Start Up Overseas and Increase Exit Chances
If you are thinking about starting a company, or in the process of doing so, then likely the last thing on your mind is selling it. That thought is not even on the radar and for good reason. You should be focused on building product and talking with customers.
However, there is a school of thought that if you keep in mind the things that would make your business attractive to buyers (innovation, profits, good bookkeeping) then you will end up building a good, sustainable business.
If getting rich is one of your goals then, everything else being equal, you might increase your chance of an exit if you base your startup outside the U.S. so that American companies can use their offshore cash to eventually acquire it.
Less and less tech companies are doing IPOs which makes acquisition a more attractive alternative if you are looking for an exit. And American tech companies are sitting on mountains of cash.
Eight big tech firms, including Apple, Google, and Microsoft, collectively have over $400 billion in cash overseas that they cannot bring back to the U.S. without receiving hefty tax bills.
Microsoft Corp., Apple Inc., Google Inc. and five other tech firms now account for more than a fifth of the $2.10 trillion in profits that U.S. companies are holding overseas, according to a Bloomberg News review of the securities filings of 304 corporations.
The same article states that those eight tech companies added $69 billion of profits to their overseas reserves in the past year. That is a lot of lot of powder for their acquisition guns.
Dollar for dollar buying a company overseas would be 35% cheaper than buying a company in the U.S. for these tech giants as that is the current tax rate on overseas profits. If they already have operations in the country you are based then that might make your company even more attractive.
Obviously the strategy has downsides as you will be far away from family and friends. Talent might be harder to come by depending on where you locate (though I believe you could use remote workers in the U.S.). Also you will be outside the Silicon Valley circles that could help you with your fundraising.
Perhaps the biggest problem with this is that if your customers are primarily going to be located in the United States then it is going to be more difficult to connect with them as you’ll be getting on a plane to see them face to face and will have to deal with time zone differences for phone calls.
On the other hand, it has never in history been easier to start a company anywhere in the world. While laws that are inhibiting these tech companies from bringing those profits home those companies are proof that borders are not something that customers care about when purchasing a product. And the digital nomad movement is also showing that business can be done anywhere.
So, while selling your company might not be on your mind, maybe starting it up abroad should be. At the very least it adds to the adventure.
