8 Tips for International Startups
Last week, Founders Embassy hosted the first-ever virtual intensive course for international entrepreneurs. The founders of 34 startups from 18 different countries joined us for one week to participate in 15 back-to-back roundtable discussions with some of Silicon Valley’s most respected investors, founders, and tech experts. We learned that despite the pandemic, “Silicon Valley is open” and investors are still actively looking for companies with compelling stories, impressive growth, and strong teams, no matter where they’re based. While proximity to Silicon Valley is no longer considered essential, it is imperative that you understand the mindset here and build a robust network. During the series, founders discovered new ways to identify customers, think about growth, authentically tell their story, and approach investors and mentors in the Valley. They had open Q&A discussions with VCs and heard heartfelt stories about success and failure from well-known entrepreneurs.
We believe that the right to build the future does not belong to white men in America who grew up wealthy, went to Harvard, and live in the Bay Area. We believe this right belongs to all entrepreneurs, no matter where they’re from, and that startups are the easiest way to bring the future into the present. So, in 2017, we set out to build an accelerator that would help founders, no matter where they’re coming from, gain access to the resources that they need in order to leverage the skills that they already have. Five classes later, we have welcomed nearly 50 entrepreneurs for our flagship accelerator program in San Francisco, and we’re so looking forward to the time we can safely invite founders again.
Our first ever Borderless Series program was held virtually, entirely behind closed doors, to encourage an open dialogue between Thought Leaders as well as the founders who participated. Thought Leaders as well as the founders who participated. The ability to be honest with feedback and candid with questions generated an environment of deep discussion and sincere commentary among the attendees. We also hosted a virtual pitch workshop with each individual room moderated by one investor and up to 7 founders who pitched their company and received immediate, constructive advice. There were breakout sessions for founders to get to know one another, as well as 15 back-to-back roundtable sessions on fundraising, growth, sales, equity, marketing, culture, and more, each morning for one week.
Only a handful of founders were selected out of hundreds of highly qualified applicants, so we put together 8 tips for international startups from Silicon Valley. Enjoy!
- Andee & Anastasia
1.) Tech is still open. Keep fundraising, develop a culture of adaptation, be resilient, and weather the storm
Like many companies, Founders Embassy is adapting. In light of the pandemic, we understand that founders around the world are facing countless challenges raising capital, managing their teams, and weathering the emotional distress it has caused. Building a company is already an often long and lonely journey and adding a global crisis to the mix seems to amplify challenges that used to feel like minor setbacks. Founders have to be even more resilient, courageous, and supportive of one another than ever before. We wanted to bring founders together, even if it required a virtual environment, to facilitate an open dialogue on the challenges they’re facing in these uncertain times. After working with over 80 international founders, we’ve learned that one of the most surprising post-program takeaways is the realization that there are so many other people who, like them, are struggling daily – oftentimes with the exact same problems.
It’s more important than ever for a company to develop a culture of adaptation in times of uncertainty, and we’ve seen shifts and trends towards certain types of companies emerging and even thriving in this environment. E-commerce, for example, has grown faster than anyone anticipated. The growth observed during just the first and second quarter of 2020 was where many experts expected it to be 10 years from now! Some investors have avoided the noise around workspace solutions, home fitness apps, and so forth, remaining focused on their existing areas of expertise. Most confirmed that they’re willing and able to invest in companies over Zoom. Some even told us that they invested in companies this way even before the pandemic.
Resilience and grit are two of the most important characteristics of successful entrepreneurs. The new “normal” is inevitable no matter the industry, and companies that embrace changing work environments, improvements to mental and physical health policies, adjustments to communication platforms, etc. will continue to thrive. International founders have historically faced far greater setbacks when it comes to raising capital, building networks, and reaching customers in Silicon Valley, but the current requirement to fundraise in “Zoomtown” has recently leveled the playing field.
2.) Investors are more willing to invest in international founders than ever before, so own where you’re from and take advantage of this opportunity
“As large funds convinced their LPs to look beyond the valley, it’s been easier for us (a smaller fund) to look Internationally too.” – Charles Hudson, Managing Partner, Precursor Ventures
When we first launched Founders Embassy less than 4 years ago, we spoke to dozens of investors about our mission and strategy for supporting international and immigrant founders. We were greeted with overwhelming support… but the encouragement sometimes came with a caveat. According to most investors at that time, “no one” was really investing in startups outside of the US and Canada. We’d often ask, “Why? There are so many incredible founders globally, why wouldn’t you want to invest in them?” Responses varied from it being a logistical nightmare with currency conversions, legal and banking challenges, to simply, “It’s written into our LP agreement that we can’t.” (While sometimes true, a few have since said that the latter is a cop-out, but the jury is still out.)
That being said, in recent years, we’ve seen large funds expand their investments internationally while becoming increasingly more open to a model which we at Founders Embassy often encourage: the Founder/CEO is based in Silicon Valley while the rest of the team, usually engineering or operations talent, sit back home. Since investors are thinking globally and becoming more open to working with and funding international founders, it’s important to make sure that the problem you're trying to solve is big enough for Silicon Valley VCs. According to Hunter Walk, the problem must be 3 things: large, urgent, and valuable. Most investors also suggest that founders stop only addressing their TAM (Total Addressable Market) using “top-down” analysis but rather taking a “bottom-up” approach in their forecasting. Make sure you’re not only thinking about how you can address your immediate market at home, but how that scales to the US and globally if you’re approaching US investors.
“Own where you’re from, what you’re building, and why you’re building it.” - Courtney Buie Lipkin, Partner, Susa Ventures
“Talent is dispersing beyond the Valley. Know your unfair advantage as a founder. Why are you the only person in the world who can start this company? What key customer insights do you have?” – Courtney Buie Lipkin
3.) Raise capital on your own turf… first. You need to come to the Valley, but you don’t have to stay
“You 100% have to build your network in the Bay Area.” - Michele Romanow, Co-Founder & President, Clearbanc
“Silicon Valley is a mindset, not a place.” – Reid Hoffman (most famously, but basically every VC)
Almost all of the Borderless Series investors and founders agreed that you don’t need to necessarily be here full time anymore, but you should come here, understand the ecosystem, and develop a strong network. People think about growth here differently and there’s an acceptance and tolerance of failure that is unlike anywhere else in the world.
We frequently encourage founders when raising a Seed or a Seed+ (“sprout”) round to consider fundraising in their home markets, at least in the early stages of the company, and exhausting any and all opportunities there before aiming their sights on Silicon Valley. Why? Silicon Valley is the Olympics of Startups. Yes, there is a disproportionately higher amount of capital, but you’re not only competing with other Toronto/Tel Aviv/London/etc.-based founders, you’re competing with the rest of the world.
Of course, there are a lot of other factors to take into account here, and founders argue with us all the time that a.) investors in their home markets are more risk-averse (possibly true), b.) the terms are worse than what they understand them to be here in the Valley (possibly – we’ve certainly heard horror stories of companies seeing terms for upwards of 40% of their company for a $200K investment and getting lowballed on valuation), and c.) that there’s less “smart” money and resources available to them. All of these are reasonable arguments, and often may be true, but I would also argue that in the early stages of your company, the use of capital should be primarily to get you to a point that you can achieve and sustain considerable growth and traction (user acquisition, MRR, etc.), in order to illustrate to investors that you’re worth the valuation that further investment would warrant.
A couple of years ago, a lot of investors wanted to see around $1M ARR before even taking a meeting for a Series A deal. Now, some argue that the bar has been raised significantly higher as of late.
“Is it worth it? That’s the biggest question to ask before you take money.” - Alex Farman-Farmaian, Liquidity & Strategic Initiatives, Carta
Make sure that your investors, your board members, employees, advisors, anyone you work with on your company are aligned with your worldview. Remember that the relationship between you and your investors in particular will likely last 10+ years if you’re lucky and employees, sometimes longer.
“When you fundraise, you’re going to get a lot of No’s. The only thing you can control is your output.” – Michele Romanow, Co-Founder & President, Clearbanc
Understand *why* investors are saying “no” to you and your company. “One of us would pitch while the other would read their faces for clues on where we went wrong or lost their attention”, says Michelle. Embracing the fact that you will most likely get hundreds of “no’s” before ever hearing “yes” will make the process far less painful.
4. Start with the “why”, but make sure you have supporting evidence to back it up
“If you underestimate the problem size, just because the market size is small, then you’re missing a lot of opportunities.” - Hunter Walk, Partner, Homebrew
Investors invest in people, not ideas.
I can’t stress how many early entrepreneurs tell us that they want to raise from US-based investors because they believe that they’ll invest in them from an idea, without any traction or revenue data backing it up. They typically refer to companies such as Snapchat (or Instagram, Facebook, etc.) that didn’t generate significant revenues before raising capital. I often reply that in this case, the investors invested in Evan Spiegel, not just the company. They saw his undeniable conviction about the future, that the product had enough traction in the market to show potential, and he had a strong network behind him that would support him along his journey. This case is an exception, not the rule. Most investors want to see growth.
Many VCs want to see at least 10-15% MOM (month over month) growth in active users, revenues, or other *real* metrics, prior to considering a company at the Series A stage. Vanity metrics are for an entirely different blog post. An investor’s job is to return their fund to their LPs, and then some. How can you provide evidence that you are an excellent investment?
Make sure that you have evidence not only on your company’s traction and the market/problem potential, but also on specifically why you will be the one who will win. Why do you get up every day to do what you do? Most founders run out of steam and quit – you need to share with investors evidence that you won’t.
Also, watch Simon Sinek’s TED talk on this topic if you haven’t already 100x.
5.) Be authentic and thoughtful when asking for introductions or reaching out to investors, customers, or mentors
“Be authentic. You have to tell a story that someone is going to fall in love with.” – Nina Achadjian, Partner, Index Ventures
Building a network in Silicon Valley is tough even if you’ve lived here for years. People are busy, especially the ones that founders are likely trying to reach. Navigating Silicon Valley as an outsider can be particularly stressful and it’s difficult to know where to begin. We receive inbound requests for introductions to investors on a daily basis from founders around the world who we’ve never even met!
To Investors:
“Cold emails are better than lukewarm emails”. – Hunter Walk
When it comes to reaching investors, many will say that while they prefer a warm introduction, they’re still willing to take a meeting with a founder from a cold email intro. But, only if it’s very thoughtfully written. Also, asking an acquaintance on LinkedIn who you met at a networking event for an introduction to someone they’re also connected to on LinkedIn but barely know, is considered “lukewarm” and is often seen as much worse than that carefully written cold intro.
To Customers:
“Personalize all outreach. Start with their problem, don’t just send an email blast.” – Asher King-Abramson, Founder, Got Users
Customers usually know when they’re on a mailing list. Appealing to their problem and how you can help is far more effective than just listing your features in an email to everyone.
To Mentors:
“Find founders that are one or two steps ahead of you. Just reach out to them with a thoughtful, custom email.” – Nina Achadjian
If you’re looking for fellow founders to help you navigate Silicon Valley, or simply for advice from people who have “been there, done that”, instead of reaching out to founders of massive companies or well-known Silicon Valley startups, start with writing founders from your home country or who operate in a similar space as you. You’d be surprised how willing founders here are happy to “pay it forward”.
6. ) As a CEO, your job is to sell your company by focusing on your USP and the benefit you have to offer your customers, investors, and partners
“Don’t tell people what you do; tell them what you do for them.” - Max Menke, Founding Partner, GrowthX
I often tell early-stage founders that their job, once they’ve achieved Product Market Fit and early traction, is really only 2 things: 1.) Sell the crap out of your company and 2.) Hire the best team possible to execute your vision. If you’re still in the weeds, you haven’t built the garden properly.
Here are a bunch of tips on growth and sales from the Thought Leaders during the program:
“The industry leaders, the early adopters, the innovators are your customers. If they spend money on the problem, then you don’t have to spend time convincing them it's important.” – Max Menke
“You, as a founder, don’t scale. You need to train a team on selling in a different way than you sell.” – Charles Hudson
“Just because Facebook can copy your idea, doesn’t mean they will do a good job. I wouldn’t bet on the company whose best people aren’t focused on the product.“ - Charles Hudson
“Your first head of sales needs to roll up their sleeves and listen to the prospects. They need to articulate what is to be done at each step of the sales process.” – Pascale Diaine, Principal, Storm Ventures
“Your first hire needs to be a Davy Crocket, willing to navigate the path through the woods.” – Pascale Diaine
“Don’t get too comfortable, the final thing to know about growth is - it never ends.” – Susan Su, Head of Portfolio & Growth, Sound Ventures
“Retention happens when you have Engagement, engagement happens when you have activation.” Susan Su
“You don’t always need large numbers; a small group of totally obsessed users is great.” – Courtney Buie Lipkin
“Look for bad alternatives to your solution to find customers.” – Asher King-Abramson
7.) Build a strong cult(ure). Carefully select investors and strategically hire employees that align with your worldview and values as an organization
“Everyone wants to feel like they have the opportunity to make a difference, while being surrounded by great people. It doesn’t cost you anything to build culture.” - Steve Cadigan, Talent Hacker & Advisor, Cadigan Talent Ventures
“Lead by being scrappy - if the leader is seen doing something a certain way, then everyone else wants to do it too.” – Michele Romanow
“Accrued indecision kills more startups than a single bad decision.” – Hunter Walk
Lead by example and remember that founders set the culture of a company from day one. We encourage CEO’s and leadership teams to agree upon and explicitly write down the values that they want their employees to embrace, and these values are taken into consideration at every step of the hiring process moving forward. You want your employees to be obsessed with the mission of the company.
“While companies grow exponentially, humans typically do not.” – Jen Holmstrom
Make sure you hire team members that will grow with you. Sometimes, there are employees who fit really well with the culture and strategy at the early stages of the company, but not later on.
Read First Round Review’s Article on this topic, “‘Give Away Your Legos’ and Other Commandments for Scaling Startups” here.
“We encourage our companies to add an independent board member early. Otherwise, you miss an opportunity to fill in a skill or diverse perspective you don’t have among your investors... “You can also create board members out of advisors.” – Jen Holmstrom, Head of Talent, GGV Capital
Diversity should be visible at all levels of the company, including at the board.
“Ask yourself: How do we get the right 100 hires?”- Michele Romanow
Hiring is always hard and founders should be involved in this process in some capacity for as long as it’s possible to do so. Finding the right talent at the earliest stages will set the tone for how the company scales in the future, whether the culture is maintained, and whether or not employees are empowered and committed to the mission of the company.
“Choose which advice to take,” Michelle adds. “Don’t take the advice of people who don’t know about your space.”
8.) After a pitch, investors should feel like they not only fully understand your company, but that they understand you and can easily articulate to others why you will win
“Every pitch should include: Problem, Solution, and Evidence.” - Josh Constine, Principal at SignalFire
Nina Achadijain, Partner at Index Ventures, encourages founders to make sure that they tell investors exactly what they do within 30 seconds of a pitch. Additionally, investors should be able to leave with a 45-second “soundbite” that is easy to relay to fellow partners, of exactly what you do, why it’s important, and why you and your team are the ones to solve this problem. You want them to be able to leave the meeting with an understanding so clear and concise that they can share it with ease. Remember that no one knows your company as well as you do and it’s your responsibility to clearly and concisely explain your company as if you’re explaining your startup to your grandmother.
Your story is infinitely important to your overall narrative as an entrepreneur. Josh Constine encourages founders to ask themselves, “What is my superhero origin story?” Why do you get up every day to do what you do? Most founders run out of steam and quit – you need to share with investors evidence that you won’t. In fact, just today, I asked Josh about one of their portfolio companies, Tempo, who just announced a $60 million dollar Series B. One of the co-founders, Moawia Eldeeb, is a first-generation American and has an incredibly memorable origin story. After interviewing the founder earlier this year, Josh wrote, “Eldeeb’s family immigrated to the US from Egypt when he was nine. But after an explosion leveled their building, they wound up in a homeless shelter. Eldeeb eventually dropped out of middle school to work in a pizza parlor and help pay the bills. But personal trainers at a local YMCA took him under their wing. He eventually paid his way through a computer science degree at Columbia University by working as a personal trainer to his eventual co-founder and CTO Josh Augustin.”
Read Josh’s first article about Tempo’s Series A here.
Pitching isn’t only about reaching investors, however. Founders have to learn to pitch candidates for executive roles on why they should work with them, potential customers and partners, and the press for coverage. Josh, who was formerly the Editor-at-Large at TechCrunch, told us, “the biggest mistake I see people make in press/PR is pitching to the wrong reporter.” Investors also experience founders reaching out to them about startups in industries they never invest in. Always do your homework.
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“A journey shared is a journey more profound.” - Dr. Luis S. Constine
Nothing will ever compare to the deep connections we make through experiences shared in person. But ,until we can welcome the next Founders Embassy class in San Francisco, we hope to continue to design programs and events that impact the journeys of founders from around the world. Thank you to everyone who has supported our mission these last 4 years and to those who helped us put this incredible virtual program together: our amazing speakers and hard working associates Eric and Sahil, our supporting husbands, families, and friends. Sincerely, thank you.
Speakers:
Nina Achadjian, Hunter Walk, Ashley Brasier, Courtney Buie Lipkin, Kobie Fuller, Lo Toney, Michele Romanow, Susan Su, Charles Hudson, Josh Constine, Jennifer Holmstrom, Alyson DeNardo, Duke Chung, Alex Farman-Farmaian, Tiffany Luck, Steve Cadigan, Max Menke, Riley Rodgers, Pascale Diaine, and Asher King-Abramson.
Also, a huge thank you to Perkins Coie, who generously donated 1:1 office hours for legal support to our founders!
We’d also like to especially thank the Summer 2020 Borderless Series class, who were consistently present (even those who were attending sessions at 3AM their time!), actively engaged in conversations, and incredibly supportive of our new virtual format. You all are rockstars. Congratulations!
