Originally published on Sifted.com
As a Spaniard who has founded and invested in companies in both Europe and the US, I knew I wouldn’t be walking into an English-speaking version of Madrid when I first got to San Francisco. In Madrid, business is very social and spontaneity is a given. I wasn’t ready for the culture shock that is the United States’ high-powered, no-nonsense lifestyle.
The United States has seen a drop in the number of foreign entrepreneurs setting up shop as it gets harder to find a way into the country — and keep a new business afloat.
Turning the American dream into a reality requires a heavy dose of realism and prep work. These are my four tips for European entrepreneurs to recalibrate and successfully make the move to the United States:
1. Separate the (American) dream from your business reality
The United States may have 300 million people and the highest GDP in the world, but that doesn’t mean it will necessarily be the right cultural fit or market for you.
The first step, before you’ve even set foot in the States, is to do market research around customers and costs, to determine if your product can land without you going bankrupt first.
Are people already educated on adopting your type of product? That might bring down marketing costs. Talent costs dearly here too, and retaining that talent is a lot harder. I’ve met many Europeans who were itching to open operations in San Francisco, yet as soon as they arrived, the sky-high costs started bleeding them dry — and they had no contingency plan.
This is a state of states, each of which is practically a small country in itself, each with wildly different consumer behaviours. Identify which states you plan to launch in first, and remember that the red tape is very different between states. Whatever your product, you’ll need the necessary permits, which could mean modifying your offering.
2. What landing model makes sense for you?
If you’ve done your research and the US market makes sense for you, draw up a loose roadmap for the initial 18 months of the expansion and allocate the budget you need to make that happen.
Firstly, do you have to move there? Creating your network and partners could require a constant presence, or you could build those relationships remotely and over a few in-person trips.
Then there’s the hybrid model: have a few US-based team members, while the bulk remains in Europe (or elsewhere). This makes sense if your budget is low and you are already comfortable finding local contacts. Returnly, a fintech that we invested in, kept a large number of its staff in Europe and maintained an extremely frugal model. When comparing the cost of US talent versus quality, they knew that they could find the same expertise back home, saving money while also supporting the national industry. Meanwhile, its c-suite did its strategic part in and around Silicon Valley, eventually securing a $300M exit earlier this year.
3. Remember: big fish in Europe, small fish in US
When it comes to fundraising your expansion, a crucial note: it is far easier to raise in the United States for European companies who are over Series B. If you’re below Series A, it will be practically impossible.
That should help you decide whether you want a US or European team of investors behind you. US investors of course bring you more on-the-ground support, but sticking with Europe-based investors is useful if you’re still a young company without much traction.
When deciding which type of US investor fits your model, reach out to the foreign founders’ groups who have interacted with different investor communities. There are so many great channels to do so. Here in Florida, we have a #Miamitech Telegram group where help is immediately offered (often by the mayor himself) to entrepreneurs.
Now, about your pitch. The hard truth is, it doesn’t matter how much success you’ve had in Europe, you will have to prove your potential from scratch in the United States. Even if you’re a novelty in Europe, chances are you’ll come up against more than one startup trying to cover your niche in the United States. Many European successful businesses have a hard time landing in the US. Just look at Spotify, which faced fierce competition from iTunes and Pandora.
4. Meet employee expectations
US startups are very generous with their tech talent in terms of salary and perks, whereas Europeans take a more structured attitude to wages. Depending on the stage of your company, you might want to give your employees equity or experiment with innovative reward systems to match US employee expectations. Whatever your approach, you’ll need incentives that thank people for working with you from the beginning.
Likewise, US companies tend to be more feedback-oriented, and employees expect regular and constructive feedback about their performance. There’s also an assumption that leaders provide training and a hands-on approach to personal development, so you’ll need to integrate these processes into employee working hours.