Think Before Leaving Home to Raise Funding in the Silicon Valley

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Stefano Bernardi emailed me out of the blue when he was a VC in Milan, Italy working at dPixel a few years ago and I had lunch with him when I was in Milan for a conference in March of 2011 shortly before he moved to San Francisco.

He wrote a great blog post linked below. I have witnessed this exact occurrence of strong and ambitious European entrepreneurs coming to the Silicon Valley chasing their dream to raise funding here and be a big fish in the big pond. I think it applies to entrepreneurs who have a strong power base at home in Dallas, Miniapolis or anywhere considering relocating to the Valley. Read this blog post from Stefano as it might save your life and your company not to mention your reputation and relationships at home.

The summary of what I have witnessed is that a strong entrepreneur that possibly raised VC funding for her last company in her home country in Europe decides that she wants to move to the Valley, raise funding from Ron Conway and the other big name angels that backed the many great tech titans and then fast track to working with VCs in SF and the Valley that are 2.5x smarter than the VCs she got to know and tolerate in her home country. She moves to the Valley and goes through a honeymoon period of how great it is to be in this ecosystem where everyone is so helpful making introductions and giving feedback and advice. It feels like being in the Garden of Eden for this European entrepreneur. She thinks and feels that she is now truly home and belongs here!

Then after becoming what feels like a Silicon Valley insider she starts to get meetings with angels and other investors via her new found friends and growing network only to find that despite these friendly faces and body language no one is actually writing a check. In the mean time, she watches lots of other companies raise funding and move ahead. Even younger startups from nowhere arrive and get funded that seem far weaker.

Hollywood is a great analogue to the Silicon Valley. Every day some beautiful girl gets off the bus (or plane in modern times) arriving in Los Angeles hoping to be the next big thing in movies or music. (At that same moment some waitress decides to leave L.A. and return home.) She was probably one of the hottest girls back in her hometown village somewhere in the middle of America, but in Hollywood talent and beauty combine with brains and network connections to translate into success. The Valley is the same thing. Some startup may have been the hottest deal on the streets of Turin, Italia, but now surrounded by all the major league startup athletes in the Silicon Valley, the completion for funding and advisors, even cofounders and technical talent is severe. Angel and VC investors here are over-shopped compared to angels at home. Eventually the entrepreneur wastes money on small local SV lawyers that charge fees and then immigration lawyers and eventually the entrepreneur returns home having burned through a lot of cash and time to face the network at home she abandoned that was ready to back her new startup at home before she left for greener pastures. They may be too proud to back her now after she rejected their initial offer to invest.

My advice to these entrepreneurs is to tank up with as much funding fuel as possible before making the big journey here. Keep much of your development at home where you control things and come to the Valley with cash funding in your bank account and start hiring real Americans here and put them in senior positions. Get local articulate native English speakers into the founding team and be magnanimous with equity to get them on board even if they are joining 18 months after you began working on this new startup. Net, net, take the cash on your home turf, arrive with a lot of ammunition and broaden your team and truly become an American international company with well connected Americans and advisors. An alternative if you don’t have the option to raise money at home is to follow Stefano’s advice and join an American accelerator if you can get into a good one.

Here are Stefano’s sage words: European startups: Here’s how to (not) raise capital in the US. or http://goo.gl/1Rcq0

Twitter: @RomansVentures

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