Why U.S. VCs don't want to invest in european startups?

13 points by chompomonim 14 years ago | 6 comments

I am startup founder from Lithuania (Europe). Now we are creating product for global market (integrating workspace for cloud-based productivity apps) and we are looking for investment both in US and Europe.

I am ready to move to California and establish company there.

During my visit in San Francisco I talked with several investors there (I/O Ventures, Google Ventures, Foundry group etc.). Most of them told me, that they are not investing in non-US startups.

Why?

md1515 14 years ago |

In this instance what is holding them back isn't necessarily that you are European. They are probably more concerned with some or all of the following (plus what I forget).

- Education? Where did you learn how to program/run a business (typically this can be counter-acted by evidence of success already)

- Location? Yes, you are visiting California and are "ready to move". But you haven't moved yet. You're still located in Europe - that's the bottom line

- Incorporation? You are not incorporated yet. You may say you are willing to, but they will typically not care much unless they know instantly you have the next Google/Facebook.

- Legal resident status? As you have neither moved to California nor incorporated there is no true indication if you will be allowed to get a visa to work in the U.S

I would suggest taking the plunge if you really need the capital. Get the visa, come to the U.S. set up your HQ out of your shared apartment and incorporate. Then look for VC.

Or just go to European VC firms - there are plenty of them.

chompomonim 14 years ago | |

Thanks for answers. I have some more questions.

- In a month I am going to incorporate my company in U.S. Is California the best State for my company? Is Delaware corporation right choice or I should look at LLC?

- I don't need a visa if I am visiting USA. But I have to leave the country every 3 months. In the future I will need a work visa. Does anyone have experience with work visas for Europeans?

zeruch 14 years ago | | |

From a financial perspective, Delaware is the often default-choice, but your best bet is having a good advisor/counsel to ultimately help work that out for yourself.

cbo 14 years ago |

Warren Buffett once said (paraphrasing) that you should only invest in what you know.

Most American VCs don't know all of the legal and cultural intricacies of building a startup in another country, which can both be huge factors.

It's way safer for their investment (and possibly even safer for the startups themselves) if the VCs only invest in startups in environments where they do understand those things.

ig1 14 years ago |

A number of east coast VCs invest in London, I'm guessing in a large part because:

1) London is as close to NY as SF is. This obviously doesn't apply to California based VCs.

2) London has a well developed legal framework for VC deals. When Accel invested in GetJar it was hugely complicated and took over 6 months to do the paperwork because so few VC deals had ever been done in Lithuania. You have to be spectacularly good for a VC to be willing to do that.

gallerytungsten 14 years ago |

re: "I am ready to move to California and establish company there."

Then do so. Your odds will increase from (probably) less than zero to more than zero.