7 Tips to Fundraise as a Foreign Founder in the US
Most entrepreneurs we work with at Dat Ventures land in Boston with the idea that raising capital in the US is an easy task. After facilitating introductions between startup CEOs and Boston-based VCs, these are some action items every foreign entrepreneur should consider before approaching investors:
1. Incorporate Parent Company as a Delaware C-Corp
Most Boston-based investors won’t be interested in investing in a foreign legal entity. There is enough local deal-flow and investors will pass on those opportunities that add extra risks. If raising capital from US investors is strategic for your startup, you should flip the parent company to the US, or even better, incorporate the company in the US since the beginning. The sooner you take action on this, the less tax issues you will face with your home country tax authorities.
2. Recruit a Native Business Leader
Investors are OK with outsourced technical teams, and this actually plays in favor of international startups. However, investors need to make sure you understand the local market, and even more importantly, that you won’t face immigration issues. Recruiting a US Manager or co-founder is key to mitigating risk in front of US investors.
3. Build a Board of Advisors
Foreign CEOs must do everything they can to build trust and pretend to be Americans, at least while fundraising. For this reason, building a a board of advisors is typically a great way to demonstrate that you are able to build high-end business relationships in the US.
4. Start with Angel Investors
Regardless of your startup stage, as a foreign CEO you still need to build extra trust among local VCs. Raising capital from reputable angel investors is not only a fast track to short-term cash, but also a great way to validate an understanding of the local market.
5. Reach Market-Fit in the US
It is fairly common to see growth-stage startups with robust validation abroad, but no customers in the US. Most Boston investors will need to see proof of local traction as well. Find your first US customers before making fundraising moves!
6. Understand Market-Rate Compensation
Related to items 2 and 3, most foreign entrepreneurs don’t know how to compensate US talent or advisors. Making unprofessional and below-market proposals can damage relationships and make you look amateur. Do your research before making a proposal, or seek advice to make an informed decision.
7. Spend Money on Lawyers
Yes, lawyers are very expensive in the US, and absolutely needed for a foreign CEO to succeed here. Working with a reputable brand is another element that will help you build trust in the US. Avoid cheap online deals that will take you nowhere and add a budget cushion in your budget projections for legal needs.
About Dat Ventures
Founded in 2014, Dat Ventures delivers a 3-month soft-landing accelerator program for international startups in Boston. Dat Ventures connects founders abroad with local US resources to build teams, adapt businesses, and engage with potential customers and investors. Dat Ventures’ mission is to be the gateway for international startups to enter the United States via Boston, while helping generate an economic and cultural impact in their countries of origin.
