The following content was created from an interview with:
Nicolas Rose, French-American Managing Partner @ XAnge
Understanding the US VC market
Special features of the VC US
In short, the job of a VC is pretty much the same no matter the geography. Nontheless, they are still some specifities for the US market:
Higher ambition 💪
It’s no secret that the size of funds and amounts invested are greater in the US. This allows VCs to participate in bigger rounds.
Think Global 🌎
The US market is big as it is. But US VCs are drawn to projects with a global dimension. European startups aiming to conquer the american market are highly valued.
Global ambition must be highlighted when pitching to VCs.
“You have to be at the peak of your ambition and show the opportunity in a big way.”
What can we expect from a US VC?
Reputation is your biggest asset in this day and age.
Usually, a VC will be able to open doors thanks to its logo and the strength of its brand.
European VCs are generally not known in the US. It will be easier for a startup to recruit and trade in the US if it has the support of a US VC.
The level of reporting / board is the same, the frequency can be higher.
Generalist VC vs specialized VC
If you are a young startup with a product in high emergence, it could be relevant for you to choose a specialized VC. Partnering with a VC who knows/masters the technology will ensure that you get advice and support tailored to your needs.
You have to choose between :
- Visibility with less market relevance 🎆
- Market relevance with less visibility 🔍
US VCs are used to interact with American entrepreneurs using American methods.
It is therefore necessary to put yourself in the “american state of mind”. Give the VC every indication that you understand his methods and that you act in the same way as an American entrepreneur.
It is not a hard thing to master, but it is a key element to successfully bridging into the cultural codes of the United States.
"The firm you choose is important. But the quality of the personal relationship with the VC is even more important."
Negotiating power of a French startup
There is no difference made based on the country of your startup. It will be related to your product and its attractiveness. A startup with an excellent product and very good traction will stand out.
Due to the size of the US territory, the VCs are more likely to have higher standards.
"Today, American VCs have no choice but to open their investment scope to companies outside of the US. They know that the creation of new ideas and talents are also in Europe" Emmanuel Schalit, co-founder of Dashlane
Contacting an american VC
Who should I contact?
US VCs make inbound calls to startups, usually it is the Associates who contact the entrepreneurs and try to understand if there might be an interest for the fund. If there is, he will pass it on to the Principal or Partner.
From the point of view of a French startup, it is preferable to contact the most senior person possible. This brings the decision-making process closer.
VC Titles | Job Description | Role in your fundraising |
Analyst | The worker. She/he is doing investment memo. May source directly | |
Associate | The padawan. She/he co-lead or support investment with a partner or a principal. Source deals directly | Best entry point |
Venture Partner | The guru. She/he may be in the investment committee. Do not invest but may source | |
Principal | The investor. She/he is in autonomy on the investment side. Source deals directly | |
Managing partner | The boss. She/he is in the investment committee. May lead investment from time to time | Champion to convince |
Partner | The senior investor. May be in the investment committee | |
Operating Partner | The operator. She/he may be in the investment committee. Do not invest nor source | Champion to convince |
Do I need a fundraiser?
The US and European markets are structured very differently. Fundraisers do not exist in the US, or only for very large rounds. The US VC market is fundamentally disintermediated.
On the other hand, an introduction by a mutual contact is highly recommended.
Investment Process
Timing of the investment process
It depends on the stage of the company:
- If the startup is young, in an emerging sector and interesting for the fund: it can be done in less than 1 month.
- From series B onward, the time frame is around 2-3 months.
There is a strong expectation on startups in terms of information sharing. Due diligences represent an intense period during which executives must be ready to share information quickly.
"It is better to arrive prepared and have a small data room ready to use. "
Pitch
They are overall the same obligatory crossing points: Problem, Product, Market, Business Model, BP, Team, Equity Story, Exit.
However, you must keep in mind that US VCs will constantly arbitrate between local (US) and international opportunities. As a European startup, it is therefore necessary to show your advantages in terms of positioning, growth and value creation.
Do not hesitate to have a plan that is very sales oriented, very aggressive but nevertheless defensible in terms of execution. You must show how, with the current and future means, you the entrepreneur and your team will be able to carry out the development planned in the BP.
➡️ Americans are very sensitive to the convergence between the initial BP and the results.
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Legal
The clauses of European shareholders' agreements are inspired by the American model, so there will be no significant differences in the US on this point.
One must be careful not to accept any clause and what is not acceptable in Europe is no less acceptable in the US.
Nevertheless, the market tends to put less and less unfair or exotic clauses.
"It is absolutely imperative to be accompanied by a good law firm. It is absolutely imperative to be accompanied by a good law firm, i.e. one that is accustomed to negotiations in the VC and accustomed to negotiations in the U.S."