How Founders In Geographies With Less Growth Capital Can Secure US-Based Investments

In the last year, the funding landscape has undergone a transformation that's left U.S.-based venture capitalists (VC) investing closer to home, taking part in about half as many international deals compared to 2022. Simultaneously, remote meetings have taken a back seat in the wake of pandemic-paused travel, and in-person meetings are once again laying the groundwork for long-lasting relationships and signed deals.

This means that overseas founders in geographies with less growth capital not only face an increasingly competitive environment but also have to vie for face time with U.S.-based investors to land investments. In the current market, founders who can't build a scalable business with local investors can get attention from U.S.-based VCs by making meaningful connections, showcasing their product-market fit and understanding key differences in the growth mentality in and outside of the U.S.

Tap the Cap Table for Warm Intros

The importance of relationship-building in the VC world cannot be overstated. According to a survey of more than 900 VCs by the Harvard Business Review, only 10% of deals come from cold email pitches by company management. In other words, referrals from founders' networks — whether from former colleagues, existing portfolio companies or other investors — are invaluable. This begs the question: Where does one start when it comes to asking for a warm introduction?

Existing cap tables are likely the best place to start, as another investor vouching for a founder will signal trust and commitment to the future of their company, both of which will affirm the connection is worth their time.

Demonstrate Product-Market Fit Locally and Globally

When it comes to securing U.S.-based investments, founders also need to clearly communicate how their product solves a global problem and translates to the U.S. market. An ideal way to do this is to highlight U.S. customers and how they're contributing to overall revenue growth to demonstrate that the product is already in the hands of consumers and there is a measurable demand for it. Investors understand that 35% of startups fail because there is no market need, and thus, founders must convey the seeds they've already planted to grow their business sustainably in the U.S.

If founders can ground their vision for U.S. expansion with even 5% of revenue coming from the U.S. and 95% of revenue generated locally, it will increase their likelihood of closing a deal.

In my experience, while there are cultural and regulatory differences that come to light when conducting international deals, these differences have not impeded founders from securing capital from U.S.-based investors. However, what is important to understand is how investors in the U.S. tend to value growth over profitability, whereas founders outside the U.S. (with some exceptions) tend to value profitability first, then scaling. If the excesses of 2020 and 2021 have taught us anything, both growth and profitability are equally important, so showcasing a path to strong efficient growth becomes imperative.

Understand the Importance of Growth vs Profitability

This difference may contribute to misalignment in conversations with VCs if founders are not aware of the mentality that U.S. investors commonly hold: If you spend first, you can grow faster. With that in mind, founders should clearly present their path to growth when pitching U.S. VCs and understand their perspective on profitability.

UiPath, a Romania-based software startup, is an example of a global company that successfully secured investments from VCs in the U.S. and went public. Founders can look to the company's business model and customer growth as a testament to the above recommendations.

Through strategic networking, a well-established product-market fit and an effective growth strategy, entrepreneurs in regions with limited access to growth capital can adeptly close deals in the U.S., creating a win-win situation for both founders and investors.

Nagraj Kashyap is a co-founder and general partner at Touring Capital.

(Opinions expressed in this article are the author's own.)