I knew from the start that the market for Appticles (multi-channel mobile publishing platform) is in US and it was clear that establishing some sort of business presence there is key.
We previously had the accelerator experience in Europe, via Startupbootcamp and we knew that if we have to go through another accelerator, that would have to be a US one. We applied and have been accepted to some US accelerators, but rejected their offer because it didn’t really make sense for us at that time. We wanted to get to US, but we also wanted to be careful on the price we had to pay for it.
We read about Saint Louis having a 342.70% deal growth in 2015, 33.02% average growth since 2012 – in fact they are the fastest-growing city in US when it comes to the startup scene. Neither New York nor Silicon Valley made the top 10 in a recent study.
Now, before actually taking the decision, we talked with our advisors, investors and also other Romanian entrepreneurs. And, obviously, like always, we got conflicting advices. Long story short, the decision was all ours to take and I don’t regret it. Actually it would have been a mistake not to take this opportunity just because it’s not Silicon Valley or New York.
What impressed you the most? What have you learned in US?
1. The experience those guys have in creating and managing businesses (mind you, not necessarily tech).
One of the partners and mentors of Prosper is Maxine Clark, founder of Build-A-Bear. What is Build-A-Bear? Well, it’s a teddy-bear themed retail-entertainment experience. In other words, you’d go in with your kid, build a teddy-bear with heart and all, and of course buy that bear.
Today there are more than 400 Build-A-Bear Workshop stores worldwide, including company-owned stores in the U.S., Puerto Rico, Canada, the United Kingdom and Ireland, and franchise stores in Europe, Asia, Australia, Africa, Mexico and the Middle East.
What’s even more surprising is that Build-A-Bear went public in 2004. I think that’s the mind blowing thing and it shows just how powerful the US market can be.
2. The amount of money available – and I’m not talking about corporate money or investor money, but rather personal wealth.
It was the first time I heard about “old money” and I wanted to understand what’s that all about. It seems that we’re approaching an exchange of generations and the accumulated wealth of some people is being split among successors and that, apparently, is a money management problem – there are actually startups trying to solve it.
3. The need for technical talent
Just like we have a lot of technical in Easter Europe and in my opinion we lack business skills, they have a lot of business/sales skills but lack technical resources. We look up to Americans, in general, saying that they’re great business people, but the reality is that they have formal education on these subjects, just like we do on engineering.
From this point of view, I believe there’s definitely an opportunity in US, when it comes to the business side (wether we’re talking about marketing, sales or leadership) just like there’s a huge opportunity in Romania and in the region when it comes to tech talent.
And I kind of knew that’s the case in US, but I didn’t have a good understanding of the magnitude of these things.
What is the difference between US vs. EU startups/entrepreneurs?
I actually asked the same question, a few years back when Matt Mullenweg, CEO and CoFounder of Automattic – the company behind WordPress was in Sofia at WordCamp Europe. In front of around 1,000 developers he said: “Stop comparing yourself to US startups.” and everybody started clapping frantically.
Now, my question is: “Is he right? Is this the correct way of positioning ourselves?”
I think that in a sense, he’s right: first of all, there are different markets. On the other hand, coming from Eastern Europe where we have a lot of technical talent, I would look at US startups and entrepreneurs and try to understand and learn the business aspect of building and managing a company. And by that, I mean really understand the business side, sales process and leadership.
I would meet with a lot of entrepreneurs and simply and genuinely ask for help and try to understand the decision making process. I would meet with sales people and try to understand their mindset and process. I would really try to understand how the US customers think, how the market works. Honestly, exaggerating a little bit, but just to prove a point: I would be like in school, viciously hunting for data.
In other words, I would go beyond the shiny story that’s build in the press, because that’s just smoking mirrors. The interesting stuff is behind the scene.
Now, don’t think that all US startups are like FB, Instagram or Twitter. And don’t think that all US is like SV or NY. However, more and more startups from NY and SV are moving their HQ in mid US (STL, Chicago, Austin and other city hubs). And the reason is pretty simple: the living costs in SV and NY are insane: the average AirBnB room for 1 guest is around $3,000 in SV. And to put things into perspective, we paid $1,000 per month, 2 people and a huge house in STL with all amenities. And 2 cats 😃
And in the same time, everybody realized the valuations are hyped in SV and there’s in fact a correction happening as we speak. In SaaS valuations used to be 10X years ago, now there’s about 3-4X. And this is a fact, it’s not just press. In other words, startups that can keep their burn rate under control are in a great advantage this days.
What do US investors or entrepreneurs think about EU startups? How do THEY see us?
What I like about most EU companies is their lower burn and more conservative business outlook. The fact that the company may already be seeing traction and then want to expand into the US with an already established product enhances the opportunity for success as they usually only need to build a US sales and support team. Valuations are more reasonable as well.
– OR –
The understanding of and access to less expensive tech talent seems to be knowledge you bring. I think the ability to manage it is the trickiest.
In other words, we need to be realistic and understand that, as a startup, to get to the next level, you’ll need US business knowledge which is not gained in a few months spent on a trip in US. That can be a start, but to get to the next level, as an Eastern European founder and CEO you might, today, need to think of the bigger picture and realize that it’ll be more beneficial for your company to find a successor, thus hiring a US based CEO.
There are startups in Romania that have done it, because that’s the mature way of thinking.
What do we have to do to be more like them? How can we improve our ecosystem?
I’ve seen a lot of Romanian entrepreneurs disputing developers that they mostly do outsourcing rather than starting their own companies. They go so far as to blame developers for not starting enough companies and going out of their comfort zone. On the other hand, nobody says anything about business graduates that prefer to get a job in a corporate and not start their own company.
I think that this is an unfair way of thinking, an opaque way of dealing with the bigger picture. And it’s a little bit hypocritical: if we look at companies that have gotten to a new level, we see that they keep their R&D head quarters in Romania and that’s a good thing. They get external business management and that, again, is a good thing. We simply have to deeply understand what’s going on, that we’re in a better position than we ever been and instead of throwing blames around I would look at what we can accomplish with what we poses – because we do have some advantages that others don’t.
The reality is that improving our entrepreneurial ecosystem will happen organically. The more entrepreneurs we’ll have (it doesn’t matter if they’re successful or not – we’re talking macro now; some will have to fail for other to succeed) the better and more attractive we’ll become as a region. You can’t gain or build experience over night, it takes time. We just need to realize that and act accordingly.
I think we have to try and be more assertive/proactive, but without revealing too much of that Easter European aggressiveness. Also, I think being humble but acting with confidence goes a long way. If that makes any sense.