With the US market offering the largest investment flows into start-ups globally and it also being the world’s largest market for digital consumption, for many new companies around the globe the US remains somewhat of a golden grail and dream market to enter. However, even a company moving from a relatively friendly environment such as the London corporate finance landscape will likely have little understanding of what it takes to enter the unique US market. Here are three basic tips to keep in mind when considering launching or moving your business to the land of the free.
1. If your core market is the US, it is critical to be there for product feedback. In general, except in a very few cases, the US market should be your first. If you are successful there you can be successful anywhere else. But success in another market is not a predictor of US success. The odds of being acquired and size of transaction grow in your favour once there. You must know the people who are your potential acquirers or partners. Everything in the world is personal so knowing the right people ahead of time is key.
2. Investment by US investors will almost always need to come into a company organized under the laws of a state in the USA, most typically Delaware. If that structure is not in place at the time conversations with investors commence, founders should be prepared with a corporate restructuring plan that includes a US parent company and potentially a family of wholly-owned operational subsidiaries below it in other jurisdictions. Relatedly, US investors will insist that the intellectual property necessary for the business in which they are investing belongs to the legal entity into which they are investing or to its wholly-owned subsidiary. Complex licensing arrangements and IP holding companies are generally disfavored.
3. When reaching out to investors in the USA, it is important for founders to have a realistic assessment of their ongoing role within the company based on their individual strengths. Undoubtedly, some founders will be more than capable of leading their company as CEOs in the USA. Others, however, may be great on the technology side or have strong talent and connections allowing them to do business development elsewhere, but they may not be ideal candidates for the position of CEO for the US business.Having an honest internal discussion about it and thinking through this ahead of time, difficult and unpleasant though it may be in certain cases, is important. If the founding team does not have a good candidate for the US CEO position among its members, and recognizes this shortcoming in advance of speaking to investors, it can begin recruiting efforts to attract an “American” CEO prior to fundraising.
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