An increasing number of EU and international startups are either making the move to the US or are deciding to incorporate in the country from day one. Many cite the massive size of the US market as one of the main reasons behind the move, but there are many underlying issues that are responsible for that shift as well. More US investors are also keeping an eye on promising EU and international startups and are trying to lure more to set up shop on US territory.
EU Startups are Facing Challenges
There have been attempts at creating a better ecosystem for EU tech startups with a sort of European version of Silicon Valley, but regulatory imbalances and the EU’s fragmented telecom market will need to be sorted out before this becomes a reality.
The US with its fiercely anti-regulatory stance towards telecoms does have its detractors, but it can seem like a paradise for any telecom company, especially one in a highly regulated market.
According to the former commissioner for telecoms and digital affairs, Neelie Kroes, the regulatory differences between EU states and the pushback towards technologies like 4G has been a huge issue.
She stated that the US and countries like South Korea are ahead of the European Union in terms of data usage, mainly because of the lack of a single telecom market and dated infrastructure.
EU Companies are Not the Only Ones that are Suffering
European companies are not the only ones moving to the US en masse in search of better opportunities. One country that has been particularly affected is Australia, which is said to be suffering from a tech “brain drain” at the moment.
While many Australian entrepreneurs have mentioned the attractive market and access to capital as one of the reasons they decided to leave, they also state that the attitude towards entrepreneurship is very different and is one of the reasons they made the jump.
One, in particular, stated that the US was the only country in the world where a couple of guys or girls can build a startup from their laptop and be taken seriously.
EU Startups are Attractive to US Investors
There’s also the fact that more US investors are looking at EU companies nowadays. There are many reasons for this. But one of the biggest is that EU startups tend to be much more conservative with their valuations. These companies often keep the same mindset when they come to shore. Acquiring European companies is very difficult, however, which is one of the reasons many US investors tend to shy away from making EU acquisitions unless they agree to move their operations and incorporate in the US.
Benefits of Incorporating in the US for Tech Startups
We shouldn’t overlook how attractive the US market can be for tech startups from abroad. For one, they can incorporate from a distance without ever having to step foot in the country, which is one of the only territories where this is possible. Then there’s the access to investors and venture capital.
Not only are there more venture capital firms in the US than anywhere else, but they tend to be much more adventurous as well. One entrepreneur stated that local investors scoffed at their valuation and that they were able to get double the funding simply by moving to the US.
While major hubs like San Francisco still attract a large number of new tech firms, other cities like Chicago also offers tons of opportunities. Chicago, in particular, is very popular because of its high number of venture capital firms, access to top talent, low cost of living, and great housing market.
Providers like Blueground, for instance, offer a tech living experience to business and leisure travellers looking for apartments in Chicago. All of the apartments are fully equipped and perfect for anyone wanting to get all the luxuries of a hotel room, with the flexibility an apartment offers. They operate units in 6 cities in the US, New York, San Francisco, Los Angeles, Chicago, Boston, and Washington DC.
Incorporating in the US is also a great option for any company who’s thinking of setting a significant or permanent operational base in the country. There’s also the fact that having legal ties in the country will not only make the startup more attractive to investors in the country but also for certain foreign investors as well. The US also has strong legal protection for enterprises and a fairly favorable tax system.
The US is doing a great job at attracting startups from all over and the EU will have to find solutions to relax its regulatory landscape and provide more opportunities if they want to retain talent. Attitudes from venture capitalists will also have to change.