere to procedures outlined in shareholders’ agreements (eg, offering shares to existing investors first).
Exit mechanisms are typically defined in constitutional documents and financing agreements to align investor and company interests as outlined below.
Time-based exit events
Performance triggers
Enforcement of exit rights
The scarcity of conventional exits has driven Cayman Islands investors to prioritise contractual redemption rights, NAV financing, and liquidation safeguards. Legal enforcement (eg, winding-up petitions) and innovative fund structures (eg, evergreen vehicles) now dominate market practice, reflecting a shift toward flexibility and preemptive risk mitigation in prolonged illiquid environments.
After a slowdown in 2022–2023 due to high interest rates and geopolitical uncertainty, 2024–2025 projections suggest a rebound in the IPO market, driven by easing regulations and investor confidence. Tech, fintech, and blockchain start-ups dominate IPO pipelines.
The IPO process for Cayman entities typically takes 6–18 months, influenced by factors such as market conditions, regulatory alignment, and corporate preparedness.
Cayman entities are frequently used as listing vehicles for IPOs on major exchanges (eg, NYSE, NASDAQ, Hong Kong). The Cayman Islands Stock Exchange (CSX) is less common for start-ups, as most target larger international markets.
The rarity of immediate IPOs has created a tangible market need for secondary market trading in the Cayman Islands. Mechanisms such as tender offers, private auctions, company buybacks, and trust structures are frequently used to provide liquidity for early investors, employees, and founders while maintaining control over ownership structures. These programmes are particularly relevant for companies at later funding stages or those experiencing delays in traditional exit events.
Existing memorandum and articles of association often impose pre-emption rights, board approval requirements, or outright transfer prohibitions, necessitating amendments to enable structured liquidity. Private company shares also lack transparent pricing mechanisms, leading to disputes over fair value. It is also necessary to balance founder/employee liquidity needs with investor protections (eg, anti-dilution rights, liquidation preferences).
Company-facilitated tender offers are a valuable tool for providing liquidity to employees and early investors while maintaining control over ownership structures. They serve as an interim solution when traditional exits like IPOs or trade sales are delayed, addressing stakeholder needs without compromising long-term strategic goals. However, careful planning around pricing, governance approvals, regulatory compliance, and funding sources is essential to ensure successful implementation.
A Cayman Islands venture capital fund will be regulated as a private fund with the Cayman Islands Monetary Authority in accordance with the Private Funds Act. Exemptions for “proprietary money” (eg, employee investments) apply only if participation is strictly limited to direct employees. Offering documents or marketing materials must contain prescribed language.
It is not commonplace to offer a venture capital fund’s shares/interests to the general public in the Cayman Islands and typically most investors/employees will be based outside of the Cayman Islands and therefore subject to the laws of those jurisdictions.
Shares/interests may be offered to Cayman Islands-exempted companies and exempted limited partnerships, but certain types of promotional activity in the Cayman Islands will require regulatory oversight. Legal advice should be sought in each case.
Structuring for multiple stakeholders may include the establishment of a segregated portfolio company, which allows compartmentalisation of assets/liabilities across investor groups. This is ideal for multi-strategy funds or employee co-investment tranches and employee co-investment vehicles.
Venture capital portfolio companies will not offer shares to the public unless participating in an IPO (in which case the relevant listing rules and obligations will apply). Shares may not be offered to the general public in the Cayman Islands.
The Cayman Islands does not have a general foreign direct investment regime and there are no restrictions on foreign ownership of land or real estate in the Islands.
Specific rules apply to foreign ownership and control of local businesses. The Local Companies (Control) Act (as revised) typically requires that 60% of the ownership interests in the local business be held/controlled by Caymanians. Furthermore it will be necessary to apply for a trade and business licence.
Such restrictions do not apply to Cayman Islands-based entities that conduct business exterior to the Cayman Islands.
Investments into locally licensed and regulated businesses are subject to approval by the Cayman Islands Monetary Authority, including ensuring that any such persons are fit and proper to make such investment.
There are currently no foreign exchange controls or foreign exchange regulations.
Recent updates to the Beneficial Ownership Transparency Act mean that certain individuals or entities who hold 25% or more of the issued share capital in a Cayman Islands entity will need to provide certain information for inclusion in that company’s beneficial ownership register. The information can include personal information such as full name, birth date/place and nationalities, but does not become publicly available. In certain circumstances, where one or more ultimate beneficial owners cannot be identified, the company may elect to record a senior managing official (ie, a director) as the beneficial owner or take another alternative route to compliance.
The economic substance regime also provides that, where Cayman Islands companies are conducting certain relevant activities, they must annually report their relevant income generated by that activity and satisfy an “economic substance test”, proving that they have adequate physical presence within the Islands. Investment funds are excluded from the economic substance regime.
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sthomas@campbellslegal.com www.campbellslegal.comThe Cayman Islands maintained its dominance as a global epicentre for venture capital (VC) and private equity activity in 2024, leveraging its tax-neutral regime, adaptive regulatory framework, and innovative fund structures to attract over USD150 billion in new capital commitments. With 17,292 private funds registered under the Private Funds Act by the end of the final quarter of 2024 and a 4.8% year-over-year growth in closed-end vehicles, the jurisdiction solidified its position as the preferred offshore hub for cross-border VC strategies. This article examines the ecosystem’s evolution through regulatory reforms, sectoral shifts, and structural innovations, while addressing persistent challenges and emerging opportunities.
Regulatory Landscape: Balancing Transparency and Flexibility
CIMA regulatory measures
New rules and guidance formed part of a series of changes introduced by the Cayman Islands Monetary Authority in late 2023, designed to modernise its approach and ensure that various rules and statements of guidance are applied consistently across the various regulated sectors.
The Rule – Corporate Governance for Regulated Entities, and the Rule and Statement of Guidance – Internal Controls for Regulated Entities, both become effective in October 2023. These measures, which outline the regulator’s minimum expectations, followed CIMA’s previous updates, including guidance on governance, outsourcing, cybersecurity and record retention.
Looking into the detail of the framework for corporate governance and internal controls, the regime previously in place for mutual funds was extended to private funds, in addition to certain new provisions. All regulated funds are required to implement and maintain a framework for corporate governance and internal controls. CIMA states that this framework must be proportionate to the size, complexity, nature of business and the risk appetite of the regulated entity.
Operators of regulated funds in the Cayman Islands, as the governing body, have ultimate responsibility for compliance and should be fully aware of their obligations. In addition to the company directors, managers of an LLC and the trustee of a unit trust, operators now include general partners of private funds established as partnerships.
In many cases, regulated private funds will already be broadly in compliance with these measures, given the strong culture of corporate governance that exists in the Cayman Islands. Where a regulated entity believes any rules are not applicable, based on the proportionate approach outlined above, it is the responsibility of the entity to demonstrate to CIMA why that is the case, if required.
The guidance confirmed that service providers or group-wide functions for internal controls or corporate governance frameworks can be relied upon to meet obligations; however, funds may be required to demonstrate the effectiveness of these arrangements. Operators of a regulated fund are also responsible for requesting appropriate information from any service providers or advisers, to be satisfied the fund is operating in compliance with all laws and regulations.
In addition to the prescribed duties of operators and extensive obligations regarding conflicts of interests, the CIMA guidance provides a useful reminder of the minimum expected requirements for board meetings. Operators of a regulated fund should meet at least once a year, although this should be more frequent if the size, complexity, structure, nature of business or risk profile of the fund demands so. As part of the governing body’s oversight function, service providers should also be requested to attend meetings where necessary.
Beneficial Ownership Transparency Act (BOTA) reforms and key obligations for CIMA-registered funds
The Beneficial Ownership Transparency Act (BOTA), effective 31 July 2024, expanded the scope of the Cayman Islands beneficial ownership regime. It introduced new compliance requirements for entities, including those previously exempt. Registered mutual funds and private funds are impacted but benefit from an alternative compliance route.
Alternative compliance route
CIMA-registered mutual funds and private funds are not required to report their Registrable Beneficial Owners (RBOs). Instead, they must provide their Corporate Service Provider (CSP) with details of a designated Contact Person. This alternative route simplifies compliance while ensuring access to beneficial ownership information when required.
Contact person requirements
Written confirmation obligations
For compliance under BOTA:
Maintaining updated information
Funds must ensure that any changes related to the Contact Person or other compliance details are promptly communicated to their CSP. Failure to do so may result in penalties or administrative fines.
Penalties for non-compliance
Registered funds failing to comply with BOTA requirements may face:
Timing and transitional period
While BOTA took effect on 31 July 2024, enforcement of new requirements began in January 2025.
This streamlined approach under BOTA ensures that CIMA-registered mutual funds and private funds meet international transparency standards while minimising administrative burdens through an alternative compliance pathway. Registered funds can also opt in to maintain a beneficial ownership register if preferred.
Fund Formation and Structural Innovations
Dominance of exempted limited partnerships (ELPs)
ELPs accounted for 72% of new fund registrations in 2024, favoured for their pass-through tax treatment ensuring profits, losses, and capital gains flow directly to investors without Cayman Islands taxation. This aligns with onshore tax frameworks (eg, US partnerships), making them attractive for cross-border investments.
ELPs are governed by the Exempted Limited Partnership Act (as revised) which allows partners to customise terms (eg, capital commitments, profit distribution, governance) via the Limited Partnership Agreement. No separate legal personality simplifies contractual arrangements, with the general partner holding assets on trust for the partnership.
From a liability protection perspective, the general partners assume liability for debts and management and limited partners liability is capped at their investment unless they participate in management.
Structural advantages in the venture capital space include no withholding taxes, capital gains taxes, or corporate taxes in the Cayman Islands and the securing of a 50-year tax undertaking from the Cayman government, ensuring future tax immunity.
ELPs therefore balance investor protections, operational agility, and tax efficiency. Their dominance reflects decades of refinement in catering to global private capital markets.
Rise of niche fund strategies
Investor demand for specialised mandates drove growth in:
Cross-border structuring trends
Jurisdictional synergies emerged as a key theme:
Sectoral Investment Focus
Technology: adjusted valuations drive opportunistic deployments
Post-2023 valuation resets enabled Cayman funds to acquire stakes in:
Sustainable infrastructure: bridging the emerging markets gap
Infrastructure investments remain a significant focus for private funds in the Cayman Islands. Venture capital firms are leveraging opportunities in real estate and infrastructure development, particularly in emerging markets or regions undergoing modernisation.
Challenges in the 2024 Ecosystem
Exit market constraints
The venture capital industry faced significant exit market constraints in 2024. These challenges stemmed from macroeconomic pressures, regulatory hurdles, and structural market shifts.
The 2024 exit environment saw the lowest activity in a decade, with the end of quarter 3 recording just USD10.4 billion in total exit value and only 14 public listings. While full-year exit value reached USD149.2 billion, this was driven by small, early-stage exits (70% from companies that had raised no further than Series A). Cayman-based funds, which often hold mature, high-value start-ups, faced disproportionate challenges due to the scarcity of large exits.
Key constraints included:
The global IPO market is expected to rebound in 2025, providing liquidity events for VC-backed companies.
Strategic Opportunities for 2025
A promising economic outlook and improved fundraising conditions have led to a resurgence in venture capital activity.
Digital asset fund innovation
The Cayman Islands has emerged as a leading jurisdiction for digital asset venture capital (VC) funds in 2025, leveraging its innovative legal frameworks and tax-neutral environment to attract blockchain-focused investments, in particular tokenised VC fund structures where investor interests are represented by blockchain-based tokens, with smart contracts automating capital calls and distributions.
2025 has already seen increased VC activity in:
The jurisdiction’s ability to accommodate smart contract audits, on-chain KYC solutions, and DAO governance structures positions it as the offshore hub for next-generation venture investing.
AI
Global VC trends in 2025 show a surge in investments in AI-driven start-ups, particularly in areas like generative AI, machine learning, and automation. The jurisdiction’s flexible regulatory framework allows funds to adapt their strategies to emerging technologies, making it an attractive base for tech-focused investments.
Emerging market convergence
Alternative investments in emerging markets such as Latin America, Africa, and Southeast Asia are attracting significant interest. Cayman-based funds can leverage their expertise in structuring complex cross-border deals to tap into these high-growth regions.
Hybrid fund models that blend traditional and digital asset strategies are becoming increasingly popular. These structures allow funds to diversify risk while tapping into both conventional markets and emerging digital economies.
Subscription finance lines (capital call facilities) and hybrid facilities combining NAV loans are also gaining traction as funds seek larger financing options.
Concluding Remarks
The Cayman Islands’ proactive adoption of FATF protocols in the beneficial ownership and VASP travel rule space (amongst others) will enable the jurisdiction to sustain its offshore primacy through the next market cycle.
With predictions of tech company numbers doubling by 2027 and continued institutional interest in alternative investments, the Cayman Islands is well-positioned to capitalise on these trends. The jurisdiction’s commitment to fostering innovation while maintaining its reputation as a “gold standard” offshore centre ensures it will remain a magnet for venture capital activity.
In summary, the Cayman Islands combines its status as a top-ranked financial hub with cutting-edge innovation in technology and finance. These factors make it an unparalleled destination for venture capital funds looking to thrive in 2025’s dynamic global market.
Floor 4
Willow House
Cricket Square
George Town
Grand Cayman
+1 345 623 2648
sthomas@campbellslegal.com www.campbellslegal.com