Thought Leadership

Coming to America: US Expansion, Fundraising and Exit

22nd October 2018

Daniel Glazer, Founding Partner of Wilson Sonsini Goodrich & Rosati’s London office, joined FirstCapital as the keynote speaker for our recent SmarterConnections CEO Dinner at The Ivy Clifton Brasserie, Bristol, on Wednesday 17th October. We were pleased to have a host of CEOs with us from a number of innovative Bristol-based companies, including Ultrahaptics, Reach Robotics, Open Bionics, GapSquare, YellowDog and Synseer, to name but a few.

Wilson Sonsini Goodrich & Rosati (WSGR) represents companies from entrepreneurial start-ups to multibillion-dollar global corporations at every stage of development. We were delighted that Dan was able to share his insights into helping UK companies expand into the US, and how to be successful in connecting with US customers, employees, investors and acquirers.

Here are some of the key points raised surrounding US expansion, fundraising and exit during this engaging evening:

Raising money from US VCs: When is this a realistic option?

It’s difficult for an early-stage European company to raise funds from US VCs; often, the first question they will ask is why are you not raising money in your home market. In order for this to be an realistic option, the most important thing to demonstrate is a strong US story – market validation of your product in the US and a track record of winning customers in this market are absolutely crucial. You typically will also need strong, senior presence on the ground, such as a representative of your founding leadership team, before seeking investment. While US VCs do invest in European businesses, this is usually either if the businesses are later stage or there is a strong pre-existing relationship.

Where to set up: Identify locations that are cost-effective and that you can manage

When considering where to locate your US offices, it’s worth drawing up some key criteria. These might include whether there are appropriate VCs in the area to invest in your business, or a cluster of local users or customers which will help you hit the ground running. Factors such as the 8-hour time difference to the West Coast add considerable managerial challenges for European businesses. Consider instead whether East Coast locations such as New York or Boston might be more suitable options.

Tailor your pitch to the audience: Make sure nothing is lost in translation

As previously discussed by FirstCapital, it’s crucial that cultural differences are not underestimated in transatlantic dealmaking.

As a generalisation, European companies tend to be understated and conservative, aiming for high levels of proof behind their growth forecasts for the business. This may be viewed by a US audience as lacking in ambition and confidence, and therefore less compelling. By contrast, in the US a self-assured, confident pitching style is widely preferred, with ambitious growth estimates (even if all parties recognise that these are unlikely to be achieved). It is imperative that you understand the size of outcome desired by the US investors with whom you are speaking; it rarely pays to be conservative when pitching in the US.

Hire the best team: Combine local networks with your own company culture

Hiring people in the US is difficult, and many European companies have lost a lot of money and time with the wrong hire. Recruiters can be hit-and-miss, expensive or a combination of both, so leverage whatever contacts you have, whether that is an accelerator, investor, advisor or tech network in order to make sure you hire skilled locals.

Several of the people around the table with experience of hiring in the US agreed with Dan that the quickest way to get up and running in the US is to hire someone locally who already has the contacts and the networks that you need. However, once you have identified the talent, you need to imbue them with the culture of your company, so your first hire should integrate with the European team on the other side of the Atlantic before returning to the US (potentially in tandem with a senior representative from your European team). This combination will help your US team to grow with the right culture and links to the European base. Everyone also agreed that judging the quality of a sales person is tough, especially in the US, where even sub-par salespeople tell a great story.

Managing Risk: Take the right advice

Doing business in the US is very different from doing business in Europe, so Dan recommended taking appropriate advice to ensure that you have a good handle on risk. While there is too much to cover in this post, some of the things to be aware of include:

  • Tax: There are as many as 10,000 different taxing jurisdictions in the US, making the tax landscape very challenging for newly arrived businesses desiring to adopt a “DIY” approach. Tax advice is a must. In particular, keep in mind that concluding contracts in the US can create tax “nexus” with the States.
  • Employment law: even if you have someone working from home, you may need to register to do business in the state in which the individual works. Take appropriate advice.

Whether experienced at doing business in the US, or contemplating setting up for the first time, everyone learned something from Dan, and enjoyed the wide-ranging discussion and networking.

This event was the latest in our invite-only CEO dinner series, which has previously featured speakers such as Simon Bax, former CFO of Pixar, Deborah Magid, Director of Software Strategy for IBM, Jos White, Founder of Message Labs and Notion Capital, and Martin Leuw, former CEO of Iris Software, amongst others.

If you are interested in being invited to our next Smarter Connections dinner, get in touch or follow our blog for updates.