Author: Uwe Wagner, Tiburon Consulting
In my last blog I talked about what startup entrepreneurs are getting wrong. Now, I am looking into the ten most important questions you should ask yourself before you enter the US market.
Most startups I have been working with over the last 15 years wanted to come to Silicon Valley. But why the Bay Area? Why not New York, Atlanta or Chicago? I don’t think there is just one right answer to these questions; however, if you are in the tech industry I would like to give you a few good reasons why you should start here in the Bay Area.
Big companies like Google, Apple, Facebook, Twitter and others are a good source for talent, early-adopters, and capital.
Major universities like Stanford and Berkeley supply intellectual capital, talent, and training.
Will you find such a vast amount of human capital anywhere else? Whether you are looking for startup CEOs and C-level executives, functional vice-president types, engineers, sales people, or marketers – it is all here in the Bay Area.
Startups need different kinds of capital at different stages — bootstrapping, founder financing, or friends and family money to get a business model, Angel capital to win customers in a specific market segment, and venture capital to expand globally and broaden the product line. There is tons of investment capital available in the valley.
Experienced investors and executives mentor companies and talented professionals. At the corporate level, such mentoring includes help with strategic vision, acquisitions, raising capital, performance monitoring, organization design, culture, hiring and firing, product development, and getting customers and partners. For example I am one of more than 25 mentors working with the German Accelerator Silicon Valley. Almost every major country runs accelerators, incubators, LinkedIn groups, seminars, panel discussions and networking receptions.
No matter where you chose your springboard into the US market to be, you may want to first ask yourself the following 10 questions:
1. Are you a company that “matters” in your home market? Is your service or solution making a difference? Is your technology disruptive? (Think Uber, AirBnB, Nest, Tesla and others)
2. Is your company scalable and capable to grow to $100 million in revenues over the next 3-5 years?
3. Do you need capital from US Venture Capitalists? VCs do not appreciate dealing with CEOs sitting thousands of miles away. They prefer to check in with you over a coffee on a regular basis.
4. Are you prepared to share part of your equity with a VC? That is very often a very difficult decision for European startups, because some do not want to share the management power.
5. Are you prepared to keep R&D in Europe but move your HQ to the US? I see more and more companies moving their HQs, Sales and Marketing to the US, but keeping their development and operations in their home country, where labor is available for a fraction of the prices in Silicon Valley.
6. What makes you different? Why should people buy from you? What is your unique selling point?
7. Who are your globally recognized reference customers? You may have very big clients in Europe, but do those names matter in the US?
8. Who are your main competitors? You probably know about your competitors in your home market – do you know who you are competing with here in the US?
9. What do analysts say about your products and services? Many decision makers in the US and elsewhere will look you up in the Gartner Quadrant.
10. Are you prepared to not see any major profits coming out of your US operation over the next 2-3 years? I have seen many companies throwing the towel after 3 years and going home, because they were hoping to conquer this market much faster.
Be prepared for a challenge upon trying to break into the US market. Consider the benefits and disadvantages. Answering these questions will be the first stepping stone in your journey.