Growth
The founder’s pathway to international expansion
- Growth
- Article
- 7 minutes read
Landing and expanding in the ‘United States – home to the world’s biggest economy, the largest public markets¹, and several of the biggest startup ecosystems² worldwide –– is seen as a core strategic priority for many early-stage startups. But international expansion requires a rigorous approach to hiring, business development, cash flow and much more. Our guide to scaling beyond your home market includes insights from founders and investors who’ve overseen successful international expansion efforts.
- Launching into the US takes up a lot of your attention and capital. But you’ll usually have a ‘home’ market to take care of as well. It pays to create a robust plan ahead of time that takes the cost of continued growth, operations and hiring in your home market into account.
- Founders should be aware that shifting the company’s domicile to the US in a Delaware Flip can be much easier the earlier you make the leap. ‘Flipping’ to become a Delaware C-Corporation is now very rare at Series B and beyond.
- Without a clear division of responsibilities in the team, the cost of expanding into the US while keeping things moving in your home market could quickly prove prohibitive. Be sure to clarify plans with your leadership team and investors well in advance of taking the leap.
More and more, founders are setting their sights on scaling internationally, even in the earliest stages of their company’s development. And for venture-backed businesses, the size of one market in particular is especially compelling.
Even if founders are eager to continue building from a European HQ, “US market entry isn’t optional,” in the view of consultancy US Expansion Partners. Their report, ‘The Board’s Guide to US Expansion’, argues that “the US typically represents over 50% of global TAM for most technology categories.”
Many founders and investors agree that the decision for VC-backed founders is not whether to go, but how and when. All the same, there are any number of critical questions for founders to answer before you make the move. Should I, or another founder, relocate as part of the expansion? How will we keep the lights on in our home market when we’re allocating so much resource to the US? And how can we make sure we hire the best people in a hugely competitive tech talent market?
Read on and explore.
Funding and scaling
The US has the deepest and most liquid tech markets globally. That also means the level of investment required to compete in the US – from your sales and marketing costs, to hiring – can come as a shock to UK and European founders. For many, the payoff is worth the outlay, but finding a way to stand out in the world’s biggest economy is no mean feat.
Investors are looking for generational outcomes from their portfolio companies. They are also swamped with email, X and LinkedIn messages. Structuring investor outreach needs discipline and a way to stand out in a sea of founder pitches. Emily Wood’s article on targeting US investors in the early stages of your funding round includes tips for securing warm introductions from other founders, commonly seen as the very best way to catch a VC’s attention.
Key factors behind successful US expansions
Hard work and ruthless focus are non-negotiable for any UK startup trying to make it across the pond. But what about the personal side of a founder relocation? As Matt Oxley says, “you have a mix of stresses that will be unlike anything you’ve experienced in your founding journey so far. The emotional side can often be tougher to handle than any commercial challenge.” Dominic Honmong’s article gives you the nuances behind the expansions that succeed and those that fail.
The thinking goes that you’ll have to pay more to get top-quality talent in the US. And while market data backs that argument up, another common theme founders and investors report is that US employees will be prepared for very in-depth discussions on their total compensation package, including equity. Our article gives founders some tips how to have positive negotiations with candidates to help give your startup the best chance of making it Stateside.
Logistics
Planning your US growth is exciting, but behind the sales and marketing flywheel is a massive to-do list: staying compliant with federal and state laws, investing in the right professional services and advice, and keeping costs under control.
From incorporation costs to transfer pricing fees, the cost of doing business in the US can ramp up quickly. A lot depends on your state, with different taxation policies and fixed costs like office space potentially making a big difference to your bottom line depending on where you land. Go for one of the big tech meccas, like San Francisco or New York City? Or focus on a smaller hub? Our blog has some frameworks to guide you in making this crucial decision.
In one respect, expansion strategy and planning has got a little bit easier for founders over the last few years. As the ecosystem has matured, US investors are increasingly comfortable with funding seed and Series A rounds without the startup adopting a US topco. But if the US is going to be your main market, it tends to be much easier to change your structure the earlier you make the move. We collaborated with transatlantic investors Frontline on a Delaware Flip infographic, giving you all the key insights in one place.
The vast majority of UK and European founders have a ‘home’ business to look after too, all while planning and executing a US expansion plan. How do you make sure costs aren’t going to spiral? And what are the most important one-off and recurring costs to be aware of once you land in the States? Our checklist here gives founders a budgetary starting point for their transatlantic expansion.
Our comprehensive guide to US Expansion
We’ve created this guide to give early-stage founders a clear starting point and a practical pointers, so you can move forward with confidence rather than guesswork. Use it as a resource to move through the key decisions and common pitfalls, and dip in at the sections most relevant to where you are today—whether you’re exploring the move, preparing to launch, or looking to scale once you’ve landed.
Any founder planning US expansion activities will be juggling many factors, from the commercial opportunity right through to the personal implications of a move. It’s vital to have all the information to hand well in advance of making the decision, because a move into to the US is one of the biggest bets any early-stage company can make.
Thank you to the founders, investors and advisors who helped us bring this guide together. Want to read more? You can access all our Founder Success content here.
Any opinions expressed are merely opinions and not facts. All information in this document is for general informational purposes and not to be construed as professional advice or to create a professional relationship and the information is not intended as a substitute for professional advice. Nothing in this document takes into account your company’s individual circumstances. HSBC Innovation Banking does not make any representations or warranties with respect to the accuracy, applicability, fitness or completeness of this document and the material may not reflect the most current legal or regulatory developments. HSBC Innovation Banking disclaims all liability in respect to actions taken or not taken based on any or all of the contents in this document to the fullest extent permitted by law. Nothing relating to this material should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction.
