Alastair Mitchell and I launched online collaboration tool Huddle in 2007. Within three years, we’d grown from a bedroom startup to a 40-strong team and had closed a $10.2m Series B round of funding with Matrix Partners – a big name US VC.
At Huddle, our mantra is “go big or go home” and we’ve always believed that European start-ups can do great things on the global stage. With our new VCs, big partners and more than half of our users based in the US, we decided to use the capital to expand our US presence and build a team in San Francisco. (Admittedly, we also had a bullish desire to take on the Americans at their own game – in their backyard.) So, in May 2010, I found myself in the heart of San Francisco’s SoMa district, surrounded by hundreds of other tech start-ups and industry movers and shakers.
No matter how successful you are on the European stage, doing business in the US is far from easy. Don’t expect to land, be given a hero’s welcome by the local press, find an office, hire a team and start trading in the space of a few weeks. It simply won’t happen. Yes, investors brandish larger pots of money, invest in businesses far earlier, and you may even live next door to the chief executive of one of their portfolio companies. But doing real business in the US is hard work and extremely expensive. Before taking the plunge, ask yourself: “Is going to the US really worth the time, expense and distraction?”
If it is, don’t go in blind. You need to make sure that the foundations for your US business are in place well before you open your office doors. By the time I relocated to San Francisco, I’d been visiting the West Coast five or six times a year for two years. Flights are relatively cheap – between £500 and £1,000 (depending on season, how far in advance you book, etc) – and you should use each precious trip to familiarise yourself with your surroundings, immerse yourself in the start-up culture and get to know the locals.
There are numerous events you can attend every night (SF Beta, SF New Tech and Startup2startup dinners, to name a few) to build relationships with other start-ups and meet investors. Plancast.com is your friend, here – use the service to follow other people in the industry and see which events they’re attending. It’s the acceptable face of stalking in San Francisco!
Different areas attract different organisations, so you’ll need to look at what kinds of companies are based where. Mountain View and Palo Alto are the heart of Silicon Valley proper and home to companies like Oracle, Siebel, Facebook, Apple, HP and Microsoft’s Silicon Valley Campus. These towns remind me of Reading, but with bonus sunshine and palm trees. Although they lack soul and non-generic shops, they are ideal locations to move a 1,000-plus person company to.
For Huddle, it was always going to be San Francisco. The buzz of the city is palpable and the city’s SoMa district – with its vast warehouses and loft apartments – is home to hundreds of start-ups, creative companies and social media consultants. There are also great office spaces available downtown in the Financial District (which has become increasingly affordable), around South Beach and in the Mission District.
When we first moved to San Francisco, we rented a two-person room from our friends at UserVoice. (Just another reason to spend time building up your network; you never know who’ll be able to help you out with cheap deskspace!) If you’re renting single desks from another start-up – or in a co-working space such as SoMa Central or Pier 38 – you can expect to pay between $300 and $500 per desk per month. For a dedicated office to house ten people, budget $3,000 – $6,000 per month.
You shouldn’t try to cut costs on lawyers. Setting up your company as a US entity, obtaining visas and hiring a team involves a mountain of paperwork – make sure you get professionals involved. A few basic tips here: firstly, the majority of US companies incorporate in Delaware, regardless of where they are actually based, because of the state’s generous tax benefits and well-defined body of case law.
Secondly, visa applications are a paperwork-intensive process. One mistake on the application form will completely void your application, so use an immigration attorney. Expect to spend $2,000 to $4,000 per visa application on a good immigration attorney.
Add to that the list of legal requirements involved in hiring a US team – employment contracts, payroll, healthcare (including vision and dental), social security, IRS – and you start to see why professional legal help is vital.
You’ll also need to budget for healthcare: costs can run to $500 per month per employee for good PPO (Preferred Provider Organisation) cover. We cover health, vision and dental for our employees, which is pretty standard.So there it is: moving to the US is about more than just jumping on a plane, stocking your start-up snack room with unhealthy treats, and buying expensive Aeron chairs (though all of this is important). But if you invest time and effort into getting it right, the move is well worth it.
Things are going so well for us Stateside, in fact, that we’ve had to grow Huddle’s US-based customer engagement team by 300 per cent in the past month, and half of the firm’s revenue now comes from the US. It could have been more if, 12 months ago, someone had handed me an article like this one.
Andy McLoughlin is the co-founder of Huddle
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