Carlos Diaz, the general partner of The Refiners, reveals the truth whether it is worth to go for new IT businesses to Silicon Valley, how to rise to fund and what strategy is winning
Conquer the world or die
Many IT startups that have global ambitious are wondering whether going to Silicon Valley is worth the trouble. Considering the fact that this is the center of IT industry, it is. And there are some reasons why.
Unique product and big ambitions are not enough to go global. To scale up fast, the startup needs money, in fact, it needs millions of dollars. If you don’t have funding, they fail in global expansion is inevitable. Hence, the primary startup’s goal is to attract investors and mentors to business by all means.
The US is the biggest IT market with the highest investments ($79B dollars per year). Many investors and business angels are based here. All of them are looking for unique products, so the chances to raise funding are much higher than everywhere.
Silicon Valley is a huge network, where you can find investors. But you need someone who will introduce you to the investors.
Although Silicon Valley is the most enabling environment for IT new projects, this is still the biggest cemetery of startups in the world. Many entrepreneurs come here with no money hoping that their idea will be enough to grow without definite business and action plan. As a result, they become one of 75% of companies that fail.
The competition in the US and Europe differ. If you validate your business idea in the US, it becomes easier to succeed in the European market. Establishing a business in any European country doesn’t guarantee success in the United States at all.
However, the US and Europe are no longer only two markets favorable to run a startup. China becomes more competitive every year and a company that wants to go global should consider Asia as well. Today, Alibaba Group takes the leading positions in the industry, and it’s hardly possible that a decent competitor will appear in the next few years. It proves that the Chinese market breathes down the US and European companies’ necks.
Are you global or multilocation business?
If you aim to grow your startup to a big company, you are to decide whether you are global or multilocal from day one.
Global startups focus on the big market from the very beginning. Their products and services would simultaneously penetrate all the markets. However, a global startup should get more concentrated on the US market, as being successful there is a good point of being successful global.
If you lose the US market, you’ll hardly go global. But if you succeeded, you’re in the winning position.
Multilocal businesses start at one market and expand their presence to others step-by-step. Therefore, these companies need to adapt to each market. But there is good news as well. If a business is multilocal, the US market is not the top priority for validation.
So how to succeed?
To be successful, a business needs to stand out from the crowd. In the IT community and Silicon Valley, it means that your startup should be ‘a unicorn’ unless you won’t attract the investors and business angels.
Besides, you need to prepare a strong pitch apart from other startups. How? The most typical mistake that startups make during pitching is to focus on the product but never start with the problem that it solves. This is not what business angels are looking for. Start the pitch with the problem and show how your idea can resolve it and help people.
Also, you need to know what will you do when raising investments. This question is common in the Silicon Valley for IT market, and this will be the first thing the investors would like to know if they’re interested in your idea. For instance, your answer may be to increase the number of developers to foster the release of the product.
However, a great and unique idea counts for nothing if you don’t have a chance to present it to the mentors and investors. The key question to be solved is who knows you but not who you know in Silicon Valley.
If you have no one who will patronize you in Silicon Valley, you have a zero chance to get seeded to the final stage.
Going global or staying local is a tough question indeed. But if you want to conquer your business niche, you should never ignore the global market. The entrepreneurs who make the decision from day one, get a chance to scale up faster and stay ahead of the competition. If you want to succeed, follow these key tips:
- Get money for scaling up. No money – no success.
- Use the possibilities of networking in Silicon Valley to find people who will patronize your idea.
- Business is global, but trust is local.
- Be a unicorn.
- Validate your idea at the US market and conquer it!