The VC industry has dramatically evolved over the years. There are a lot more VC funds and funding in the ecosystem today than ever before. Power in the VC industry has also started to shift to new funds, who are ready to give out big tickets and hunt startups with sophisticated algorithms. As the landscape changes, especially in the Parisian ecosystem, the value of raising funds with an American VC firm will really depend on your strategy. If the United States is in your market roadmap, it can be very interesting to raise your next round with American players.
Nonetheless, there are several challenges inherent to your foreign status to overcome. Americans may be really friendly, but they are tough when it comes to business. It will be harder for you to get clients, raise funds, sell, or even hire!
French startups who think of going global from Day 1 might want to raise US capital sooner rather than later. However, they first need to make sure they have a solid product-market fit and a predictable revenue stream. For most French companies, this stage tends to come at around their series A. It can be harder to generate investors’ attention at the seed stage unless you have specifically promising technology and an A-list angel investor team.
It is essential to keep in mind that the U.S. is already the most competitive market in the world. While the challenge can sound exciting to most entrepreneurs, you must beware of spending additional time and money as a result of transitioning at the wrong time. Taking that into account, keep on reading if you want to learn how to make the most of your time and money when moving to the U.S.!
Build a partnership with investors and find a human fit.
Interact with VCs as frequently as possible. You will need to show potential investors that you are on the right track through an investor deck, but face-to-face interaction matters just as much. By using your interpersonal skills, you can build rapport and easily share anything that advertises the company positively. Remember an investor does not only look at the project, but they also will take into account the vision and the team. Find the right VC aiming to build a long-lasting relationship. Make sure all of your touchpoints set the tone for the partnership you are building with your investors. Discussing with other CEOs from their portfolio companies can help you better understand the investors you are targeting. Try to better understand the people you connect with in order to find partners that you share common interests with. They will automatically be more inclined to talk to you if you are in their area of expertise. This also means you need to do an introspection. Think about who you are, your added value, and who you would want to work with. As a French founder, you might have more chances to raise funds from a french-speaking partner as he or she will share more cultural affinities with you (education, clients, company culture, etc.) compared to an American partner.
Find creative ways to reach out to VCs.
Investors do read emails, but they receive so many that you need to find other creative ways to reach out if you want a chance to stand out. To overcome this first selection and actually speak with partners, some founders go through a middle man — usually an investment bank. However, this can be seen quite negatively by investors as it shows that you can’t sell yourself on your own. So, unless it is a trusted investment bank — where in that case it is a good sign that you caught their attention in the first place — it is not recommended. Instead, you should try to develop your network to increase the chances of a warm introduction to your targeted investors.
Always do your homework.
Do your research on the market, your customers, and the people you are talking to. When you work on your competitive landscape, make sure to focus on your American customers. Investors will only be interested in the traction you can get in the US.
As mentioned earlier, it is important to do some research on your partners and VC firms, and particularly on how much they generally invest. Some funds only invest small tickets and will not be able to lead a round of funding. In that event, you will know to look for other investors to close your funding.
Every VC fund is different and it is essential to know what you are expecting from them. They can bring more value than just funds. A bigger firm can help you on an operational level and by leveraging their network. Some VCs also help to hire using their own portfolio of talents or by acting as headhunters, while others can help on business development. The key is to choose a VC of the right size, in your industry, that understands the challenges and needs of your company.
While dealing with rejections, keep in mind that getting NOs from investors might not have necessarily something to do with you but with what the VC does. Do not take it personally, instead take the feedback into consideration, as they might be very useful. Doing your homework will however minimize your rejection rate as you target relevant investors.
Think of the fundraising process as a product
If one thing you do when you want to sell a product is to create a marketing strategy for it then you should be doing the same for your company. Thinking of the company as the product itself really has become the best practice. This means that being out there and trying to get people hooked to your startup will increase your chances of catching the eye of investors. The ultimate goal is to be visible: write blog posts, articles, produce content, anything that gets people talking about you! While you implement your marketing and communication strategies, you can reach out to VCs simultaneously through cold emailing and especially through warm intros.
As you work on marketing your startup, you also need to attend relevant events to increase your personal branding and step up your PR game. For that, you can think about where you want your company to be displayed. One tip we often get is that when you show your deck, try to put forth one or two pieces (articles, mentions, talks…) that are really relevant to the problem and solution that your product is working on. This will highlight market validation and traction.
If you do a good marketing job, you will become desirable and people are going to come to you. When they do find you, you’ll want them to get what our mentors call an emotional spike. You want investors to think: “They are in the press, they are talking at this event, the competition must also have their eye on them, I need to move quickly.”
You can use your customer value to get goodwill branding from your users and show it to your potential investors. “I have [this company] as a client, and this is what they think of me”. Have the best brands endorse you on your board. They will be your best advocates.
Prepare your US funding rounds in Europe. From a US investor perspective, having too much help from the government is not a good thing either. In the US, business is a private thing. The more you can internationalize your company, the larger your market will seem to potential investors and customers. Doing all of your communication in English (internal and external) from the start can be a big help when you settle in the US. It should not mean that you can’t be proud of your French heritage, but consider these are just the rules to go global.
With the fundraising process as a product and the company as a brand, pay great attention to your deck presentation and pitch
Do not forget that you are competing with plenty of other companies and that first impressions are key. You need to iterate with your pitch and slides deck to see what works or not to stand out from the competition. Start with a small number of investors to warm up and see how they react. Listen to questions, take notes of how you reply. After 5–10 meetings you will have a whole list of questions VCs are likely to ask along with impactful answers ready to use.
When it comes to your pitch, use a top-down approach. People get bored so start with a hook, representing the problem your product is meant to address. Rehearsal is key! Americans are good at storytelling and they expect the same from you. French entrepreneurs often think that the audience will implicitly understand the technology, the product, the company vision, etc. and that everyone is going to find it amazing. Companies are advised not to take their audience for granted, and while they might be skeptical to hearing that you’re the best company in the universe, don’t be shy to say why your startup brings the most value in a competitive landscape.
Negotiate your terms and manage your board.
Startups gain power of negotiation only if they can afford to refuse a deal, this means having several options to choose from. Be strategic when you plan the timing of your meetings with different VC firms. You can leverage having different proposals at the same time.
When negotiating, entrepreneurs usually only look at the startup valuation, but you should also look at who you are giving seats on your board to. You should want to have investors with different strategies and cultures. Some will want you to be the next billion-dollar company and only focus on the vision without regard to the risks. Others will want to focus on profits and precise metrics. Make sure they add value to the company through their network, expertise, strategy or finances. Grant a seat on the board only to people who have proven their added value.
When it comes to terms sheets, as the market has become more competitive, they have become more consistent across firms. The trend two years ago was a one-page term sheet for each deal, now it stretches more towards half a page. Be religious about your terms and keep them simple.
Some entrepreneurs are worried about justifying the amount they want to raise. VCs want a percentage of the company’s worth, and the valuation depends on the check they are willing to sign. This makes it rather easy to justify your round. Once they have invested though, they are going to be closely monitoring the company’s growth and how you deliver on your plan of action. Make sure to ask for an amount which you know how to spend.
Timing is key
Always consider your timing. Is it the right time to move to the US? Am I ready to raise funds with American investors? With how many VCs can I negotiate at once? etc. Once you raised the funds you needed, American investors will expect an important cash burn very quickly. This allows them to assess if the company is working and if they made the right move by investing. The problem is that sometimes, you do not only need money, but also time to penetrate your market. Americans take the saying “time is money” very seriously. You have to manage their short-term vision and know when to refuse to take unnecessary risks.
To sum up, what are American VCs looking for?
“Don’t just talk about your vision. Show for it.” — Matt Turck, Managing Director at First Mark Capital
A company becomes interesting for investors when the founding team is really clear about the overall vision, the product and themselves. It is essential that you show clarity of thoughts and sophistication in how you market your company. This sends the signal that you have thought about the process and have a deep understanding of your core value, your industry and the market. Do your homework, be sharp. If a VC is going to be at a board for 7 years, he or she does not want to waste his or her time on convincing you to do basic moves you should have already thought of.
Even at a relatively early stage, American VCs will be questioning you pretty thoroughly on your metrics and market. It is less about having an answer than understanding very well the consequences of your decisions, even if you are not clear about what you want to do. It is okay, you can ask for advice.
The team is also really important, everybody knows the concept of product-market fit, achieve a founder-market fit too. If the company is highly technical, you must have a tech guy in the founding team to be taken seriously. It is more convenient to implement a startup mindset to technical teams than make a business team tech-savvy.
If you don’t know where to start, consider joining an acceleration program. They will invest in your team and help you get the network, expertise and sometimes even the funds to kickstart your US journey.
Business France is running its acceleration program IMPACT USA in New York and San Francisco for promising French Tech startups. The next edition is this fall in San Francisco, you can check it out here.