Before you raise your Series A in Silicon Valley — Foreign Startups Guide
They say, “showing up is half of the success”. Unfortunately, that is not true for foreign startups showing up and fundraising in Silicon Valley. Basically, most doors of US funds will be closed to you. However, there are several things that can help you increase the probability of securing a Series A.
It is a myth that US Investors respond to cold emails and therefore you should start working on introductions to American investors from your home country. There is nothing worse than a cold email. Founders should spend significant time building relationships with people who can facilitate warm introductions in the Bay Area. A solid referral is key to success. When asking for introductions offer something in return or pay it forward. Paying it forward means that you owe a favor or have to do something above and beyond in the near future. You need to deliver this when someone ask for the favor. Founders can ask for introductions from foreign trade missions in the Bay Area, law firms or meetup organizers.
Sand Hill investors want the CEO of the startup to be in the Bay Area and you need to be ready to move or you are already here. Proximity to Palo Alto is important for building relationship with the board members, key customers, follow on investors and large tech companies looking to acquire your startup. You will not be able to build a Unicorn without the experience of people who have done it before you. If you have doubts about relocating here you should not waste time of US investors. You should also know that the probability of securing a series A increases by 10X with your relocation to the US.
US investors want to see minimum US traction and without US customers Series A is very difficult. Having solid traction in Europe is not enough. Foreign startups need to show evidence of US growth. In many instances it might make sense to apply to 500 Startups and YC to bridge the gap before a full US series A. Top US accelerator can help with US product market fit.
Try to secure a seed round with a foreign fund with solid ties to US venture capital. Solid ties mean a fund that has done at least 2 deals with American venture funds and/or has exited an investment with US investors. A solid European investor with ties to the Bay Area can make a huge difference. As mentioned before the venture business is very relationship oriented and having a seed investor with the right network can make a series A happen.
How big can this be?
Silicon Valley investors are only interested in company that can hit unicorn ($1B) status pretty quickly. Series A discussions are ways for the US investors to gauge your potential. This mean that you have to demonstrate (again compelling evidence) that your startup can grow, scale to new verticals, develop network effects, the team can deliver a repeatable business and generate revenue. In other words, your startup has to be a big business. This can be sometimes challenging for foreign founders looking to raise a Series A in the US.
It is not enough to create a startup and raise seed money in Europe to get attention of US investors. The best foreign companies and founders are ready to risk all to accelerate growth with the help of the Silicon Valley ecosystem. Silicon Valley does not need more entrepreneurs because it has a lot of them. Silicon Valley needs and rewards the biggest risk takers, including foreigners with large ideas.