The US is the land of big opportunity as a tech-entrepreneur. More than a few companies have made the leap over the years, with some achieving success and others not quite getting there.
So, what is it about the US that is so important if you’re a tech firm? And what’s key to achieving success in this vast market?
We caught up with a couple of Kiwi’s who’ve made it stateside, and returned to tell the tale, to help us with some do’s and don’ts for Kiwi companies aspiring to crack the American market.
Paul Grey from ExportX, put’s it like this: “Your valuation is only 10% of what it could be if you’re not there. Since it’s the biggest English speaking market, with the largest appetite to invest in technology, you can’t afford not to be there.” Miles Valentine, a serial tech entrepreneur is pretty forthright: “It’s all about choice. For most companies it costs the same to get a small customer as it does to get a large one. The large ones yield more revenue, so why wouldn’t you choose those?”
With so many more customers and resourcing options on hand, you are not as constrained as you are with a small market – this gives you a lot more choice in how you can grow and succeed. Size matters.
Both Miles and Paul agree that understanding the size of the market, and the business culture that goes with it, is key. In New Zealand we are used to being ingenious with few resources. In the States, they think in terms of scaling using lots of resources. It’s almost the opposite of what we are used to.
“When you’re in front of an American Venture Capitalist, they expect you to talk big and understand scale – because that’s how they get their return on investment,” says Miles.
From a financial and governance perspective I believe getting the right structure in place beforehand is crucial. That structure is determined by where your shareholders are. Adapt that structure as you get investment, not second-guessing where the cash will come from. The tax regime between the two countries means it is really important to make sure you have the right structure in place and the right way round so as to not erode shareholder value.
Many Kiwi entrepreneurs don’t think beyond California. “It’s such a big state it’s hard for us to get our heads around it” says Paul. But thinking the US stops at the country’s most populous state is a trap. Despite its size, California still only accounts for about 12% of the people in the US. Other States compete hard to attract business over California and often there can be good reason to look elsewhere for your base of operations. Remember that every state is different with a variety of legal and compliance regimes to deal with. There can be big differences in cost structures depending on where you are.
When we talk about supersizing, no one does it like the Americans. And it couldn’t be more apt in terms of doing business there. Thinking more in terms of how you create scale – from corporate structure, to software architecture, as well as addressing the market – are all examples of what it takes to be successful as a tech firm in the US.