The United States is a fantastic market for startups, with its huge single market, open-minded buyers, access to fantastic tech talent from the world’s greatest universities, and the holy grail of venture capital.
But many foreign startups think they have to start in the United States, which is wrong. Perhaps America is not even the ideal place to incubate your startup idea. Sound strange? Let’s go through some reasons to start your idea abroad first and then scale it here after reaching product/market fit.
1. U.S. wages aren’t startup friendly
Tech salaries in New York and Silicon Valley are off the charts. A young back-end developer there costs around $100K, while a guy in Munich with the same qualifications and experience costs around $60K.
2. The U.S. advertising market is saturated
While there surely are some modestly priced advertising markets hidden in the United States, it is also home to the most expensive advertising market in the world. Even reaching students as customers is hard, as every startup is aiming for the “Facebook effect,” attempting to go viral with colleges, and there is not one week where a startup isn’t launching at some U.S. college.
3. Overseas, you can aim for critical density rather than critical mass
When trying out your initial beta, it is better to aim for a critical density of 10,000 users in a smaller area than 10,000 users scattered around the vast United States. This will allow you to learn better from them, and the “viral” effect is much stronger when you go for critical density in your beta launch.
4. You don’t need the U.S. for talent or ideas, but you will need it for marketing
The U.S. does not have more clever scientists or innovators than the rest of the world. I actually think that the world’s supply of tech geniuses and breakthrough scientists are scattered somewhat evenly around the globe in technology clusters and renowned universities. So there is no scarcity of ideas, talent, and co-founders anywhere in the world. But the U.S. and especially Silicon Valley does have the world’s most concentrated knowledge of how to scale a nascent startup to a global powerhouse. The U.S.’s expertise in VC, marketing, and growth strategies are truly unmatched. Just look at Waze: It first demonstrated product/market fit in its home country of Israel and then arrived in the United States with its cool technology. There the U.S. marketing masters took over and pushed the Waze app so effectively that Google acquired the company for $1.3 billion.
5. Programs exist to help migrate foreign startups to the U.S.
From the standpoint of foreign startups, it might look daunting to enter the U.S. market and try to attract local capital. But there are VCs and startup programs that look specifically to bring foreign startups to the U.S. The State of Connecticut, for instance, initiated a breakthrough project last year to award $5 million to the best IoT, health, artificial intelligence, and FinTech companies from around the world to bring them to U.S. shores and Connecticut. Last year’s VentureClash competition had winners from Israel, Canada, and the United Kingdom, who are scaling their startups here now and are already employing hundreds of Americans. Similar startup programs have also been started by New York State’s government with its 43North venture challenge and a VC in California, which launched the Startup World Cup last year to attract the world’s most promising startups to San Francisco.
While I believe the U.S. is the best place to grow, scale, and exit your startup, I’d say that Barcelona, Tel Aviv, and Berlin are some of the best places to launch before trying to conquer the U.S.