Breaking Into A New Market? 5 Practical Tips For Non-US Startups To Succeed In The US

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In 20+ years in Silicon Valley I have both seen, advised and sometimes dissuaded foreign entrepreneurs about coming to the US. This is a post with my top 5 insights / practical tips – most of it applies overall whenever leapfrogging from your home market to another country. 

1) Not An Obvious Transition – By many metrics the US is the largest market for a startup, largely a function of its population and prosperity. Case in point, it has the third largest population (after China and India) and has been the largest economy as measured by GDP since the 1920s (China is fast approaching that place, albeit with a billion more people). But big numbers don’t necessarily mean outsize success. Foreign entrepreneurs can often comprehend the language, after all English is the closest to a global tongue, spoken by 1.5B people. And the same can be said for cultural familiarity given America’s influence globally. But for those exact reasons we caution founders even more strongly – it all seems deceptively easy. Whether it’s understanding rules and regulations for a healthcare company, or people’s mindset for a consumer company, or connecting with key decision makers for large enterprise sales, there are particularities about the US that have no shortcut.

2) Localizing The Team – We believe succeeding in any market pre-supposes committing to it. Commit could mean i) moving to the US, ii) spending significant time there regularly, iii) hiring top leadership locally, iv) moving headquarters officially and v) dedicating a non-trivial amount of time and money to the country. Tau is primarily a seed fund and as such our investees are inherently riskier than companies further along. So, like most seed funds, we overwhelmingly look for the strongest commitment to minimize execution risk i.e. CEO based in the US. If you are an early entrepreneur and moving is not feasible, you can perhaps find some funds that will be supportive, but our strong practical advice is to build towards being able to expand into the US later, likely after series A. A little word about moving headquarters – a Delaware incorporation has become the de facto standard since it’s business-friendly and well-understood globally.

3) US-Based Investors – Raising funds from a good investor is also about establishing credibility and opening up networks. Definite bonus if you raise from a fund that specializes as a bridge between places. Historically the strongest bridges we have seen are Israel, India and China but nowadays we are seeing a proliferation of such funds, whether it’s about a country (say Brazil) or a region (say LatAm). If you are raising from such a fund one common dilemma is whether to work closer with the partner based in your country or with the partner based in the US. This is really a case by case discussion but one that entrepreneurs should definitely have upfront before signing up the term sheet. The advice in this section applies also to advisors and (independent) board members too, with the caveat that those usually have a lower commitment to your company so the help and validation will typically come with lower stakes.

4) Leveraging Your Advantages – Foreign companies who succeed in the US typically bring a disproportionate advantage in cost or features relative to local competitors. First scenario: your home country provides a stable revenue base and/or has great talent that is more affordable so you can afford to commit more resources towards the US. Israeli founders are perhaps the archetype, with a large percentage building and keeping R&D there once moving to the US. Second scenario: the rules in your home country allow you to run the company in ways you couldn’t necessarily in the US. Spotify being in Sweden for instance arguably shielded them more from the digital rights violations than a similar initiative in the US. Third scenario: your ability to develop the tech in your home country is better than in the US. The most publicized example here are AI companies from China who often can get more data given the norms there.

5) Don’t Come aka The Case Against The US – All that said, there is wisdom in *not* coming to the US. Especially where relationships or regulations are more entrenched, such as in healthcare or govtech. That is not to say you can’t do it, just means it’s an additional obstacle to overcome beyond the inherent uncertainty of a startup. History is littered with case studies where companies tried to expand too early, too fast, too much. The world is not flat and its wealth is definitely unevenly distributed. But what has happened in the last decade especially is the emergence / strengthening of ecosystems in many other parts. With the caveat it’s an imperfect metric, almost half of the unicorns in the world are non-US according to CB Insights in Mar 2022. Think global, stay local may be the right advice indeed.

Inspired by several conversations, latest with Mrinal Sinha. Originally published on “Data Driven Investor”. Amit is Managing Partner and Cofounder of Tau with 20 years in Silicon Valley across corporates, own startup, and VC funds. These are purposely short articles focused on practical insights (we call it gl;dr — good length; did read). See here for other such articles. If this article had useful insights for you, comment away and/or give a like on the article and on the Tau Ventures’ LinkedIn page, with due thanks for supporting our work. All opinions expressed here are from the author(s).

Amit Garg I have been in Silicon Valley for 20 years -- at Samsung NEXT Ventures, running my own startup (as of May 2019 a series D that has raised $120M and valued at $450M), at Norwest Ventures, and doing product and analytics at Google. My academic training is BS in computer science and MS in biomedical informatics, both from Stanford, and MBA from Harvard. I speak natively 3 languages, live carbon-neutral, am a 70.3 Ironman finisher, and have built a hospital in rural India serving 100,000 people.

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