CAYMAN ISLANDS Law and Practice Contributed by: Simon Thomas, Richard Spencer, Alexandra Clynes and Sayak Bhattacharya, Campbells
• Hybrid Financing Models: Continuation funds leverage blended facilities combining uncalled capital commitments and asset portfolios to address concentration risks. This approach is particularly popular for tech and digital asset portfolios. Impact and ESG Integration • Emerging ESG Strategies: While explicit government-backed VC funds are not promi - nent, ESG-aligned funds are gaining traction. Cayman’s enhanced governance rules (eg, independent directors, risk frameworks) sup - port impact-focused strategies. Digital Asset Dominance • Blockchain and Web3 Leadership: A sig - nificant number of Cayman-based fintechs raised capital in 2024, with funds leading investments in DeFi, NFTs, and tokenised assets. Exit Environment • IPO Pipeline Revival: Improved market condi - tions in 2025 are expected to unlock exits for mature VC-backed firms, particularly in fintech and AI. 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 exist - ing 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. 3. Investments in Venture Capital Portfolio Companies 3.1 Due Diligence Due diligence with respect to Cayman Islands entities will typically include a review of: • basic corporate information, including the memorandum and articles of association, reg - isters of directors and of members, particu - larly to evaluate the requirement for any third party or shareholder/board consents and any most-favoured-nation provisions in respect of an investor; • any charges included on the register of mort - gages and charges; • if the entity is in good standing with the Cay - man Islands registrar of companies; • whether compliant with economic substance and beneficial ownership regimes; • any litigation against the entity; and • all statutory books and records of the entity. 3.2 Process 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 uncertain -
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