Why European Startups Should Consider The US
Six years ago, my co-founder and I started our company in Amsterdam. Today, we’re headquartered in Boulder, Colo., with a team representing more than 15 nationalities and employees based globally.
While the path for most startups is nonlinear and often takes surprising turns, we calculated the decision to move nearly 5,000 miles from the Netherlands to the U.S. in the early stages of the company. We’re not alone: According to Index Ventures research, from 2008 to 2014, nearly two-thirds of European startups expanded or moved to the U.S. before their Series A funding rounds. While this wave decreased to a third of European startups between 2015 and 2019, software startups in particular may profit significantly more by moving across the Atlantic. Here’s why:
1. Access To Funding
Like most startups, we primarily sought to relocate to the U.S. to access funding. While it has been improving in recent years, many startups face challenges when it comes to fundraising in Europe. According to Atomico’s State of European Tech report, Europe estimatedly invested approximately $35 billion in venture capital in 2019, which pales in comparison to $116.7 billion in the U.S. Due to this funding gap, it’s challenging to build a European startup that competes with American companies.
It behooves aspiring European tech founders to either pursue a business idea that doesn’t directly compete with American companies in scope or scale or to raise funds in the U.S. Adyen and Spotify are examples of European startups that successfully differentiated themselves from American competitors and maintained a European presence.
Accelerator programs, such as Techstars and Y Combinator, are an excellent starting point for startups founded outside of the U.S. looking to break into the market. Two days after our Techstars NYC demo day, we received an email from a well-known co-founder and CTO looking to invest six figures in our company. That kind of momentum was unprecedented for us, and it immediately revealed the accessible fundraising landscape in the U.S.
2. Better Positioning For Global Expansion
Just as important as fundraising opportunities is access to the right customers. This is another area where the U.S. offers more possibilities for B2B companies. In their handbook, “Expanding to the U.S.,” Index Ventures discovered that European corporations invest a whopping 76% less than their U.S. counterparts in software. In general, European companies are still considerably more conservative when it comes to innovative technology, while American companies are more likely to invest in cutting-edge business software. In 2020, European companies poured approximately $106 billion into B2B software, while North American companies invested more than double that at $240 billion, with a projected 15% increase by 2024. Such investment lends to improved products that optimally serve core customers.
Ultimately, software companies looking to operate at the enterprise level should consider the best tactics early on for reaching target markets. For some, geographic location won’t play a role. However, for us and many others, the connections made by moving to and fundraising in the U.S. set the stage for consistent and exponential revenue growth.
3. Shaping A Globally Diverse Team
Lastly, while it was more of a byproduct than an initial intention, relocating to the U.S. provided the opportunity to build a global team. We deliberately kept an office in Amsterdam because it’s a hub for attracting top technical talent, and our team there is an invaluable asset. Meanwhile, we grew our sales and marketing teams in the U.S. With the transition to remote work, there is more opportunity than ever for companies to tap into this international mindset and reap the benefits.
Ensuring our teams remained in sync despite the distance presented an additional challenge, but it provided the necessary experience for continued expansion. It also pushed us to sharpen the skills that any leader in a cross-functional, multi-department business should possess. As a result, we’re able to source from a much larger talent pool, recruiting employees worldwide to join the team remotely. This is great for our bottom line, as we believe a diverse workforce lends to a diversity of ideas, helping us stay on top in a growing market.
Whether your company has global roots or not, don’t allow geographic boundaries to define your team’s potential. If it works for your business, dare to think broader, but start slow and controlled — perhaps with one or two remote employees. Ensure you have systems in place to adequately connect and set your team up for success, such as management software like Lattice, 15Five or Culture Amp and regular meetings in different time zones. With the proper tools, effort and adaptability, you’ll be on your way to effectively managing a remote team — global or not.
Ultimately, a wide lens and the fortitude to explore alternative paths are imperative to innovation. For us, that meant relocating to the U.S. while maintaining a global presence, and being razor-focused on securing funding to develop our team.