Colombia’s growth company market has followed the broader Latin American correction and recovery cycle, though with distinct local dynamics. After the 2021 peak driven by mega-rounds for companies like Rappi, the market contracted through 2022–2023 as global risk appetite declined and valuations compressed. According to Crunchbase and LAVCA, the recovery began in 2024, when Colombian start-ups raised approximately USD354 million across 70 deals, positioning Colombia among the top four VC markets in Latin America behind Brazil, Mexico and Chile. This rebound mirrors regional trends: according to Crunchbase, Latin American VC funding rose to approximately USD4.1 billion in 2025, up from USD3.6 billion in 2024, with deal quality, founder discipline and capital efficiency improving across the board. Fintech continues to dominate Colombian VC, though sectors such as SaaS, healthtech, logistics and agritech are gaining market share.

The most notable Colombian VC-related transactions over the past 12 months reflect the market’s increasing maturity and its ability to attract global institutional capital. According to Crunchbase and publicly reported data, ADDI, the buy-now-pay-later platform, raised a combined USD186 million in equity and debt during 2024, followed by a USD71 million credit facility upsize in late 2025 backed by Goldman Sachs, Fasanara and BBVA Spark. According to Crunchbase and publicly reported data, Finkargo, a trade finance fintech, closed a USD95 million Series A extension led by QED Investors and CIM, comprising USD20 million in equity and USD75 million in debt. According to publicly reported data, Simetrik, a financial reconciliation infrastructure company, raised USD55 million in a Series B led by Goldman Sachs Asset Management, with participation from Mercado Libre and Simma Capital. According to Crunchbase and publicly reported data, Bold, a payments and point-of-sale fintech, secured USD50 million in 2024. On the exit front, no VC-backed IPO has yet materialised in Colombia, though Rappi has publicly signalled its preparation for a US listing; a development that, if realised, would represent a landmark event for the Colombian and Latin American venture ecosystem. The absence of IPO exits continues to shape the market’s reliance on contractual and secondary-sale exit mechanisms, as discussed in 6. Exits, and underscores the importance of well-structured fund documentation in managing investor expectations around liquidity timelines.

Across Latin America in 2025, the number of VC transactions fell, while the average ticket size climbed. However, this pattern of investors writing larger checks but backing fewer companies was not necessarily replicated in Colombia. Although a fewer number of transactions (62 deals at an average of USD3.6 million) indicates investors narrowing down investment opportunities before deploying capital, there was a decline of overall funding. The latter might be caused by the moving political landscape edging an election year and government decisions that cause investors to act cautiously.

Colombian start-ups continued their shift toward bootstrapping and efficiency-focused approaches in 2025, as investors seem to privilege companies with real potential for traction and efficient growth, leaving behind the era of growth at all costs.

As early-stage funding seems to struggle and contract, Series B funding solidifies as the strongest-performing round stage in 2025 regionally, a trend that seems to be reflected in Colombia by financial services.

Fintech remained the dominant industry driving Colombian VC activity in 2025, as financial services accounted for a significant share of funded deals. This continues to be the sector most actively attracting both new financing rounds and M&A interest in 2025, as evidenced by Banco Itau’s acquisition of KlapCL in December 2025.

Key 2025 fintech funding deals included:

• Simetrik (USD55 million Series B, June 2025);
• FinMaq (USD29 million, January 2025);
• Finaktiva (USD10 million, April 2025);
• Avista (USD10 million, July 2025); and
• Gopass (USD8 million Series A, April 2025)

Colombia’s buy-now-pay-later market is also growing rapidly, and is expected to reach new heights over 2024, with key players including Mercado Pago, EBANX, RappiPay and Addi.

Renewable energy and cleantech emerged as a prominent vertical in 2025, with energy emerging as the top industry by funding ticket in Colombia in 2025, driven by corporate venture capital actors like Isagen and Bancolombia.

Among VC-scale transactions, SunCompany closed a USD9.8 million Series B equity round plus USD5 million in debt financing in September 2025, backed by Bancolombia and the investment managing group SEAF. Unergy raised a USD4 million seed round in November 2025.

Regionally, VC-backed exits surged to USD4.9 billion in 2025, but this was driven by strategic sales rather than IPOs. Companies in more mature fintech sub-verticals (lending, payments, BNPL) remain closest to M&A exits, while earlier-stage sectors like cleantech, healthtech and AI/SaaS continue to see primarily fundraising activity.

In Colombia, venture capital funds are typically organised as Fondos de Capital Privado (FCP). FCPs are trust-like structures managed by a licensed fund manager (sociedad administradora) (typically a trust company, brokerage firm or investment management company) in a structure functionally analogous to a common law limited partnership, though lacking independent legal personality.

Day-to-day investment decisions are entrusted to a Gestor Profesional (GP) (the functional equivalent of a general partner), reserved matters require approval by the Investors’ Assembly, and an Investment Committee is standard market practice for approving individual transactions.

The principal governing document is the fund rules (reglamento del fondo), comparable to a US limited partnership agreement, which must be registered with the Superintendence of Finance of Colombia (SFC). These rules cover investment policy, fund duration, drawdown mechanics, waterfall, fees and carried interest, governance, key person provisions, transfer restrictions, reporting and liquidation. Ancillary documents include subscription agreements and side letters for anchor or institutional investors. If the fund manager were to delegate the GP role, a management agreement (contrato de gestión) between the fund manager and the GP would also need to be put in place.

Fund initiators/managers/principals (“Fund Principals”) in Colombia participate in economics through three main channels: a management fee (typically around 1.5% to 2% of committed capital during the investment period), carried interest (generally around 20% of profits above a preferred return), and a GP commitment to the fund. These percentages are indicative of prevailing market practice and may vary by fund size, strategy and negotiation. In FCPs, fund agreements conventionally provide for distribution waterfalls aligned with international standards, including a preferred return (commonly around 8%, though subject to variation), a GP catch-up and carried interest. Continuation funds and GP-led secondaries remain nascent in Colombia. As exit windows have tightened and valuations have adjusted, Colombian managers are beginning to explore these structures to retain high-performing portfolio assets while providing interim liquidity to investors.

Regarding evolving market standard terms, Colombian fund documentation has progressively incorporated stronger investor protections in line with ILPA best practices. Key person clauses are now standard, triggering suspension of the investment period upon departure of select principals. Clawback provisions requiring the GP to return excess carried interest upon final fund liquidation have become customary in FCP documentation, alongside escrow or personal guarantee mechanisms to secure the relevant obligation. No-fault removal and for-cause removal rights for the GP are increasingly negotiated, as are investor advisory committees with defined authority over conflicts of interest and related-party transactions. Reporting standards have tightened, with quarterly financial reporting, annual audited statements, and capital account transparency now expected by institutional investors, such as Colombian pension funds. ESG commitments and responsible investment policies are emerging as negotiated terms, particularly in funds seeking capital from development finance institutions and international LPs.

FCPs are supervised by the Superintendence of Finance of Colombia and generally governed by Book 1 of Part 3 of Decree 2555 of 2010. There is no VC-fund specific legislation.

Colombia’s VC environment is shaped by significant government participation, growing impact investment and corporate venture capital. Key actors include Bancóldex (which launched the first Colombian fund of funds with sub-funds for PE and VC), iNNpulsa Colombia (providing grants, acceleration, and co-investment) and a vibrant corporate venture capital segment. Notable Colombian CVC programmes include Bancolombia Ventures (fintech), Ventures EPM (the corporate investment arm of Colombia’s largest utility, active since 2016 in energytech and smart city innovation), Ventures Comfama (social impact start-ups), ISA’s Inndigo, launched in late 2024 in partnership with Wayra (Telefónica’s CVC) with a commitment of approximately USD130 million to invest in energy transition start-ups through 2030, and the CVC vehicles of Grupo Sura, Grupo Nutresa and Grupo Argos (administered by the professional manager Veronorte through FCP Innovación). Other significant corporate venturing initiatives have been developed by Grupo Bolívar, Banco de Bogotá, Ecopetrol and Grupo Corona, alongside multinational CVC operations such as Wayra (Telefónica) and BBVA Spark. The country has approximately 70 active VC funds with a combined portfolio of roughly 1,000 companies or more (an approximate, rounded estimate), spanning through fintech, SaaS, healthtech, logistics and agritech as the most active sectors.

To accommodate extended average holding periods, which are common in Colombian VC given limited exit opportunities and a still-maturing IPO market, fund documentation typically provides for initial terms of around ten years with one or two extension periods (usually one to two years each), subject to Investors’ Assembly approval. Managers increasingly negotiate recycling provisions allowing reinvestment of early exit proceeds during the investment period, thereby extending effective capital deployment without requiring additional commitments. Co-investment vehicles and SPVs are used to warehouse assets that exceed fund concentration limits or require longer holding horizons.

The level of due diligence conducted by VC fund investors in Colombia varies significantly depending on the stage of investment and the size of the transaction, but has been trending toward greater thoroughness. For early-stage (pre-seed and seed) investments, due diligence tends to be lighter, often limited to a review of the founders’ backgrounds, the cap table, basic corporate documentation and IP ownership, whilst for Series A and beyond, the process becomes substantially more rigorous.

The key areas of focus in a Colombian VC due diligence process typically include:

• corporate and organisational matters, including the verification of proper incorporation and, a review of the by-laws and existing shareholders’ agreements, as well as proper documentation and full and unencumbered ownership by shareholders;
• tax compliance, covering both formal obligations and substantial taxation matters;
• labour and employment, which covers the review of employment contracts and independent contractor arrangements (a frequent area of contingency for start-ups), social security contributions and compliance with Colombian labour regulations; and
• intellectual property, which customarily is aimed at confirming that IP rights, creations and developments are sufficiently assigned, registered and protected, as may be required, to ensure the target’s permitted and protected use of IP assets.

Other areas include foreign direct investment and exchange regulations and specific sector regulatory compliance.

The timeline for a new financing round in a Colombian company can be expected to take approximately three-to-six months from initial engagement to closing, depending on the stage and complexity of the transaction, as well as the general readiness of the target company and its founders.

In a typical Colombian financing round, existing investors generally have pre-emption (preferential subscription) rights under both the Colombian Commerce Code and market-standard by-laws and shareholders’ agreements. It is common practice for existing investors to participate on a pro-rata basis on subsequent rounds to maintain their ownership percentage, with new anchor investors typically leading the round, as well as setting the valuation and terms.

In Colombian practice, the lead investor and the company typically engage separate legal counsel. It is common for the lead investor’s counsel to draft the initial term sheet and investment documentation, with the company’s counsel reviewing and negotiating. Co-investors who are not leading the round typically rely on the lead investor’s counsel and the pre-negotiated documentation, though some larger co-investors may engage their own independent counsel.

Under the S.A.S. structure (ie, a simplified stock corporation, Colombian leading corporate structure for VC-funded companies), quorum and majority rules can be freely established in the by-laws, subject to certain minimum standards. For new share issuances (the primary mechanism for growth or late-stage VC equity funding rounds), approval and regulations from the Shareholders’ General Assembly is typically required, with shareholders’ agreements commonly imposing additional consent requirements, such as supermajority or unanimous approval for equity issuances that would dilute existing investors beyond a specified threshold.

Colombia’s S.A.S. legislation provides significant flexibility for structuring VC investments through multiple instrument types beyond common stock. This flexibility allows Colombian S.A.S. companies to create share class structures that mimic the preferred stock mechanisms the in US, including liquidation preferences, anti-dilution adjustments, and differential voting rights – though the specific mechanics must be carefully adapted to Colombian corporate law.

Even with this considerable range of possibilities granted by Colombian regulations, early-stage financing commonly deals in SAFE and convertible debt, rather than priced equity.

SAFEs are highly regarded by Colombian investors, as they offer the speed, simplicity and cost efficiency valued for pre-seed and seed rounds. However, these instruments must be carefully adapted to Colombian law, as certain provisions of the Y Combinator standard may not translate directly into the local framework.

Convertible notes remain widely used in Colombia, particularly for bridge rounds between priced equity events or for risk-averse investors who prefer the structural safeguards of debt, or that limit their exposure by a hybrid structured instrument combining elements of both notes and SAFEs.

The typical key documents required for consummating a financing round in a Colombian growth company include the following.

• Term sheet: A mostly non-binding and preparatory document setting out the essential commercial terms of investment, such as the structure of the transaction and economic basics.
• SAFE: A contractual right to receive equity at a future-priced financing round. Unlike a debt instrument, SAFEs do not accrue interest and impose no repayment obligation, making them more founder-friendly than convertible notes while still providing investors with meaningful upside. It is common practice that a side letter is negotiated to include additional protections and rights for certain investors.
• Convertible notes: This short-term debt instrument accrues interest and has a maturity date typically ranging from 12 to 24 months, upon which the investor may demand repayment or negotiate an extension if no conversion event has occurred. Key economic terms include:
1. the interest rate;
2. a valuation cap and/or conversion discount, operating in the same manner as under a SAFE; and
3. the maturity date. The convertible note agreement typically also specifies a qualified financing threshold, events of default and conversion mechanics.
• Shareholders’ agreement: A separate agreement among all shareholders (existing and incoming) governing share transfer restrictions, pre-emption rights, tag-along and drag-along rights, board composition, reserved matters, information rights and other governance matters.
• Investor rights agreement: In more sophisticated rounds (particularly where international investors are involved), a standalone investor rights agreement may be used to document information rights, registration rights, pro-rata participation rights and major investor thresholds.
• Share subscription agreement: The definitive agreement pursuant to which new shares are issued and subscribed by the investor, containing representations and warranties, conditions precedent and closing mechanics.

• Templates and market standards. There is no single set of Colombia-specific model legal documents equivalent to the NVCA Model Legal Documents used in the US. In practice, Colombian VC transactions draw upon a mix of:
1. adapted NVCA-style documentation for rounds involving US-connected investors;
2. Y Combinator standard SAFE forms adapted for Colombian law for seed rounds; and
3. bespoke documentation prepared for specific investor needs.

Liquidation Preferences

Investors in Colombia typically secure a preferential liquidation privilege, where in a downside scenario (eg, winding up), the privileged investor is entitled to receive a liquidation sum equal or close to the invested amount (plus any agreed interest or preferred return), before any distribution to ordinary shareholders. In the current market environment, where investors have greater leverage due to constrained capital availability, participating liquidation preferences (where the investor receives both the preference amount and a pro-rata share of remaining proceeds) have become more common, particularly in later-stage rounds.

Anti-Dilution Provisions

Anti-dilution protections are standard in Colombian VC transactions, thereby granting investors the right to subscribe new shares after a down round. There is no market standard or preference for an anti-dilution mechanism, but it is common that full ratchet provisions appear in investor-favourable transactions, as opposed to more measured provisions as a weighted-average anti-dilution.

Pre-Emptive and Subscription Rights

Pre-emptive rights are a standard feature of Colombian VC transactions, both under default corporate law provisions and through enhanced contractual provisions in shareholders’ agreements or introduced directly in the by-laws. These give existing investors holding shares in a company the right to participate in future financing rounds to maintain their ownership percentage.

Given the challenging fundraising environment and the shift toward investor-favourable terms in 2024–2025, several trends have been observed:

• compressed valuations have made liquidation preferences more economically significant;
• investors are increasingly requiring more robust information rights and financial reporting obligations; and
• investor-favourable terms such as cumulative dividends on preferred shares have become increasingly negotiated in the current environment.

The S.A.S., a regular choice amongst start-ups, does not legally require a board of directors. However, once VC investors appear in the equation, it is standard practice to establish a board of directors (or an advisory body) through the shareholders’ agreement or by-law amendments. The lead investor in a priced round will typically secure at least one board seat, with a the other board members being appointed by founders and one or more independent directors.

In Colombian VC practice, investor influence is typically exercised through a selection of reserved matters requiring investor consent, which commonly include:

• new equity issuances or changes to the company’s capital structure;
• changes to the company’s by-laws or corporate purpose;
• merger, acquisition or sale of all, or substantially all, assets; and
• bankruptcy filings, dissolution or voluntary wind up.

An important feature of the Colombian governance environment is the Commercial Proceedings Office (Delegatura de Procedimientos Mercantiles) within the Superintendence of Companies, which has jurisdiction over disputes arising from shareholder disputes and corporate governance matters. This court has earned a reputation for high-quality decisions rendered in relatively short timeframes, providing a meaningful enforcement mechanism for investor governance rights.

In a Colombian VC financing round, the company and founders typically provide representations and warranties covering the following areas.

• Corporate matters: Due incorporation and good standing of the company; authority to enter into the transaction; no conflict with existing agreements or by-laws; and capitalisation.
• Financial and tax matters: Accuracy of financial statements; absence of undisclosed liabilities; tax compliance; and proper filing of all required tax returns.
• Intellectual property: Ownership of all material IP; valid assignment agreements from founders and employees; and absence of IP infringement claims.
• Labour and employment: Compliance with labour laws; proper classification of workers; and compliance with current social security contributions.
• Regulatory compliance: Rights over, and compliance with, all required licences and permits; compliance with data protection laws; and foreign exchange registration compliance.
• Litigation: Absence of pending or threatened litigation.

The scope and specificity of representations and warranties scale with the round size. For SAFE and convertible note rounds, representations are typically limited to corporate authority, capitalisation and absence of undisclosed liabilities.

Covenants and Undertakings

Post-closing covenants in Colombian VC transactions typically include the following.

• Affirmative covenants: Regular financial reporting (monthly or quarterly); compliance with applicable laws; proper management of IP; and timely filing of tax returns and foreign investment registrations.
• Negative covenants: Restrictions on incurrence of debt; restrictions on issuance of equity; non-compete and non-solicitation obligations on founders; and restrictions on asset disposition.

Recourse for Breaches

The principal forms of recourse available in the event of breaches or violations include the following.

• Indemnification: Investment agreements typically contain indemnification provisions whereby the founders are liable to the investor for damages arising from breaches of representations and warranties.
• Specific performance: Under Colombian law, parties may seek specific performance of contractual obligations, sought by means of arbitration or commercial litigation. 
• Acceleration and conversion rights: For convertible instruments, breaches of material covenants may trigger acceleration of the maturity date or forced conversion at terms favourable to the investor.
• Dispute resolution: Depending on the transaction, disputes may be resolved through arbitration and commercial litigation. Arbitration clauses are increasingly common in VC transactions, as it offers a typically faster resolution than traditional judiciary channels.

Colombia has developed several government and quasi-government programmes to incentivise equity financings in start-ups and growth companies. However, they remain modest when compared to initiatives of neighbour jurisdictions and other entrepreneurial hubs.

iNNpulsa Colombia, the national entrepreneurship and innovation agency, provides a range of support mechanisms for companies, which vary depending on stage and industry. These include:

• non-dilutive grants and co-financing for innovation projects;
• acceleration programmes and technical assistance; and
• co-investment vehicles that participate alongside private investors.

iNNpulsa’s programmes are primarily designed for entrepreneurs, but tend to de-risk private investment by providing matching capital or grants that reduce the capital requirements for private investors.

The Colombian government has established a fund-of-funds structure that invests in private venture capital funds. The GP of the fund is Bancoldex, the state-owned business development bank. This approach enables channelling government resources through professional fund managers rather than making direct investments in companies.

Fondo Emprende, administered by SENA, the national vocational training agency, provides seed capital and loans to early-stage entrepreneurs, particularly those emerging from SENA’s own training programmes. These are condonable upon the company meeting certain employment and sustainability goals. The above enables critical pre-seed support that helps companies reach the stage where they can attract private equity investment. SENA also provides beneficiaries with advice in formalisation, as well as technical assistance.

Municipal programmes have also emerged. Most notably, since its launch in late 2024, the Medellín Venture Capital programme, co-led by the Medellín District and Ruta N, has invested USD1.5 million, and has served to unlock USD13 million through Bancóldex as co-investment ally.

The Ministry of Science, Technology and Innovation also operates various grant and co-financing programmes for research-intensive start-ups and technology companies.

The tax treatment of an investment in growth/start-up/VC fund portfolio companies does not differ from that conducted in connection with regular companies.

See 4.1 Subsidy Programmes.

Securing the permanence of key personnel, including founders, is critical and highly sought-after in Colombian VC practice. The founders’ and key employees’ long-term commitment is procured through a combination of equity-based incentive mechanisms, contractual restrictions and compensation structures that have been adapted from international VC standards to fit the Colombian legal framework.

• Founder equity vesting (reverse vesting): The most common mechanism for ensuring founders’ long-term commitment is the use of vesting schedules for founder shares. Under this structure, founders receive their full equity allocation at or near incorporation, but the shares are subject to a repurchase right or a call option that lapses over time. VC investors routinely insist on founder vesting as a condition of investment, as it protects the company’s cap table from a departing founder retaining a significant ownership stake without contributing to the growth of the company.
• Non-compete and non-solicitation covenants: Founder and key employee commitment is further reinforced through non-competition clauses and non-solicitation provisions included in shareholders’ agreements or employment contracts.
• Leaver provisions: More sophisticated VC transactions in Colombia incorporate leaver provisions that distinguish between so-called “good leavers” and “bad leavers”. Bad leavers typically forfeit all unvested equity and may be required to sell vested equity back to the company at a discount (often at cost or book value rather than fair market value), while good leavers receive a more favourable treatment.

Colombian start-ups and VC-backed companies use several instruments for incentivising founders and employees, adapted to the flexibility provided by the S.A.S. framework under Law 1258 of 2008.

Stock Options

Stock options, which grant the right to purchase shares at a predetermined exercise price, are widely used in Colombia, particularly where the company has international investors or is a subsidiary of a foreign parent.

Phantom Equity (Phantom Shares/Phantom Stock)

Phantom equity has gained traction in the Colombian start-up ecosystem as an alternative to equity issuance. Rather than granting actual shares, phantom equity provides employees with a cash bonus tied to the value of the company’s shares without granting ownership or voting rights. This approach is particularly attractive for Colombian start-ups because it avoids dilution, keeps the cap table clean and simple and simplifies the corporate governance of the company. Standard vesting terms for phantom equity mirror those of actual equity: a four-year vesting period with a one-year cliff, with payouts triggered by specified liquidity events (acquisition, sale of substantially all assets, or IPO).

Employee Stock Option Plans (ESOPs)/Option Pools

Colombian start-ups commonly establish option pools, as reserved shares set aside for future grants to employees and advisers, as part of financing rounds. The creation of option pools and ESOPs is a standard feature of Colombian VC-backed cap tables, with pool sizes typically ranging from 10% to 15% of fully diluted equity. The option pool is generally established or expanded at the time of a priced financing round, and its dilutive effect is typically borne by the pre-money valuation (ie, the pool is carved out before the investor’s money comes in), consistent with global VC practice.

Special Shares Used for Incentives

Given the S.A.S.’s flexibility to create multiple classes of shares with differentiated rights, some Colombian companies create specific share classes for employee incentive purposes that carry limited or no voting rights but include economic participation rights (such as preferential dividends or liquidation participation). This approach allows founders to retain governance control while extending economic upside to key employees.

The tax treatment of equity incentive instruments in Colombia is governed primarily by Article 108-4 of the Colombian Tax Code, which specifically regulates stock option plans and general income tax provisions.

Stock Options

For stock options, the taxable event occurs when the employee exercises the option to subscribe for shares (for traditional stock options) or when the employee becomes a shareholder (for share transfers as compensation). The taxable basis is the spread between the exercise price paid by the employee and the fair market value of the shares at the time of exercise.

Tax Rates

The spread at exercise is treated as income and is subject to progressive income tax rates of up to 39% for Colombian tax residents. For non-resident employees, a flat 20% withholding rate generally applies. Upon subsequent sale of the shares, any capital gain is taxed at 15% if the shares have been held for more than two years (qualifying as fixed assets); if held for less than two years, the gain is taxed as ordinary income at progressive rates up to 39%.

Withholding Obligations

The Colombian employer entity must apply withholding tax at progressive rates (up to 39%) at the taxable event and report and pay such withholding to the tax authorities.

Employer Deduction

The Colombian employer entity is allowed to deduct the FMV of the granted stock or the value at exercise, provided that (i) the labour withholding tax is properly applied and (ii) social security contributions are paid. This deduction is available even if the Colombian entity is an affiliate of the entity issuing and granting the stock, provided that, under Colombian accounting standards, the value of the granted stock is registered as an expense during the relevant year.

Phantom Equity

Because phantom equity results in cash payments rather than share transfers, payouts are taxed as ordinary compensation income at progressive rates up to 39%, subject to standard withholding. Phantom equity payments do not qualify for the preferential 15% capital gains rate that applies to shares held for more than two years, which is a significant disadvantage relative to actual equity grants.

Wealth Tax Exposure

An additional consideration as of 2026 is the wealth tax. Equity holdings (including shares received through equity incentive plans) form part of an individual’s net wealth for purposes of Colombia’s wealth tax, which applies to individuals holding net wealth above the applicable threshold.

The implementation of an investment round and the set up or expansion of an employee incentive programme are closely interrelated in Colombian VC practice, both from a process perspective and in terms of dilution mechanics.

Option Pool Creation and Sizing

Establishing or expanding the employee option pool is typically a negotiated element of the financing round itself. In standard VC practice (followed in Colombia), the lead investor will negotiate for the option pool to be included in the pre-money capitalisation – meaning the dilutive effect of the pool is borne entirely by the existing shareholders (founders and prior investors) rather than by the new investor. This is a critical negotiation point: if a 15% option pool is created on a pre-money basis, the effective dilution to founders is significantly greater than the dilution from the investor’s equity purchase alone.

The typical sequence for implementing an equity incentive programme in conjunction with a financing round in Colombia is as follows.

• The term sheet negotiation phase addresses the option pool size, its treatment in the pre-money or post-money capitalisation, and the basic terms of the equity incentive plan.
• During the definitive documentation phase, the by-laws of the company are amended to authorise the new share class (if issuing actual equity to employees through privileged or restricted shares), increase the authorised capital to accommodate both the investor’s shares and the option pool, and establish the legal framework for the incentive plan. The shareholders’ agreement also addresses the governance of the option pool, including who has authority to make grants (typically the board of directors or the legal representative with board approval), the vesting schedule, acceleration provisions, and leaver terms.
• Following closing, individual grant agreements are executed with each employee recipient, specifying the number of shares or options, the exercise price (for options), the vesting schedule, and other terms specific to that grant.

Cap Table and Dilution Management

The cap table reflects the option pool as a reserved allocation of authorised but unissued shares, which appear in the fully-diluted capitalisation but do not represent outstanding shares until individual grants are made and (in the case of options) exercised. A well-structured option pool and clear vesting terms provide predictable dilution and valuation clarity, which is essential for maintaining investor confidence and simplifying due diligence for future financing rounds.

Phantom Equity Simplification

For companies that choose phantom equity over actual equity grants, the implementation process is significantly simpler from a corporate law perspective. No by-law amendments are required and no new share class needs to be authorised. The phantom equity plan is implemented through a standalone instrument and individual grant agreements, which can be adopted without the corporate formalities required for actual equity issuance. However, the cash-settlement nature of phantom equity means the company must plan for potentially significant future cash obligations.

Co-Ordination With Investor Rights

The creation and administration of the option pool is subject to the investor’s consent and oversight rights are commonly established in the shareholders’ agreement. Reserved matters typically include the authority to make grants from the pool, modifications to the pool size, changes to vesting schedules, and acceleration of vesting for departing employees. This ensures that the incentive programme operates within the parameters agreed upon during the financing round and that the investor retains control over dilution resulting from equity incentive grants.

At the portfolio company level, exit-related provisions are governed by shareholders’ agreements adapted to Colombian commercial law. Standard provisions include drag-along rights, tag-along rights, rights of first refusal, and liquidation preferences determining distribution priority upon a trade sale, dissolution or deemed liquidation event.

Transfer restrictions are customary and typically include lock-up periods during which founders and early investors may not transfer shares without investor consent, rights of first offer or first refusal in favour of existing shareholders, and consent requirements from the board or investor majority for any proposed transfer. In S.A.S. entities, Law 1258 permits broad contractual freedom to tailor these restrictions, including outright prohibitions on transfer for up to ten years. “Exit triggers” are commonly defined as a trade sale (change of control), an IPO, a merger or consolidation, a sale of all or substantially all assets, or a deemed liquidation event (eg, the latter typically encompassing any transaction in which control of the company effectively changes hands even if not structured as a formal sale).

In the absence of any VC-backed IPO to date and with a still-shallow M&A market for technology companies, three mechanisms have emerged as the main practical exit routes in Colombian VC: drag-along rights, redemption mechanisms and secondary sales. Drag-along provisions are the single most relied-upon contractual exit tool, enabling a lead investor or majority holder to force a full sale and deliver liquidity to all shareholders. Redemption rights and put options serve as the second critical pathway, providing institutional investors with a contractually guaranteed exit on defined terms and timelines – functioning not merely as a backstop but, in practice, as a primary means of achieving distributions where market-driven liquidity events are scarce. Secondary transactions constitute the third pillar. Direct secondary sales allow investors to transfer positions to specialised buyers without a company-level exit event; GP-led continuation vehicles enable the GP to roll high-performing assets into a new fund structure while offering existing investors a cash-out option; and structured liquidity solutions such as preferred equity recapitalisation and investor-led tender offers bridge the gap between fund term constraints and extended holding periods. Complementing these three exit routes, anti-dilution protections (typically broad-based weighted average), pay-to-play provisions, and carefully structured distribution waterfalls ensure that investors recover their capital before founders participate in exit proceeds. Collectively, drag-along, redemption and secondary-sale mechanisms now form the practical core of exit planning in Colombian VC – supplanting the role that IPOs and deep M&A markets play in more developed jurisdictions and reinforcing the centrality of well-drafted shareholders’ agreements in protecting investor rights.

There has been no IPO of VC-backed Colombian companies to date, although it has been rumoured that Rappi will soon pursue an IPO. The most sought-after listing venues are NYSE and NASDAQ.

There is a tangible and growing need for pre-IPO secondary trading in Colombia. With no public market exits to date, holding periods stretching well beyond fund terms, and a rising number of mature start-ups, early investors, employees and founders are left holding illiquid positions for years. Global VC secondaries capital remains largely undeployed in Latin America, despite the region’s expanding venture ecosystem, further underscoring unmet demand.

Key challenges include valuation uncertainty without public benchmarks, information asymmetries between private share buyers and sellers, cap table and governance preservation, and compliance with Decree 2555 and SFC supervisory requirements. To operationalise structured liquidity programmes, shareholders’ agreements must expressly permit secondary transfers and carve out rights of first refusal; company by-laws must address share transfer mechanics; AML/CTF and KYC procedures must clear incoming shareholders; and, in S.A.S. entities, the contractual flexibility under Law 1258 must be calibrated to facilitate transfers while preserving tag-along rights, board consent requirements and information rights.

Company-facilitated tender offers are gaining ground, though they remain less common than in the US. The company or a designated buyer offers to purchase shares from employees and early investors at a negotiated price, typically alongside a new funding round or a GP-led liquidity event. These must be structured to avoid triggering public offering requirements under Colombian securities law, to ensure pricing transparency, and to control cap table access. When properly executed, tender offers allow founders and employees to monetise a portion of their holdings without diluting existing investors or awaiting a full exit, thus serving as a practical retention and motivation tool during prolonged holding periods.

The offering of a company’s equity securities in a venture capital transaction in Colombia is governed by a layered regulatory framework, the applicability of which depends on the nature, size and audience of the offering.

Public Offerings v Private Placements

Under Decree 2555 of 2010 and the regulations of the SFC, a public offering of securities is defined as any offer directed at the general public or to 100 or more determined persons to subscribe, sell, or otherwise acquire securities.

Conversely, a private placement (ie, an offering directed to fewer than 100 identified persons) is exempt from these requirements. The exemption also extends to offerings of certain securities (shares or mandatorily convertible bonds) made to existing shareholders of the issuer, if they are directed at no more than 500 recipients. The vast majority of venture capital transactions in Colombia are structured as private placements, since financing rounds typically involve a small number of identified institutional investors and/or high net worth individuals.

S.A.S. Securities Offering Framework

The S.A.S., under Law 1258 of 2008, is expressly prohibited from listing its shares on a public stock exchange or engaging in a public offering of securities. This prohibition is a defining characteristic of the S.A.S. and means that any equity offering by an S.A.S. must remain a private placement. If a company wishes to pursue an IPO, it must first convert from an S.A.S. to a traditional stock corporation (sociedad anónima or S.A.), which involves complying with the more rigorous governance and reporting requirements applicable to S.A. entities.

Relevance of the 100-Person Threshold for Employee Incentive Programmes

The 100-person public offering threshold becomes particularly relevant for larger growth companies with extensive employee equity incentive programmes. If stock options, restricted stock or other equity awards are offered to 100 or more employees, the offering could be classified as a public offering requiring SFC authorisation. To mitigate this risk, companies should ensure that individual option grant agreements are made to specifically identified employees and not structured as a general invitation. Phantom equity programmes, which do not involve the issuance of actual securities, avoid this threshold entirely.

Crowdfunding Regulation (Decree 1357 of 2018)

As an alternative to traditional private placements, Colombia’s crowdfunding regulation permits the issuance of debt or equity securities through licensed Collaborative Funding Companies (SOFICOs). Crowdfunding is regulated as a form of public offering of securities but through a simplified framework. However, further measures are needed to strengthen secondary market trading for these types of securities and to mitigate the associated liquidity risk, which would make participation more attractive for new investors. This channel may be relevant for smaller capital raises by early-stage companies, though it has not replaced traditional VC financing as the primary funding mechanism.

Colombia maintains a generally open foreign investment regime, but several regulatory frameworks may restrict or condition the investment of a foreign VC investor in a Colombian portfolio company.

Foreign Investment Registration

Colombia operates a registration-based (not approval-based) foreign direct investment regime. As a general rule and setting aside some industry-specific exceptions, there are no general regulations that limit or restrict international investment or the flow of cash into or out of Colombia. However, all foreign investments must be registered with the Colombian Central Bank. The key requirements include:

• funds must be channelled through exchange market intermediaries or registered clearance accounts;
• an exchange declaration for International Investments must be completed and filed; and
• cancellation and/or substitution of the registered investment must be completed in a six-month period after the investor exits the company.

Failure to comply with foreign exchange regulations can result in fines of up to 200% of the transaction amount. This registration requirement is not a barrier to investment but is a critical compliance obligation that must be carefully managed in VC transactions.

Antitrust and Merger Control

Under Colombian competition law, transactions that meet specified revenue and asset thresholds are subject to prior notification to or clearance by the Superintendence of Industry and Commerce. While most early-stage VC investments fall below the applicable thresholds, later-stage investments or acquisitions in concentrated markets may trigger merger control notification requirements.

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