Back in October I took a trip to the US where I met many investors. So I wanted to write an article of my learnings on the similarities and differences between US and European investors.
There is a well-trodden belief around the world that everything is better in America. Portion sizes are bigger, petrol is cheaper and the ambitious “moonshot” mentality is embedded in business culture like nowhere else. For any startup looking at expanding there, that makes the US opportunity as scary as it is big.
This was my preconception, too, before I embarked on a Transatlantic mission to meet with the kind of people who might be able to help take my company, Signal , to the next level. The two weeks I spent on both coasts showed me that, whilst the climates are quite different, both sides of the pond also have plenty in common.
There are many European startups like my own, keen to expand their business in the States. So, to help anyone else making an exploratory trip like mine, I have compiled my takeaways for my compatriots.
Differences
First, let’s get the obvious out of the way…
US companies are more comfortable with early investment
Whilst European funds are more reticent to invest in services that don’t tick every box, US investors are more prepared to acknowledge the potential reward from all ideas. If you have an amazing product just waiting to explode, but it’s taking time to secure funding from within Europe, the US might be a better bet.
In-house advice is more developed in the US
VC firms in Europe have expert individuals ready to help portfolio companies reach the next level. But larger support teams in the US make American VCs more attractive to investment hunters. And US firms are more likely to put top business minds at your disposal. In October, for example, Greylock Partners announced the hire of former Skype CEO Josh Silverman as executive-in-residence – an illustration of the calibre of individual portfolio companies are able to interact with in the US.
Not all VC firms are equal
The idea that all US VC firms can be grouped into one bucket is totally wrong. During my visit, I spoke to firms with funds ranging from $200m up to more than $1bn. This means huge differences in the way these firms operate and interact with their portfolio companies. But they also have their own specialisms and areas of particular expertise – don’t just tailor your pitch for US firms, but for the many different kinds of US firms.
Similarities
A VC is a VC. Whether you are approaching in San Francisco or London, hold these truths to be self-evident…
They both look for amazing teams
The importance of building a high-class team can’t be overestimated. Investors look much more favourably on businesses which are able to attract the top people in a particular sector. This is most apparent when it comes to the founding team, but it definitely applies to the lower levels of your organisation as well.
A big potential market is a must
Investors won’t look at companies that don’t have the opportunity to succeed in big marketplaces, and change the way people think about a certain service or industry. The US might be more geared towards potential than Europe, but both sets of investors need to see evidence of a massive market waiting to be cracked.
Financial focuses are similar
When it comes to Software as a Service (SaaS), investor attitudes are impressively aligned. I was reassured that investors in Europe and the US largely concentrate on the same key metrics, including monthly recurring revenue, customer churn, customer acquisition cost and customer lifetime value. This may not be quite the same for businesses in all sectors – but it’s heartening to know, impressing VCs on both sides of the Atlantic does not require a radical readjustment.
Of course, the disparity in funding volumes is stark, and unicorns aren’t exactly roaming European plains. But, whilst the US startup climate is heady – with VC spending hitting a 13–year high, according to CB Insights – they still speak the same language as you. So don’t be afraid to go at it.