If you’re considering overseas expansion, you’re doubtless wondering how you’re going to pay for it. Securing investment from Venture Capitalists (VCs) will certainly support your business from a financial perspective, but with so much rejection and endless rounds of ‘grillings’ from potential investors, is it worth it?
Well, it entirely depends on your business, the level of control you want to share or retain, the market you currently operate in (and hope to operate in), and the nuances of the location you want to expand to. So, it’s impossible to say with any confidence whether or not you should pursue investment to support your expansion. But, the short and generalised answer is yes – securing capital is a giant leap in the right direction for a business that’s serious about international growth.
Investment will mitigate against the risk your business faces from a financial perspective: by having the support of investors as you expand, you’ll have access to capital, resources and contacts to make the process smoother, decreasing the likelihood that your expansion will be a failure.
However, from the outset, it’s worth mentioning that it’s probably a good idea to seek investment overseas from the country you’re expanding your business into.
For example, if you’re considering expansion to the US (an example we’ll use from this point onwards), it makes sense to seek investment from US investors. This is because you’ll have an easier time to convincing an investor to reach into their pocket if you’re going to be operating on their turf. And, you’ll also find you’ll increase your likelihood of securing investment if you present your plan in a way that correlates with the businesses practices and regulations your US investor is already familiar with.
However, if you’re operating in a global market, you could operate a ‘shotgun fundraising approach’ instead. This involves contacting investors from all over the world, potentially ‘opening up’ opportunities for international expansion elsewhere beyond the location you may have initially set your sights on.
But, whether you resolve to secure investment from a VC in the country you’re expanding to, or investment from elsewhere in the world, it will pay to know a few tips for making the process a little easier.
Get boots on the ground: Investors are going to be more receptive to your proposition if you’ve started making significant inroads to exploring their market, so demonstrate you’re doing your research by getting employees in your chosen location. You won’t necessarily need to do anything as risky as setting up a subsidiary to do this, as you can instead work with companies that specialise in hiring US employees in your chosen state on your business’s behalf. Hiring employees is likely to get traction with US investors as they’ll see that you have ‘boots on the ground’.
Look for venture capitalists with a proven track record: There are a number of investors you might want to approach, but only a handful of them will have a proven track record of investment in your industry or market. Similarly, an even smaller number will have a proven track record of transatlantic investments, so continue narrowing your search on this basis (bearing in mind that this small pool of investors is likely to make only a handful of investments over a period of time) before delivering your best pitch.
Seek investment from VCs you share commonalities with: A UK business may have luck attracting foreign investment from a US VC due to the fact they share similar languages, business cultures and corporate structures, so don’t under-utilise the power of drawing on commonalities.
Pitch your company’s best assets: Are you a mature company and therefore require a less hands-on approach insofar as involvement is concerned from a VC? If so, you might be suitable for a long-distance financial relationship, and make yourself a better option from an investment perspective.