As a founder who has raised in Canada and is now raising in America: the cultural difference is night and day. America has significant advantages in willingness to take risk and the amount of capital to deploy. I have data showing, population adjusted, dollars per time, that American VC outclasses Canadian VC by at least two orders of magnitude. Likely much more.
An anecdote from a friend I was discussing this with:
"A former partner of mine was turned down by [every Canadian firm he went to.]
Went to the US for a weekend and came home with US$10M.
4 years later, that company is valued at US$35B"
It is an amazing experience talking to people who understand technology, understand risk taking, and put their money where their mouth is.
I'm bullish on American's performance in a globalized VC market.
VCs new they had to make investments in Asia and South America as they saw more successes come out of those regions.
Technology is global, so VCs can't afford not to be.
However, I believe most of these VCs still expect companies to be set-up as Delaware Corps. Anybody have any insight on that?
This is rapidly becoming less true. YC stopped requiring/recommending a Delaware corp back in W20.
There are countries that are more "investor" friendly where the laws about corporate ownership, governance and investment are clear, and enforceable. Singapore being one such. (Last thing an investor wants is to send money and not get any ownership that the courts will respect).
As long as you're setup in one of those countries, lack of Delaware is not a true blocker anymore. Mostly it's whether the fund is comfortably focused in the region.
Which countries?
I would say the most common after Delaware is Hong Kong and Canada.
There's some jurisdictions where we still expect the company to form in Delaware, like our African or Latam investments.
If you are taking money from US investors, being a Delaware C-Corp is what they are used to deal with and what they are comfortable with.
If you are selling internationally, a US setup might make lots of sense.
I always thought the problem with European startups was lack of a VC critical mass and risk taking ethos. So I thought the globalization of VC would help, but this sounds like it’s bleaker than ever.
Is it the absurd bureaucracies? Taxes? Red tape? Europeans are a super-smart bunch but their devs make far less and they lack any superstar tech giants. Makes no sense.
However, the founders have to comply with backup withholding and all that jazz if they live overseas and are not U.S residents.
These two are related. You can’t have high salaries without a competitive market full of money sloshing around.
A company making $300k/employee can never pay as much as a company making $1mm/employee. Even if it wants to.
I wonder how much brain drain the EU tech scene experiences by people working for US tech companies. Either remotely, via local offices, or plain old moving to USA.
Europe only makes 10% of the world population, and the EU population is a bit over the half of that. I don't have the numbers, but I'm confident the EU gets more per capita.
> Is it the absurd bureaucracies? Taxes? Red tape?
All of that plus Europe is quite developed. VC wants a high return and under-developed emerging countries can give more for your buck.
Regulations can also be a opportunities. Your client might start dedicating money to fulfill that regulation. If you are able to help your client with that in a timely manner, it's easy money. ( B2B setting )
To the point: Our main frustration as a high growth entity was how hard it was to jump from market to market.
We got into Spain because nobody was there, cool. let's replicate in Germany. Oups. Total failure and the brand is damaged.
Every single country is a battle that you have to understand intimately. We got a way out thought a random re-seller in Holland that started distributing us in China.
Our roadblocks were made of small market with already implanted competitor. Not regulation or taxes.
( To be fair: we were selling hard/softaware on very niche and finite market. )
From what I heard from others, the main issue is access to credit and funding. European investors are risk-averse and ask for too much in return, probably because their experience is in traditional low-margins sectors; sadly that's a vicious circle, where low margin begets low margin and things never improve. Also, people just don't like to pull the insane working hours that are normal in the US.
And the cycle continues.