5 things European founders need to know about breaking America

Will Capper of DirectlyApply shares 5 tips start-up founders should know about breaking into the US market.

Here, Will Capper, co-founder of job discovery platform DirectlyApply, gives his top tips on how to make it big in America when you’re a small European start-up.

DirectlyApply was founded in London by a Brit and a Kiwi and operates from premises in the UK, but so far 99 per cent of its business has been in America. 

#1 – Don’t treat America as a single market

The United States’ model of a federal republic devolves power to its composite states to set taxes, regulate and implement laws. As such, businesses trying to break ‘America’ should set up with caution when deciding where to put down roots. As you would expect, to get a different deal from basing yourself in England, Northern Ireland or the Isle of Man, new investors should weigh up the pros and cons of states before committing to a decision.

Beyond its markets, infrastructure across the US varies greatly. Some states are better set up for domestic flying where others favour the roads or, much more rarely, trains. The sheer diversity of America’s opportunities and challenges will have to be considered against what it is that you are trying to sell and what you are willing to sacrifice to sell it.

Federal powers make the US a fascinating and dynamic challenge to work around. California, the largest chunk of the American economy, has crucially different rules around data and privacy from the rest of the country. A bill in Colorado took effect in January this year, making it illegal not to include a salary in a job advert– a change that pushed us to change our practices.

>See also: Five top tips for UK businesses that want to sell into China

#2 – Prepare for a different kind of economy

The US is the world’s second largest economy and shows little sign of slowing down. Where GDP growth in Europe has stagnated in recent years – hinged largely upon Germany’s foreign trade – the US still shows willing to lay down the infrastructure needed to keep up with China. Forty times larger than the UK, the passing of a bill or the discovery of some vast new natural resource will ripple through business at a much larger scale than can be expected here in Blighty.

Accordingly, new investors should be mindful of currency fluctuations as the US throws its weight about. As faith in the dollar evolves around US foreign and domestic policy, profit margins translated back into sterling stands to gain or lose out. This extra consideration, if missed, can be disastrous for a company with limited capital to account for the value of its assets. We have had month to month salary fluctuations which have almost amounted to the same figure as payroll for that month.

#3 – Anticipate early adoption of technology

Since its inception, the US has pioneered the use of patents and trademarks to encourage innovation in new technology. Coupled with this, the States has shown willing throughout its history to fund major investment programmes in emerging fields. Early and sudden adoption of technology has since allowed trillion-dollar companies like Apple, Amazon and Microsoft to thrive, and the US has consistently attracted more great minds to its shores than it exports. By contrast, the UK is now playing catch-up, investing heavily in key fields to stop haemorrhaging its skilled workers.

That said, obtaining a trademark in the UK is a relatively easy and cheap process. You can often do it yourself for under £300. In the US, new businesses would be best placed to hire a lawyer and shouldn’t bet on the cost being much less than $5,000– and that’s before anyone decides to challenge your patent or trademark.

So where the US may welcome innovation and investment, those looking to break its markets should familiarise themselves with the challenges that this brings and ensure they have a good lawyer, before putting pen to paper.

‘Be patient for growth, but impatient for profit’

#4 – Get a grasp of the law

Trademarks are one thing but the day to day operations of business will require a deeper understanding of how things like insurance and contracts work across the pond.

Working out of the US demands a comprehensive insurance package, but we found that a number of insurance companies were unable to insure us for the exact service we offered. Be prepared to shop around and take some time to find the right deal. Also, expect it to be around five to ten times more expensive than the equivalent insurance coverage in the UK.

Likewise, you should be prepared to seek the services of a savvy contract lawyer who will protect you from being overcharged or thrown by differences in the legal systems. If you end up in a dispute with a client or supplier, you need to be aware of the type of case that can be brought against you as well as the jurisdiction. Although US law is derived from the common law system of English law there are countless important distinctions, so you need to make sure you have done your due diligence on what to expect if things do go wrong.

>See also: 8 questions to ask that will help grow your business

#5- America doesn’t have to cost as much as you think…

…but there will be other challenges to get your head around.

It is a common misconception that you will need vast sums of capital to break into America, especially if you are able to keep your staff and operations in Europe. Although, if you do decide to remain a non-domiciled business, you should be mindful of the challenges of competing directly with American nationals. Even the freshest entrepreneur in the US will have years more experience in local customs and social expectations than an overseas observer.

We started our business with a comparably small amount of capital from a UK based angel investor and haven’t needed to seek additional funding. Yet we see multiple start-ups raising millions of dollars in capital to try and crack America before even attempting to achieve half of what we have already done. If you can keep your business operations in Europe, but still reach the US consumer, there should be no need to raise additional investment.

So although we wouldn’t totally disagree that operating a US-focused business from Europe doesn’t have some disadvantages and challenges (which can, in some instances, be solved by a large capital injection) being ‘patient for growth, but impatient for profit’ is a strategy we would strongly recommend.

Will Capper is co-founder of job discovery platform DirectlyApply

Further reading

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Will Capper

Will Capper is co-founder of job discovery platform DirectlyApply.