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"Foreign" as a filter for startups

Thursday, February 4, 2021

In this article, we will talk about a specific type of founders and a specific type of international investors, corresponding to those founders. We’re talking about the founders from CIS countries, who have fears and insecurities connected with coming to Silicon Valley to complete all the trials, which are necessary to receive an investment. By “corresponding” investor, we mean the one who sees the circumstantial advantage, which the founder is afraid of and considers a drawback. In fact, the article itself is dedicated to these circumstances. I will immediately object to the phrases like “Not everyone like that, there are others,” — and there are some, and there are many of them but in this specific context they are not suitable as main characters.

Startup Jedi

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The Founder’s theory

Founders from the CIS consider themselves strangers in Silicon Valley. They think investors consider them a dubious waste of time: they have arrived, but there is no guarantee that they will stay, and won’t go back home in a week or two. Founder see themselves through the eyes of investors as a person who hasn’t achieved anything in their native familiar market, therefore they have set sights on a foreign one.

Another factor that increases the founder’s uncertainty and entails a lot of inconvenience is the English language. With a foreign language, there are two main problems: understand and explain. It is difficult for a person to clearly convey ideas, to competently negotiate on business, the gift of persuasion simply doesn’t work. In addition, poor knowledge of the language doesn’t make it possible to understand the implications of the questions asked, correctly understand the client’s feedback, recognize what the interlocutor wanted to convey, etc.

Another problem is the difference in mentality. For example, in the USA, it is a common practice to speak positively about everything. A local resident understands what kind of “positive” a refusal means, but for a foreigner it is more difficult to understand.

And the founder has to overcome all these tests for the good of the startup.

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"Foreign" as a filter for startups

Investor’s practice

Through the eyes of numerous investors, the topic with immigrants works quite obviously: these are people who have passed certain filters while getting to them. For starters, startups have mustered up the courage and strength to break into another country where they know almost nothing. Then they found investors, translated the presentation and speech into English, learned the pitch — not everyone can take these steps:only one out of ten founders who want to get to the Valley, will gain strength and actually move there. The very fact that the founder has reached an investor in Silicon Valley serves as a litmus test for him. This means that the startup has at least a strong character and a business idea worth taking the risk. Even if this idea doesn’t meet the expectations or requirements of the market and the investor, then its character will help to improve this idea and continue the “fight”.

For the American founder, the situation develops at a lower level of complexity, since the person was born and raised there. In other words, if he suddenly starts his startup today, he will be able to get the attention of investors with the help of friends and acquaintances. Then the question arises: does the investor need such a startup, which made it there in an easy way? Perhaps, it may be in need: ​​there are many brilliant and punchy guys among Americans. However, the number of the local population, which pitches and makes startups, is initially larger. In this mass, it is sometimes difficult to determine which startup is “sustainable”. Local founders make a startup and pitch well for the first month, while they are on the first wave of motivation. There is no guarantee that the enthusiasm will still be alive in a couple of months.

While immigrants have already passed some test of strength. If a startup enters the international market, where an investor can earn a lot, then the founder’s place of residence before arriving in the Valley is an unimportant detail. However, some funds jointly invest only in immigrants, for example, One Way Ventures. And the Valley funds with Russian roots are impartial towards startups from the CIS — TMT Investments, Gagarin Capital, AltaIR Capital and others. Investors from the CIS countries who do business and live in the United States fully understand the path of a startup, since some of them have gone through it themselves.

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What to understand and accept

Investors, who see founders from other countries as people who have already passed certain filters, exist independently of the fears and concerns of these founders. You can start looking for funds with Russian roots or focused on immigrants to soften the blowback, and contact them.

Silicon Valley has the most startup-friendly ecosystem, which apriori means startup founders’ striving to get to the Valley. This ecosystem rests on the interaction of founders and investors and, therefore, founders are its integral element.

Startups from the CIS countries have received investments in the United States more than once. Therefore, for an investor, a conversation with a foreign founder is more familiar than unusual.

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COVID-19 amendments

Raising investments in the Valley doesn’t mean to stay there. The life in Silicon Valley is an expensive one. If the startup manages to grow, being in the original location, without spending investor’s money to pay for the team’s life in California, that’s even better. Today, when all business processes are conducted online, there is a possibility to create unicorns from any place in the world.

You can raise money from an American investor without leaving your home. The network is a very effective tool that works great for this purpose. Actually, you can cope without it. Some time ago, startuppers had to catch investors at events and pitch them literally on the go, while having no recommendations to come along. Now you can find an investor’s contact and do the same remotely: with the world going online in lieu of COVID-19, many investors have become more willing to respond to incoming requests in social networks and by mail.

Shortly speaking, Geography is not a barrier as all the barriers are in our minds. It is better to focus your efforts on the presentation, growth performance, financial prospect for the startup and other business nuances, and not to worry about the language and cultural barriers.

4 Feb 2021

 

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