Cracking America has always been the ultimate test for musicians, retailers and brands alike.
Now making it in the US has become the dream of a growing number of UK tech startups.
However making it in the US is not without its complexities and risks.
In my role at Mercia Ventures, we regularly meet founders and teams with ambitious fundraising plans that centre on making it big in the USA.
More than half of our Series-A stage businesses are currently active in the USA and we’re continually developing best practices to support those with transatlantic ambitions.
There are three areas to consider if you’re thinking about cracking America.
The involvement of the founder/CEO
The founder/CEO plays a pivotal role in setting the tone for the company’s expansion into the US.
While technology and digital connectivity have made remote management more feasible, there are distinct advantages to being physically present during the initial stages of expansion.
Executives of US companies value face-to-face interactions with potential partners and suppliers to a much greater extent than UK counterparts.
The US market is known for its dynamism and rapid changes so US execs like to know they’re talking with the key decision maker, the deal ‘do-er’ and the person post-deal they can pick up the phone to.
Being on the ground allows the founder/CEO to gain a deeper understanding of the local business culture, consumer behaviour and market trends.
This first-hand knowledge can inform strategic decisions and adaptations that are crucial for a business in its early stages and in our experience it’s the CEO/founder who is best placed to take advantage of this.
How to sell to US customers
Selling to US customers requires a nuanced approach, one that takes into account the distinct cultural, economic and market factors that shape consumer behaviour.
The US is a diverse country, and consumer preferences (and legal frameworks) can vary significantly from state to state.
You may think selling products in the US is similar to your home market but the correct way to go-to-market in the US is likely be completely different.
When you take the size of the US market, there is a tendency to spread efforts too thinly.
Some of the most successful businesses we see are those that focus on a niche first, be it hospitals in Boston or other scale-up businesses in Silicon Valley for example.
Networking is key in the US. Attending industry events, conferences and networking sessions is a well-trodden route for US execs looking for a new technology solution for their latest problem.
By being there in person you gain essential credibility, particularly when European businesses can be perceived as small, less sophisticated businesses.
By achieving impactful early case studies with well-known US businesses, you can quickly access a much broader customer base to test and learn before committing to grander US plans.
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What UK companies need to consider before expanding
It’s a well known fact that the US is a far more litigious environment than the rest of the world.
Employees know their rights, companies under IP pressure are more combative and navigating this complex legal terrain requires not only a solid understanding of US laws but also a proactive legal counsel to safeguard a company’s interests effectively.
Following a similar vein of localisation, US companies are most comfortable contracting with US-registered businesses.
As a result, to achieve real scale, you’d usually set up a formal US subsidiary to contract with US companies.
Seeking legal counsel to navigate complex issues like intellectual property, employment law, and tax regulations is also essential, particularly looking forward to limiting issues on a potential exit.
With everything pointing to the founder/CEO needing to travel regularly or migrate, the requirement for a co-founder or COO who can maintain the home corporate culture and motivation is an absolute essential.
Conclusion
Expanding your UK tech startup to the US is a bold and potentially rewarding move.
However, it requires meticulous planning, cultural sensitivity and adaptability.
By understanding your US customers, addressing UK-specific considerations, and being mindful of the associated risks, you can increase your chances of a successful transatlantic expansion.
Preparation is everything and working with investors and advisers who can share others’ successes (and failures) is invaluable.