International Investing – 10 Things to Consider When Taking Money From Overseas

1. Will your other investors mind? Will your current investors care if more funds come from country X? Does country X help or hurt them financially, legally or psychologically? Getting your current investors’ permission might be necessary.

2. Will your overseas investors have access to your company’s trade secrets? Frequently, investors want to understand and potentially copy your intellectual property. It may be impossible to track the actual source of overseas money. Thus, some overseas investor could be connected to a real (or future) competitor. Investment dollars might come from a real (or future) client or vendor. Will they be able to access your “secret sauce” and do you mind if they do?

3. Do you understand how to deal with the investor’s culture? We are back to the No. 1 stumbling block in international business: the differences in culture. If your way of doing business is completely different than what your investors are accustomed to, then there may be potential conflict on the horizon. How will you deal with their views on risk, profit, law, ethics and management? How will they deal with yours? How much education and hand-holding will be necessary? How active will your investor be in running your business?

4. Do you realize it may take more time to deal with an overseas investor? The single biggest cultural difference is our perception of time. The overseas investor may be willing to invest, but not as quickly as your firm wishes. Investors are often known for showing high interest initially, and then stalling. In places like Asia and the Middle East, that syndrome is even more widespread.

5. Are there tax consequences to your company taking foreign money? Even if you completely and fully understand the U.S. tax ramifications, does country X’s tax practices agree with ours? Are you suddenly filling out a tax return for country X?

6. Are you suddenly dealing with a whole bunch of foreign laws? Firms may not think of this, as in the United States we often have contracts that say “this is governed by U.S. law,” but does country X care what you wrote down (in English) and signed (in the United States)?

7. Are you suddenly dealing with government agencies in the U.S. that you may not have dealt with previously? As an example, a high-tech firm may take on an investor from country X and before they know it, they are on the radar of the Defense department, the IRS and the Department of Homeland Security. It’s easy enough to check this out in advance.

8. Is there an intermediary involved and will he or she make you comfortable with each other? In many situations brokers facilitate transactions between buyers and sellers. Many times, they prefer to stay in the middle of all transactions (this is the best way to ensure they get paid). But when a firm takes on an investor, it takes on a partner. Any intermediary must facilitate a relationship between the funder and the recipient of funds.

9. Is there an intermediary involved and is he or she authorized to do this kind of work? That intermediary needs to be authorized in the United States as well as in country X. You don’t want to be a party to breaking foreign laws unknowingly.

10. Does the country that’s investing in you have some kind of stigma? So, will your clients or employees mind if you are taking funds from country X? Does the country that is sending you money have a poor reputation for anything? If you take money from country X, does that mean that you can’t take new money from country Y? What countries does country X have a rivalry with?

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