10 tips for European startups looking to raise money in Silicon Valley
We wrote about packing your bags and going to Silicon Valley yesterday, and the reason most entrepreneurs do that is of course to raise money from VC’s there. (While AlltthingsD is calling Silicon Valley “the next Detroit” today, there’s still a lot of VC activity down there.)
Recently, Dominik Balogh of M.dot already gave some excellent advice to European founders with plans to move to the Valley – namely to “stay in Silicon Valley as long as you can”.
Here’s some more advice from Jussi Laakkonen, an entrepreneur from Helsinki who moved to California. Laakkonen is the founder and CEO of Applifier, a cross promotion network for games that grew to over 55 million users in 100 days. He has 10 tips for raising money in Silicon Valley:
“We recently raised our seed round at Applifier and it was led by a silicon valley seed fund MHS Capital, whose general partner is Mark Sugarman. My key takeaways from talking to roughly 40 institutional investors in the valley about investing to an European startup are:
- Traction cures all ills. If you can really demonstrate up and to the right path and consistently deliver on your promises, the funding will find you.
- It’s not a dot, it’s a line. I stole this from Mark Suster (http://www.bothsidesofth
etable.c…), i.e., one meeting is not enough. Especially as a foreigner, everybody will need time to get to know you.
- Warm intros are a must. It’s likely that the investors don’t know you, so try and find warm intros from people in your network.
- Get locals as your advisors. They will help you with access and build social proof, but only do it if they can also add actual business value and advice beyond just getting to meet investors.
- Get ready to move over. You will have to do the “Israeli model” (e.g. R&D in your home country, HQ in US with the CEO moving over). Talk with your spouse, and be real about it – can you really move over? If not, raise locally.
- Do the corporate flip. If you are in the very early stages with your company and there are no major reasons (e.g. tax, R&D incentives, what not) to keep your company as a non-US entity, then you should consider a corporate flip i.e., create a new Delaware corporation that will own all the shares of your local company. Consult a tax attorney first, because this may have significant personal and corporate tax liabilities.
- Reduce the perceived hassle that comes from foreign investment. If you are asking investors to invest into a foreign entity, get legal and tax experts to prepare the memos for them about the tax impact on their fund, governance of foreign corporation etc. You need to show that it is not really that much harder / difficult than an US entity (which it typically true for an European startup).
- Read Venture Hacks (http://venturehacks.com/
). And then read it again. See if you can get on AngelList (http://angel.co/). They also do foreign companies.
- Practice pitching. It doesn’t come naturally to many European founders. God knows I’ve struggled with it. Pitch to your advisors, to US entrepreneurs, to your colleagues, wife, what not. You only have one chance at a first impression.
- Get your deck to 10 slides and then throw it away. Not literally, but one big surprise to me was that in the 40 odd investor meetings I had, I managed to open the deck probably only 5-10 times. You will need to be able to tell your story verbally without any visual aids. Simplify, practice.
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