Home Grown member Daniel Glazer is an American technology lawyer, strategic business advisor, and the founding partner of Silicon Valley-headquartered Wilson Sonsini’s London office.
Since the 2010 launch of the UK Government’s “Tech City” initiative, Daniel has advised thousands of high-growth UK and other European technology and life sciences companies on raising capital, expanding their businesses into U.S. markets, and connecting with U.S. investors, corporates, advisors, and other stakeholders.
With Daniel’s wealth of experience and knowledge, we took this opportunity to ask him some questions for entrepreneurs considering expansion.
Comparing 2018/2019 to 2021/2022, have you seen interest from more UK/EU tech and life science start-ups that have wanted to branch out into the US?
Very much so. As an initial matter, interest in accessing the sizable US commercial and capital markets has always been strong among UK/EU tech and life sciences companies. The heightened interest over past few years has been driven by two dynamics in particular. First, the amount of venture capital invested into UK/EU companies has increased dramatically: in 2021 there was over $25bn invested into London-based tech companies alone. The increase in available capital has made it easier for UK/EU companies to pay the higher U.S. salaries and bear the other costs associated with scaling up in the States. Second, the pandemic-driven improvement in and increased reliance on video communications has made it much easier for UK/EU companies to access U.S.-based customers, users, and investors.
Are there significant differences in the way/style that US VCs invest vs UK VCs?
It is very common for US VCs – particularly early-stage US VCs – to be former startup founders or operators who successfully took substantial risks and are now looking to leverage their expertise and network to invest in and help scale companies that have massive upside (and downside) potential. This profile is less common in the UK, where the majority of VCs come from backgrounds in investment banking, private equity, management consulting, or large corporate.
The resulting differences in investment style include:
- It is common for US investors to pass on a company with a highly likely (but relatively small) eventual IPO/M&A exit in favor of a company with multi-unicorn potential – even if that potential is relatively unlikely to be realized.
- US investors are less likely to be focused on short-term profitability at the early stages of a company’s life cycle, given that near-term profitability usually comes at the expense of hyper-growth and market capture. U.S. investors’ focus tends to be on eventual profitability at scale.
- Because US VCs are likely to view their expertise and network in building US businesses as the added value they provide, they are likely to require early-stage UK/EU companies to have a strong US “story” before investing (e.g., management in the US; strong US customer or user traction).
- US venture-stage investors do not expect to engage with corporate finance advisors. Utilizing corporate finance advisors at an early stage in the US is perceived to create a barrier between investors who look to engage with founder-led businesses and the founders of those businesses. The ability to raise capital is viewed as one of a startup’s core business functions, and is generally not outsourced.
How can entrepreneurs in the UK connect with US VCs?
- Contacting US investors on a “cold call” basis is always difficult. Seek advice and connections from your existing investors, board members, industry sources, mentors, professional advisors, accelerators, and other contacts who are knowledgeable about your sector. Some business sectors, like cybersecurity, are very specialized, with a limited number of key players; others are more diverse. Perhaps surprisingly to UK/EU companies, it is very common for a US company’s external corporate lawyer to connect the company with investors!
- Attend conferences, conventions and other programs where those interested in your sector can be expected to attend. In many cases you will be able to see an attendees’ list from a prior year and determine whether the event has been of interest to investors. Many such events are very large, of course, and it is difficult to make contact with potential investors unless you have planned out, in advance, how you would propose to do so. If at all possible, pre-arrange meetings with investors whom you would like to meet, or obtain introductions from other attendees whom you know.
- Take advantage of trade missions and other pitch opportunities that may provide introductions to interested investors. The UK Department for International Trade, Tech Nation, and the (London) Mayor’s International Business Programme, for example, take regular trade missions of UK-based companies to the US (and elsewhere), typically with a specific sector focus. These missions are sometimes led by prominent members of government, which can help attract media attention. Participation may provide opportunities to meet interested investors and to raise your profile so that investors are contacting you, rather than vice versa.
- Recruit angel investors and non-executive and advisory board members who are well-connected in the markets/sectors on which you are focusing and are invested in helping your business succeed. These key connectors will not only help you attract investment – they may also provide invaluable connections to potential customers and partners, and their participation in your business may enhance your company’s credibility in the market.
Many founders/entrepreneurs are ambitious and eager to expand at rapid rates but what’s your advice for these start-ups and when should they really look at expansion outside of the UK/EU?
In our experience, the UK/EU companies that have had the greatest success in the US go early or go late. In other words, they decide early in their life cycle to move management to the US to build and market an American product offering and raise money from US investors, or they obtain product-market fit and raise money in the UK/EU until pulled into the US by customer traction or user growth.
A few UK/EU funds have published excellent guides on this dynamic, with a focus on the real-world US expansion experiences of their portfolio companies. These include Index Ventures (link), Notion Capital (link) and Octopus Ventures (link).
Could you share the successes of some of the fast-growing start-ups you’ve guided?
Wilson Sonsini’s London office has a particular focus on supporting high-growth UK/EU tech companies with transatlantic financings, M&A and IPOs, including publicly announced transactions for Babylon Health, Beamery, Checkout.com, Improbable, Insider, Multiverse, Onfido, Paddle, Peakon, Privitar, Remote, Signal, Skyscanner, TrueLayer, and Wayflyer.
If you’re interested to find out more, join us for our next member-hosted supper series – ‘Food for Thought: Coming to America: US expansion and fundraising with Daniel Glazer’ on 20th October, 6.30pm.
Over dinner, Dan will facilitate a Q&A session, where he’ll discuss best practices for navigating the logistical aspects of launching and operating a UK business in the States and setting and meeting expectations for US later-stage funding. To help formulate your burning questions in advance, here’s Wilson Sonsini’s US Expansion and Fundraising FAQ: link.
If you’re interested in enriching your entrepreneurial experience and finding a strong community of entrepreneurs, investors and business leaders then contact our membership team at Home Grown.