I went to a great event sponsored by Orrick this morning about expanding your business from the UK (or anywhere ex-US) to the US. The principles will apply on the whole to any international expansion, but are especially true for a move to the US where visa and tax issues are especially complicated.
The (great) panel comprised of:
- Scott Sage from DFJ Esprit
- Andy McLoughlin, founder of Huddle
- Joe Stepniewski, founder of Skimlinks
- Natalie Langley from PwC
The key takeaways I noted were:
- Spend time going to US regularly before making the ultimate move – it sounds pretty obvious, but a surprising number of firms don’t “test the waters” by sending a founder or senior team member out 6 times a year for a few weeks each to see how necessary a presence on the ground is. That’s a whole lot cheaper than moving people out there on a permanent basis – Huddle did this
- Think about just needing an American voice on the phone – they can even be based in your home office with an American sales or sales support person using a local caller ID and working US hours – Huddle did this
- Don’t underestimate how hard it is to manage a multinational business. It’s v hard to maintain culture across 2 countries/continents. So to mitigate this it’s VIP to have 2 or 3 early employees from the UK to seed the new office with the company culture
- Natalie warned us that you must be careful about traveling too much to the US without a corporate structure in place in case you trigger a tax liability by passing a cumulative visit length threshold
- We spent a fair few minutes discussing the merits of having a UK top co or US top co – Huddle did the former, recommended by Andy given the vast amounts of offshore cash that US multi-national corporations can only use offshore unless they want to trigger a 25% tax liability by bringing it onshore. Know all that money they aren’t paying UK taxes on? They can spend it on your startup. They can’t spend it on a US startup….
- Andy has become a reluctant expert on visas and recommends:
- E Visa – $100k investment requirement and >50% of the company must be owned by British investors (incl Fund LPs). NB that a full non-immigrant visa makes you liable to personal tax which for the US is on worldwide earnings which can hurt
- B1 visa – with this visa you still officially work for the UK business so there are no personal tax implications. You can travel in and out of the States as often as you want
- When are you ready to make the move? Scott focused on having a reliable sales methodology that has been tried and tested in the UK and runs smoothly and when your Customer Acquisition Cost is being paid back at worst in 2 years assuming a minimum of 4-5 years LTV. He also noted that a high inbound lead velocity that is growing consistently is a good sign
- How can your VC firm help. They all focused on the importance of having a top tier US VC both to attract local talent (everyone in the industry in the Bay Area knows which are the top tier VC firms and they love to see them backing you, even if you’re tiny) and to introduce prospective customers with their amazing black books…. What about us, the UK firms that took the early risk – they implied that our job was more or less done if we helped prepare them for the US investment and move…
There was a bunch of other stuff I thought was less relevant so won’t bore you with that here. I agree with all of the above and found the UK top co point most interesting and relevant.