By Andrew Butt, Co-founder and CEO at Enable, a modern, cloud-based software solution for B2B rebate management.
Building a successful tech startup is about more than developing cutting-edge solutions. Even if a company offers the best digital products and services in the world, this won’t do them much good if they aren’t in the right market. For European tech companies, this often means finding their way to the United States — one of the largest economies on the planet with a massive tech industry that will only continue to expand in the coming years.
But the size of the market is just one of the reasons tech companies should consider a move to the U.S.; they will also have access to more capital, a larger and more dynamic workforce and many other advantages. To succeed in the United States, companies have to establish themselves in the country (with ample support from their teams back home), choose the right location and identify market opportunities and sources of funding as quickly as possible.
While a move to the United States may sound intimidating, there are many ways it can be done responsibly and productively. In the long run, the transition will open up a vast range of opportunities for companies that are capable of making it work.
A Sprawling Tech Sector
According to Gartner, IT spending worldwide is projected to reach $3.9 trillion this year — an increase of 6.2% from 2020. There are several reasons for this increase, such as demand for technology that companies didn’t feel they could afford during the pandemic and the new emphasis on remote work. These are powerful reminders that tech startups should position themselves to take advantage of the dramatic growth in the industry over the next year.
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For European tech companies, a move to the United States is among the best ways to leverage the surging demand in their industry. CompTIA reports that the total economic output of the American tech industry is $1.9 trillion — about half the size of the entire German economy. The industry also employs more than 12 million people, with 307,000 jobs added in the past year alone. S&P Dow Jones Indices found that U.S.-based companies make up almost three-quarters of the global IT market — including 86% of the software market.
It isn’t just the huge tech market that attracts businesses to the United States — it’s also the investment opportunities. According to OECD data, American investments in startup and early-stage companies are more than 11 times higher than France, Germany and the U.K. combined. In fact, they’re many times higher than all other OECD countries combined.
Now Is The Time To Become Transatlantic
There has never been a better time for European tech startups to consider moving to the United States. Beyond the fact that the U.S. tech market is on the verge of explosive growth, American investors are also increasingly interested in European companies as hubs like Silicon Valley become too expensive. In the first half of 2018, American VC firms invested $3.8 billion in European startups — a number that rose to $5.3 billion over the same period in 2019.
While cross-border U.S. investment in Europe has been increasing, founders who want to fully enter the American market need to move. This can help them learn about the market, get accustomed to relevant laws and regulations and gain traction with investors. When investors see that you have a physical presence in the U.S., they’ll see that your company is fully committed to the transition. As companies make this transition, they’ll be able to maintain operations like never before due to remote-work capacities they developed during the Covid-19 pandemic.
Even as employees return to offices around the world, many companies say they will allow a significant proportion of their workforce to continue working remotely as the pandemic subsides. Meanwhile, for companies that offer digital communication and collaboration tools, the U.S. market will be especially receptive — a recent PwC survey found that the two top investments American executives are focused on in the remote work era are “tools for virtual collaboration” and “IT infrastructure to secure virtual connectivity.”
How To Make The Move
Just having remote capacities in place isn’t enough for a European startup planning a move to the United States. It’s also essential to have a strong team in place back in Europe while setting up the American office. This will maintain continuity of service for your customers, ensure that employees are taken care of and keep internal operations running smoothly during the transition — a vital component of starting strong in the U.S.
Companies should also choose their new location in the U.S. wisely. Just a few metros account for the majority of VC investment in the country — according to data from PitchBook, the Bay Area alone comprises roughly one-third of these investments. That said, PitchBook also found that the proportion of VC deals taken up by companies on the West Coast fell from 62.3% in 2018 to 50.2% a year later. Meanwhile, regions in the American Heartland saw their proportions increase, owing to increasingly active hubs of innovation and entrepreneurship like Austin, Texas. Your company will have to decide if it’s willing to pay the high price of admission for the human capital and high-dollar investors in the Bay Area or New York, or if it is better suited to a more affordable rising metro somewhere else in the country.
No matter how you transition to the U.S. market, if you intend to do so, get to work on your visa application and other relevant documentation right away. The startups that get on the ground in America faster are the ones that will have a serious competitive advantage in the coming years.