Early stage Founder: Should you move to the Silicon Valley? #Growth

I have met many great Founders in the past 18 months, coming from Europe, Israel, India, China, and South Korea.

Even if California is a great place to live, most of them told me how hard it was compared to what they expected: high cost of living, time to develop local trusted relationships, challenge to put together the right team.

So I thought I’d share some learnings to try to help. If you are considering moving in the Silicon Valley, you should come for the right reasons.

A few questions for you as food for thought.

Let’s have a chat about the market, your team, and how to navigate the SV ecosystem.

1) WHAT DO YOU KNOW ABOUT THE US MARKET ?

in SF, DocuSign Chairman Keith Krach recently told young European entrepreneurs at the latest event theRefiners that: «Entering the US market for French people is like American coming to Japan. It’s tough! », and he was convincing to emphasize the differences as he did open this emblematic Japanese market for his company.

1) Do you think US customers are the same as in your home country?

We watch the same movies and series and we use some of the same global brands, but in the day-to-day life, our preferences, our habits and behaviors are just different. So before even talking about tech and product roadmap, I would encourage you to engage with your potential customers.

I met the French startup TokyWoky (crowd-powered e-commerce) a few months ago, and I was impressed to see one of the co-Founders express that they had a few things to change to adapt to the US customer, even if successful in France across multiple verticals, including global retailers.

E-commerce is different in the US. Acknowledging it is a strength.

Yes, thinking global is great, but the final users, and the key decision makers have their own culture. It’s not just about langage. It’s not just about having an American corporation as a customer to generate revenues.

Best way to learn them is to spend time throughout the country to understand market specifics, before jumping in the US for good. And think big, start small, scale fast: proof-of-concepts are not a waste of time, they prove to you and people who trust you that it works.

2)In B2C or B2B2C, do you think that location matters?

Yes, the US is a big market, how exciting!

However local differences exist wether you’re selling beauty products, a new service.

Understanding them can matter to be successfull.

Instacart, the rising start up for delivering grocery in 2 hours, had to struggle to make sure they managed their deliveries when the weather is hot in Miami (yes ice can melt in a car), a new context compared to the foggy San Francisco in the summer time.

Any beauty brand in the US knows that it’s not just about age, skin type, ethnicity, it’s all about location : teeth whitening may be a big thing in New Jersey, and Sun tan in Florida, and a Los Angeles trendy make-up is not the same as the New York one.

Do your homework, take time with experts in the field, interview customers, travel (it’s a nice way to understand the US).

2) If you are in B2B, is engineering a good reason to move to SF?

There is engineering talent here, but competition is tough and wages are high ($250K for an engineer). If your partners are Google, SalesForce, Facebook, Oracle or Adobe, you should be in SF as it’s hard to build a partnership remotely. Same if most of your customers are here.

I’ve seen many French entrepreneurs deciding to be an American company to raise funds and be close to their business partners but keeping their R&D and development team in France for good reasons.

Else don’t forget the cost of running your startup in SF is the double compared to Paris or almost anywhere.

So you bet by coming here that you can raise more and grow faster… Let’s come back to that.

2) HAVE YOU CHOSEN YOUR CO-FOUNDERS AND ADVISORS? YOUR CORE TEAM?

1) You are a Founder and CEO. Great! Who are your Co-Founders? Who are your advisors?

Don’t understimate that the heroes of the Silicon Valley are great engineers with a vision. If you’re an MBA, not that you’re not welcome in the Bay, but it’s not at all an advantage. As an HEC Alum, I feel connected to you, as nobody knows this degree here (even if plenty of CEO in top companies graduated from it).

As the famous Steve Blank shared at a Hive Data event as a joke: « You’re an MBA having a degree that has more than 2 years? Run out of this room, you’re dangerous, and toxic for your team and your company. »

So take great care, especially if you’re an MBA profile, to have a strong CTO, and have also advisors that help you on the Tech side. And chose also some advisors with a deep understanding of the vertical you’re about to disrupt.

Prove who you are, by what you have accomplish and what’s next to come.

Convince them by your vision, having an impact in people’s life and the edge in your business model and go to market strategy.

Inspire them by your drive and being articulate and poised.

If you come from another country, show you have American people in your team. As underlined in the cultural differences, invest in people knowing the US market, especially in Business Development and Sales.

One of the founder I advise, Oxford and Harvard alumni, has founded a platform using AI for booking appointments when in mobility. She has convinced one of the founders of Opentable to be one of her business angels and advisors. She saves a lot of time for her strategic plan, and shows she’s connected to experts in what she’s about to build.

But please avoid a long list of non engaged advisors, it’s easy to check for your investors, therefore choose them carefully as connecting to what you stand for.

2) Did you consider that hiring also means firing, from time to time?

Hire slowly, fire quickly. It’s the best way to grow as company.

I have met a great founder in the media/tech that did the reverse.

He had a great track record in France but was just about to close his third company, which he had founded in San Francisco.

Maybe he came too early, or too late, Luck (and not only talent) is part of having the right idea at the right time.

But he also shared with me what he thought was his mistake. He had hired too many developers. At a high price as there is a fierce competition in the Silicon Valley for having great talents as engineers.

If he had to do it again, he would have taken more time to hire the right profiles, at the right pace to be top efficient and deliver the product to his potential business partner as a corporation.

He ran out of cash before even being able to watch if he was right. And he waited the last moment to make his employees aware of the situation. Not an easy year for him, even if I’m convinced he has learnt a lot to build his next startup if staying in the US.

Hiring is difficult, if you’re wrong and you see it, it’s better to explain it to the concerned people, avoiding you and them to waste time.

3) HAVE YOU CHOSEN YOUR RELEVANT SUPPORTERS IN THE ECOSYSTEM?

Nobody can do it for you, as each company is unique. So you need to understand the ecosystem before coming.

There is a lot of money in the Valley. But it’s still tough to raise money as a startup. Why? Investors are picky.

Competition is insane.

According to who you are as a company, which vertical, and which stage, choose carefully your core target.

Here are a few insights. I have been lucky enough to catch being invited to many events, and honored to have people sharing time with me as a new comer, Advisor&Board Member and Mentor.

It could help you in your future conversations and potential introductions.

Remember trust is local, image is global, so it matters.

Don’t lose time, but also respect the time of the people in front of you.

Let’s come back to the role of incubators and accelerators, business angels and VCs.

All of them have a place in the ecosystem, and they meet in many different meet-ups and conferences, even if different networks.

1) Incubators: is there anything else when you’re not chosen by Y combinator or 500 startups ?

Yes. But don’t expect from them everything, especially being the magic tool to raise funds.

The definition of an incubator is they help new startup to develop by providing services or office space.

They first and foremost provide a space where you can compare yourself to other startups, benefit from the good vibes, events, talks, improve your market fit, find the edge in your go to market strategy, finally learn to pitch for the demo day. You can expand your network. If you don’t dream of plenty of checks at the end of the demo day given by multiple investors (even if it happens), you won’t be disappointed as incubators definitely can add value to your company.

Corporate initiatives (such as Orange Fab for telcos and other top French corporations) are not very much interested by equity but more eager to help their executives to understand startup culture, and on your side you can gain awareness and visibility and access to decision makers for your future Proof of Concept, and in the middle term have a partnership.

Just choose the right one according to your product and solution. Intel, Verizon, Samsung, Cisco, GE are pretty active in the Bay. Salesforce incubator is interesting if one of your potential partners.

How to find your incubator ? First look at the Founders : Dave McLure and Kristin Tsai are inspiring leaders, embracing diversity in their values. From the begining I liked them and saw them scale 500 startups to become global. I pretty much do the same when I choose to be a mentor in an incubator.

Each incubator has its own rules ( around 15k to 150k and 4% to 8% in equity) and place in the ecosystem.

For instance just to mention a few:

  • GrowthX (with GrowthX academy) backs startups that are mission and data driven, and help them in UX design, growth hacking and sales.

Will Bunker is a charismatic serial entrepreneur (Match.com) and Business Angel. He and Sean Sheppard like performance but first and foremost they engage with great founders and they love to develop people, you can feel it when you meet them.

  • The Refiners has a cross boarder culture, and helps to understand Silicon Valley culture. Géraldine Le Meur, Pierre Gaubil, Carlos Diaz have been in the Bay for many years, and they have been successful entrepreneurs. They understand the difference of cultures as coming from Europe. They invite a lot of famous speakers and have great French entrepreneurs as mentors for the program.
  • I am a mentor for both of them, so let me say they do a great job!
  • Hax is inescapable if you’re in the hardware industry especially in B2C, can be proud of the partnership with Shengzen area for producing products, and focus on retail. Cyril Ebersweiler has spent many years in China, and in the SV.

I have heard bad stories at some incubators which I won’t mention in the post. Be aware the founders negotiated a reduced part in equity (from 4 to 1.5%) as the service provided didn’t happen (mentors that were indeed consultant having something to sell or not existing, connections to investors that didn’t happen in any way).

I’m a partner at @50partners incubator in Paris, guiding Founders thanks to the network of entrepreneurs. I should add that if you have already been part of an incubator, I don’t encourage you to be part of another one, except if you have other expectations than the first time (take care of your equity). Jump on the other opportunities.

By the way, if you look for Co-working space in San Francisco: WeWork for sure (with different locations and style), Galvanize, Covo, Parisoma are my preferred ones.

2) If you are not having an easy introduction to Ron Conway, Dave Morin or Dave McLure, who are the best early-stage investors/Business angels to meet?

There are many Business Angels in the Bay. Successful executives or entrepreneurs that give back what they received and are also mentors.

Don’t forget also sites such as Startup Grind, AngelList, Draper University. Just be aware that cold mails are not the best way to connect, so learn who is interested by what you do before trying to mail them.

Let me describe you Angels networks as I’ve seen a lot of misunderstanding in the last few months.

Business angels are not super wealthy individuals, even if some of them are, and most of them enter a network to invest 25k to 50k per year (let’s say 2 deals) where they invest with other people in the network.

Some of them have loose bounds, such as Bay Angels (led by Roger King, one of the first investor in OpenTable), I’m proud to be member of, they count on the differents skills and expertise of their members, associates (that do a great job in due diligences) and mentors to do the job and find the right startups for the monthly pitch events.

Some of them are with an organization dedicated to animate the different committees before the monthly review and dinner. Band of Angels is part of it : 150+ angel investors former or current high tech executives. They have been very successful in the past, and claim to be one of the oldest network in the Bay.

If I take the Band, they invest between $300k to $750k and often lead a syndication of $1 to 1.5M.

Just be aware : they all prefer to invest in companies located in Northern California, they love entrepreneurs with a track-record of leadership and performance, they like early revenues, and a potential exit in the 3 to 7 years to come.

Frustrations I’ve seen are startups managing committees (where there is a guidance) and due diligence steps, and even pitching at the final event, but not having the match with investors.

Again as incubators, you don’t lose time having a conversation with them if you fit the criteria, as you’ll learn from the questions and concerns.

You’ll meet a diverse and exciting group of people.

There are also networks of Wharton, Stanford, Berkeley alumni.

Or global networks such as Keiretsu that claims « Great association with quality deal flow ».

Be aware that all networks are connected : as usual, be always courteous and respectful of their time. Romain Serman (BPI) wrote a great post about the etiquette in the SV, it’s worth reading it.

Best is to find the right Business angel as connecting to your business and guiding you in addition to his (her) investment. He (she) will be your best spokes person to convince other investors.

My advice would be to plan a few targeted conversations, that will lead to a few introductions.

Don’t be transactional, take your time to understand the ecosystem, and you’ll find the right fit.

Worst thing to do would be to jump from a meeting to another, without having taken the time to listen to the input, and wasting time (yours and investors time) because you meet people by opportunity not with a goal and a clear plan.

3) If you are not the perfect match for Andreessen Horowitz or Sequoia (who are stage agnostic) how to find your best VC partner?

Mark Suster talked 2 years ago about the shift in Funds, annuncing Seed funds were 67% of new funds, raising less than $50M.

So are Micro Funds the new eldorado for startups?

Let’s pay a tribute to one of his inventors (if not the one).

Jeff Clavier is the Founder and Managing partner of SoftTech VC, one of the most established VC firms in the Silicon Valley, having closed 150 investments since 2004. His Fund IV with $85M is making 16 commitments of $850K per year in mobile, cloud, saas, as well as healthcare IT, marketplaces, consumer hardware.

If you take his example, he roughly invests in 1% of startups he has seen.

You need to end up in someone’s 1% of deals.

To follow his advice shared at the NewCo conference earlier this year:

First you need to develop your list of target investors filtered by your stage, industry, geography.

Use CrunchBase, AngelList, or CB insights for firms and partners interested in you sector.

Make sure they have not invested in competitors.

Raise the right amount, with a valuation connected to your stage.

Choose carefully your investor.

Finding a VC is like finding your partner/spouse in life or your business partner, it’s not only about money and performance, it’s a trust relationship for many years.

The first conversation is an opportunity, don’t miss it, as you never have a second chance to make a first good impression.

But your goal is to have the second one, and the next one. As it’s how you’ll build the trust, being transparent (don’t hide big things) and showing you’re reliable, flexible, consistent in your vision and ambition.

To conclude, if you decide to come to the Silicon Valley,

-Answer to the 3 questions : do you know the US market (yes, it’s a big one!), have you the right team around you as a Founder to convince investors, have you identified your future partners. in the ecosystem

-Prepare your coming, and don’t forget your family

-And be ready to have a lot of fun, even if working hard.

Be ready to learn a lot every day, and to have taken a life-changing decision. Nothing will be the same.

Cheers!

Odile