News and Tech Talk

5 things to consider before seeking a Silicon Valley investment

[fa icon="calendar"] Jan 5, 2018 4:51:00 PM / by Jakob Soderberg

Jakob Soderberg

As a Danish tech startup actively fundraising in the US there are a number of things to consider before starting spending valuable resources (a.k.a. time & money) in that quest.

We’ve gathered the most important issues to consider in this (not exhaustive) blog post. Before engaging in the fundraising process ask yourself if you are ready to:

  • personally move to Silicon Valley
  • “flip” your company (and have you thought about the consequences?)
  • pay a lot of money in rent (a lot!)
  • be turned down (a lot)
  • spend a lot of time in traffic

Move to Silicon Valley

Most investors want at least the founding/executive team to move to Silicon Valley. Investors can provide the best help to a startup if they are close and within range. Especially in a startup it is crucial to be close to your investors (and typically board members) when important decisions are made for the company.

In Silicon Valley more than 50% of the population is foreign born. In other words, it is a proven model for foreigners to move their company to Silicon Valley. And a lot will make the move due to an investor in the Bay Area.

Most VCs insist on executive teams moving here - but some investors (both Angels and VCs) have begun to go more internationally when looking for dealflow.

 

Do the “Flip”

The flip is when you turn your Danish entity into an American entity (typically a Delaware Corporation) - and make your Danish company the subsidiary. US investors prefer to invest in a company structure that is very well proven and the Delaware Corporation setup is by far the most common structure.

However it may implicate some series tax issues - and you should consider this carefully before actively seeking US investments.

Rule of thumb: The earlier stage of the company, the better (=less implications).


Extreme Housing Costs

“Brace for impact!” a 1-bedroom apartment (2V in DK) is somewhere between $2,700 to $4,500 per month depending on location! San Francisco and Silicon Valley are some of the most expensive places in the world to live in.

A common saying in this area is: you pay a lot for the good weather. And on that note - the sun is shining a lot here - and that also counts for the positive and relaxed atmosphere.


A lot of No’s

Be prepared to hear a lot of “No’s”. People win the lottery every week and we all know someone who had a term sheet in their hand after only one visit to a potential investor.

However, the true story is that you should prepare for a lot of No’s. Listen to the podcast by Reid Hoffman, Masters of Scale, it tells a great story about persistence and the power of accepting No’s.

Be prepared to make your business pitch over and over again. 50 - 100 - 150 times or more.


Spend a lot of time in traffic

Yes, traffic in Bay Area can be challenging (to say the least). However it gives you a great opportunity to listen to inspiring podcasts like Masters of Scale or similar. Especially during rush hour (from 6am - 9am and 3pm - 6pm) the traffic can be grueling.

The traffic situation has sparked the art of the phone-meeting or “the call” as we like to call it. A lot of meetings doesn’t necessarily have to take place face-to-face, especially when time is a scarce commodity.

Traffic in Silicon Valley can be grueling

(On the other hand, within the next few years, we'll all be flying around in driverless drones anyway... problem solved). 

Nice, you are still with me. You will find a large amount of things to outweigh those downsides of Silicon Valley. Some of them are mentioned in this blog post.


If you are willing to go the extra mile, go ahead an apply for our SCALEit for US Investment Ready Danish Startups in November 2018.

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