Raising Growth Capital from US Investors
European companies have traditionally looked for capital infusions from US investors when scaling internationally. While there are a number of ways founding teams plan for growth, we were pleased to host a private roundtable event on ‘Raising Growth Capital from US Investors’ as part of the FF Live series, in partnership with Wilson Sonsini.
The discussion was led by Michael Labriola, Partner, Wilson Sonsini with panellists Husayn Kassai, Co-Founder & CEO, Onfido, Jason du Preez, Co-Founder & CEO, Privitar, Catherine Birkett, CFO, GoCardless, and Thomas Hovaguimian, CFO, Checkout.com giving first-hand accounts and shared the lessons they learned when scaling to the US.
The discussion centred on how UK businesses can forge relationships with US investors, why it is important to raise growth capital from US investors when looking to expand to the US, and when a company should start to think about fundraising.
We would like to offer our thanks to Husayn, Jason, Catherine, Thomas, and Michael for generously giving their time, alongside the 140+ attendees to the session for their contributions.
The following insights emerged from the discussion:
1. For European companies looking to scale in the US, American investors have considerably more to offer than large ticket sizes
- The draw of US funds for European founders is less about the ticket size they can offer as European and Eastern funds grow in size and confidence
- Instead, US investors also provide large talent pools, operational playbooks and support, strategic advice, and local knowledge to help investees scale in the US
- US firms are able to provide invaluable connections and operating experience in the local market when attracting local consumers and talent
2. Brand and other credibility signals are important factors to consider when raising US capital
- Many US funds and banks see a US footprint and existing American investors as credibility signals when looking to conduct business with foreign firms
- Having major US backers is often vital for gaining real traction in the US, as seen in the case of GoCardless who arrived with strong pre-existing US backing
- Beyond investors, industry credibility is also an essential factor when expanding – this has been notable for fintechs such as Onfido and Checkout whose US expansion has been supported by positive reputations across the global financial services community
3. Timing is key to success when raising growth capital from US investors
- The US is an important market for any business looking to establish a global footprint, and panellists recommended that European companies should enter the US market earlier than feels comfortable to quickly establish a footprint
- Revenue should not always be the deciding factor when raising external capital or expanding; Checkout.com ran a US fundraise that focused instead on robust profits, using this to ensure they entered the US market in a strong financial position
- It is also essential to understand the business’s value proposition when looking to expand to the US: if a company can offer global solutions then they will have a far more attractive proposition than if they were solely trying to compete for local business
- One option when raising US growth capital is to establish a sales beachhead and win customers prior to meeting with investors. This provides valuable testimonials and proof of traction to show investors the business model is successful
4. Nurturing long-standing relationships with targeted investors can be extremely advantageous when looking to fundraise internationally
- For early-stage businesses looking to fundraise abroad, relationships count for a lot more than metrics, as all the business can really give investors is a promise of their future
- Entertaining discussions with investors prior to fundraising will ensure startups know who to go to when the time is right to raise
- The partner in a fund is often as important as the fund itself: it can be particularly useful to connect with them on a personal level as well as consistently keeping them posted on professional developments, so when it comes to fundraising there’s already an established relationship and knowledge of the business
- When a company is in fundraising mode, the focus should be on targeted and concise investor discussions in order to close the round as soon as possible and get back to conducting usual business
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