Description of inbound migration of foreign company to the US

1. Inbound “Flip” Transactions
Preparing Your Foreign Entity
for US Venture Funding
October 2012

2. The Inbound “Flip” Scenario
• Forco is a foreign corporation. It has
identified and filled a market need
and has accelerating year-over-year
growth. With proper funding, Forco
can rapidly improve its short-term
profitability and long-term viability.
Without proper funding, Forco
remains vulnerable to better-funded
emerging competitors.
• Forco needs venture capital funding
to continue growing.

3. Venture Capital Funding in the US
Global Venture Capital and Private Equity Country Attractiveness Index ranks the US as
the venture capital leader overall and in the following five categories:
Size of the Economy
• Gross Domestic Product, 2011: $15.1 trillion
Size of the Stock Market
• Stock market cap, 2011: $15.6 trillion
Stock Market Liquidity
• Daily trading volume, 10/11/2012: $4.7 billion
IPO Market Activity
• Number of IPOs, 2012 first half 71
M&A Market Activity
• Number of M&A deals, 2012 first half: 3,159
Sources: Global Venture Capital Statistic: Ernst & Young, Globalizing Venture Capital: Global venture and insights and trends report; Rankings: The Global Venture Capital and Private
Equity Country Attractiveness Index 2012, Alexander Groh, Heinrich Liechtenstein and Karsten Lieser, http://blog.iese.edu/vcpeindex/unitedstates/; “Size of the Economy”:
http://www.imf.org/external/pubs/ft/weo/2012/01/weodata/index.aspx; “Size of the Stock Market”: http://data.worldbank.org/indicator/CM.MKT.LCAP.CD; “Stock Market Liquidity”:
http://online.wsj.com/mdc/page/marketsdata.html; “IPO Market Activity”: http://www.pwc.com/us/en/press-releases/2012/q2-ipo-watch-press-release.jhtml; “M&A Market Activity”:
http://www.marketwatch.com/story/ernst-young-us-ma-activity-falling-2012-07-02.

4. Global Venture Capital Hub: Silicon Valley
2011 Venture Capital Totals:
Global: $48.7 billion
United States of America:
67% of Global Venture Capital
Silicon Valley:
41% of US Venture Capital
Source: Statistics: Ernst & Young, Globalizing Venture Capital: Global venture and insights and trends report;
https://www.pwcmoneytree.com/MTPublic/ns/nav.jsp?page=historical.

5. The Problem
• US angel investors and venture
capital fund managers’
discomfort or unfamiliarity
with foreign entity structures
and governing laws may
dissuade investment in such
entities, rendering them less
likely than a similarly situated
US company to secure
funding.

6. The Solution: Inbound “Flip” Transactions
Stock in Forco
Domco
Shareholders Shareholders
(US)
Stock in Domco
Domco
(US)
Forco Forco
(Foreign) (Foreign)
Description: The shareholders create a new US entity (“Domco”), and exchange their Forco
stock for Domco stock. After the exchange, the shareholders will own Domco, and Domco
will own Forco. Angel investors and venture capital funds would invest at the Domco level.

7. Results and Details
• Angel investors and venture capital funds are
much more likely to invest in the corporate Shareholders
group at the new Domco level.
• Royse Law Firm has been performing inbound
Domco
“flip” transactions since 2006. (US)
• “Flips” can typically be achieved tax free, with
only entity creation and legal document costs.
Forco
• “Flips” are generally executed quickly, and can (Foreign)
be completed within about three weeks.

8. Perks of a Physical Move: Silicon Valley Customers, Employees, Acquirors
Adobe Systems AMD Apple Cisco eBay
Facebook Google HP Intel Intuit
Nvidia Oracle Sun Microsys. Yahoo! YouTube
Source: Statistics: https://www.pwcmoneytree.com/MTPublic/ns/nav.jsp?page=historical; Graphics: http://en.wikipedia.org/wiki/Silicon_Valley.

9. Additional Resources
www.RoyseUniversity.com
Providing business, tax, and personal finance ideas to
founders and executives.
www.RoyseLink.com
Connecting founders with investors.
www.rroyselaw.com/ijuris_login_jp.html
Offering legal document templates and more.

10. Contact Us
Palo Alto Office: 650-813-9700
PALO ALTO LOS ANGELES SAN FRANCISCO
1717 Embarcadero Road 1150 Santa Monica Blvd. 135 Main Street
Palo Alto, CA 94306 Suite 1200 12th Floor
Los Angeles, CA 90025 San Francisco, CA 94105
www.rroyselaw.com
Twitter: RoyseLaw

11. Circular 230 Disclosure
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used, by any taxpayer for the purpose of avoiding tax penalties that may be imposed by the
Internal Revenue Service. Each party should seek advice based on the party’s particular
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