Business for Finnish Startups in U.S. - for Kasvu Open

01/05/2023 1

Starting Up in the U.S.Tonxu & Hartti, Team FinlandJanuary 26, 2017

Finpro

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What’s Hot and What’s Not in Silicon Valley

• First off, check http://www.kpcb.com/internet-trends (only 213 slides :-)

• Data science, Machine learning, deep learning

• Voice interfaces (especially Alexa)

• Blockchain (Fintech and other uses), VR/AR, “IoT”

• Going, going, gone• Food delivery services, on-demand transportation

• IFTF in 2017• Who is controlling the data, Future of media, The workers of the future

http://www.kpcb.com/internet-trends

http://www.kpcb.com/internet-trends


CASE: BedditInternational Success Years in the Making

• Founded in 2006, won McKinsey business competition in 2007• U.S. was target market early on

• Initial focus: Patient bed monitoring through licensing deal -> pivot 1 at the end of 2008

• Consumer beds through licensing model -> pivot 2• Take 3: Own products, started with prosumer model• Indiegogo campaign 2013

• Not only sales but great visibility• Bed Bath & Beyond deal through a distributor• Partnership deal with Misfit

• Direction has changed after Misfit got acquired• Available at Apple Store from fall 2015• CEO moved to U.S. in 2015


Doing Business in U.S.

• From breadth to focus (both product & customer segment)• Takes time, resources, money and commitment• From product to solving a real customer problem• Finnish references are worth nothing (or very little)• Business model changes (especially in education and health)• Agility, communication, semi-independence• Differences in employee compensation & benefits • Understand the role of marketing• Understand that the opportunities are of different shape



Are States Different?

• In short: yes!

• California would be the 6th largest economy if it were an independent state

• Taxation: corporate tax levels, income tax levels, VAT, etc.• Fun fact: U.S. corporate tax rate is 30%

• Incentives: https://www.selectusa.gov/programs-and-incentives

• Cost levels: Salary differences, rents, cost of living, population

• Politics, culture, regulation, etc. (including employment agreements)

• Corporate law: E.g. Delaware has corporate-friendly legislation

https://www.selectusa.gov/programs-and-incentives


Incorporation

• Use standard deal (= Delaware C Corp)

• Fast, but getting certain paperwork, like certificate and FEIN might take some time

• Use lawyer – any mistakes will cost you later• Whole package: $2,000 to $5,000, or equity or payment schedule

possible as well

• State you incorporate in and state you do business in can be (and usually are) different• You need business license(s)

• At one point you might need to flip, start preparing that in advance


When to Incorporate?

• Well, it depends…• What are you selling? Software? Services? Physical goods?

• Additional viewpoint: Who is responsible for the products and liable for them?

• How are your clients paying you?• Note: Still 50% of B2B payments are done with checks...

• Are you hiring? Do you need visas for personnel?• Are you looking for funding? What kind of funding are you

looking for?• Clients or contracts might require an U.S. entity• Often the answer is: The sooner the better.

• Brings additional responsibilities and costs like accounting, tax returns, etc.


Immigration

• Get a real visa, do not gamble with ESTA• Note that different visas treat spouse differently!• B1 is a lightweight way to start

• “Salesperson” visa, your family stays in Finland• Reserve time for non-immigrant visa application (likely L1, E1, O)

• Average 4 months• Use lawyer• Use premium processing

• Green card / Diversity Visa Lottery• Free to participate in lottery, 2-year timeframe• https://www.dvlottery.state.gov

• Startup Visa still not available

https://www.dvlottery.state.gov/

https://www.dvlottery.state.gov/


“Startup Visa”: Some DetailsNote: Things Might Change…

• USCIS published a final regulation on Jan 19, 2017• Will go in effect on July 16, 2017

• The effects of the new presidency are not known yet• Would allow 30-month stay (potential for 30-month extension)• Spouse can join (and apply for employment authorization)• Requirements

• Entrepreneurs must own at least 10 percent of a U.S. startup• The company is less than 5 years old• Demonstrate the company’s growth potential (including number of jobs)• Investments ($250k+) from qualified American investors or grants from

U.S. authorities ($100k+)• “Significant public benefit to the United States”

• https://www.federalregister.gov/documents/2017/01/17/2017-00481/international-entrepreneur-rule

https://www.federalregister.gov/documents/2017/01/17/2017-00481/international-entrepreneur-rule





Family

• For the first 6 months your productivity is well below 100%• New environment, new customs, new everything

• New place is a new place for the whole family!• From working spouse to “stay at home” spouse

• Remember your responsibilities at home, share of chores

• Not all visas work the same way for the spouse• Does the spouse get it at all, can the spouse apply for a work permit,

etc.?

• Schools, school districts, hobbies

• Some families decide to move back because of family reasons





Interactions with People

• Americans are uncomfortable with silence• Put them at ease!

• Google them – find a hook• Small Talk doesn’t have to be SMALL!

• Start small• Move onto something interesting• “What do you do when you’re not working?”

• Good topics: sports, travel, food, music, movies, books• Avoid: religion, politics, anything controversial (gun control,

abortion, gay marriage)• Sports metaphors are everywhere! If you don’t know, ASK!• Build long term relationships, pay it forward!


Setting up an Office

• Where?• Most importantly: Close to first customers or partners• Forget the state incentives & lower in the beginning• Forget relative preferences, personal preferences• Consider time differences to Finland, flights• Silicon Valley, NYC are really expensive• Industry clusters

• http://www.clustermapping.us

• Start with virtual office – you need an address!• Silicon Valley: GSV Labs, Nordic Innovation House, WeWork, etc.

http://www.clustermapping.us/

http://www.clustermapping.us/


Office practicalities

• Bank account• Use national bank or some startup friendly Silicon Valley bank (for

example SVB)• You need U.S. Inc., address, FEIN, paperwork, and open the bank

account in person

• Accounting• Quickbooks is de facto standard, you can save by keeping the books up-

to-date yourself and use accountant only for annual closing of accounts

• Payroll – needed immediately when you start hiring

• Insurance (liability, property, etc.)• If you work with retailers, they have their own requirements


Legal Risks

• Commercial liability• Personal injury liability• Regulatory violations• Employee-related claims• Intellectual Property related claims• Data privacy violations• Litigation• Tax consequences• Immigration violations• Transferee (imputed) liability to European entity• Officer and Director liability


Lawyers

• Lawyers are not only for legal issues but also resources for example for networking

• Use different lawyer for different tasks• If some lawyer promises to handle wide variety of tasks -> RUN!• Referrals

• Smaller firms and individual lawyers are less expensive• Bigger and well-known firms have their benefits

• Name recognition for example in fundraising• More aggressive in litigation

• Being sued is more common than in Finland but not THAT common• Validation: You have arrived!


Lawyers (ctnd)

• All the contracts needs to be in writing and drafted and/reviewed by knowledgeable lawyers

• Obtain necessary licenses and permits

• Control the legal risks through insurances

• Proper IP strategy• Trademarks, patents, trade secrets, confidentiality agreements (NDAs)• Before committing to U.S. market – search the USPTO Trademark

database!


Accelerators

• Too widely used term, does not mean anything anymore• In many cases it is just repackaged, renamed group consultancy

• 500 Startups Accelerator -> 500 Startups Seed Program

• Accelerator or launchpad?• 500 Startups/Ycombinator/Techstars or Blackbox/TINC/LandInChicago• Investment or payment?• 3 months+ or 1-4 weeks?


Branded Accelerators

Accelerators with funds (Verticals & General ones)

Launchpad programs for international startups

Getting familiar with Silicon Valley –trips

Examples Salesforce, Microsoft, Nike, etc

500 Startups, YCombinator, Hax, Alchemist

Blackbox.vc, TINC, ScaleIT, Golden Gateway

Tech focus Narrow Varies: Broad or Narrow

Broad Broad

Duration Typically 3-5 months

Typically 3-5 months

2-4 weeks 1-4 weeks

Price Equity Typically equity (6-8% for 100k-150k)

Company pays 10k-20k + travel & housing

Company pays 2-5k + travel & housing

Additional Benefits

Can have sponsors like AWS, Google

Can have sponsors, like AWS, Google

Useful to who?

Companies with ties to certain ecosystems

Company with product, looking for market entry / expansion

Company with product, looking for market understanding

Company looking for inspiration

Cohort? Yes Yes Yes Yes

Selection Competitive Very competitive Varies No


Thoughts about VCs

• VCs and Angels are looking for higher returns than in Europe

• Foreign HQ limits your options• LP agreements, VC attitudes, etc.• Flipping is a transaction and could generate tax consequences

• European-style cap table might limit your options

• Team & being close is important

• What you need?• Short intro (you need to be introduced!), one-pager, pitch deck• Forget business plans but do business planning (like business model

canvas)• Intelligence work on partners


VC process

• Prepare for a high number of meetings• Cold calling / cold emailing does not generate results

• You need a good and trustworthy introduction• Initial meetings with junior associates / junior partners

• Immediate and future value!• Meeting with the partner responsible for your industry• Meeting with partners

• Mondays are usually partner meeting days• Every VC firm works slightly differently, so ask early on how they

make decisions; what is the process• Understand what is a “VC no”• Be on time.

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Pitch decks

• Everyone has a different opinion on optimal pitch deck• 10-20-30 –rule (Guy Kawasaki)• 13 slides (Bill Joos)• Etc.

• Find your own voice, evaluate feedback and choose the parts which make sense• But don’t do averages!

• Avoid sharing pitch deck to VCs before meetings as the deck only part of the whole package (slides + speech)

• Pictures are worth a lot• Allows discussion on multiple levels


Pitching skills

• Presentation skills• Prepare• Practice• No, really, practice!• Improve based on feedback

• Debating & conversations skills• Listen• Handling conflict• Use “and” not “but”

• Medium is the message• Visuals• Remember that pitch night pitches are beauty competitions, not

examples of real pitches to a single investor


When Pitching to a Real Investor

• Know the audience

• Have backup slides

• Work the numbers bottom up

• Engage the investor – this is not a monologue• Allow the investor to bring some solutions on the table (even if you have

thought through those things)• Keep control of the discussion so that you have time to get your

message through


Additional VC Materials

• Ivan Nikkhoo’s VC investment presentation• https://www.slideshare.net/secret/v01N30VjCOWzRY• Very dense with information!

https://www.slideshare.net/secret/v01N30VjCOWzRY

https://www.slideshare.net/secret/v01N30VjCOWzRY


Product Crowdfunding

• Nowadays maybe too crowded market

• Really hard process, requires lots of work before, during & after

• Best for tangible products

• Do not use this as a last resort if everything else fails!

• Kickstarter still requires U.S. bank account (basically U.S. corporation) and U.S. SSN of a person• Also certain types of projects are blocked from Kickstarter

• Indiegogo is more flexible but possibly also more unreliable (from the customer perspective)

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Selling in U.S. – Things to Keep in Mind

• What is your online strategy?• Own online store vs. 3rd part online store vs, Amazon (with or without Amazon

Fulfillment)• Check regulation – including import rejection laws and trade barriers

• Sources & regulatory agencies vary depending on your product (Homeland Security, USDA, FDA, FCC, etc.)

• Brochures, sell sheets, and websites are considered part of your packaging and subject to regulations (where applicable) – they also need to be “Americanized”

• Set-up your own business (incorporation, business licenses)• Aspects: Exposure (accounting, taxation, liability), site selection, etc.

• Customs issues are complicated so talk to a customs lawyer first and consider using a customs broker• Licenses, taxes, duty fees, etc.

• Get necessary licenses (note: samples have their own processes)• Prepare for customer support and handling returns

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Selling in U.S. – ctnd.

• Many stakeholders involved – know what each does and will not do (for example – most retailers do not import)• Importers, distributors, brokers, and retailers

• Shipping is getting more costly (Fedex, UPS, USPS, etc)• Retailers have websites for vendor (=you) requirements

• For example: Target, Best Buy (https://www.extendingthereach.com/wps/portal)

• Learn the importing terminology (Inco 2010)• Check into local political, religious, and social issues, including

action groups that could impact your business• Determine your competitors’ access and hold on to your

distribution and retail channels

https://www.extendingthereach.com/wps/portal)

https://www.extendingthereach.com/wps/portal)


Additional Thoughts about Retail

• Prepare for substantial return rates• ~10% for brick and mortar, close to 30% for online• Many online stores offer free returns• Many returns for online purchases are done at physical stores• On average, retailers spend about 8% of sales processing returns

• Pricing• Comparison shopping is very popular, affects also physical stores• Price guarantees (either stores or credit cards)• Price structure is quite different from Europe (more margins needed)• 3-3.5x your cost (if you target brick and mortar also)• Remember exchange rates!

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Online ShoppingSimplicity, Speed, Experiences, Prices

• All about seamless user experience• Do not lose a customer before checkout and make customers return• Recommendations, shopping cart handling, backend processing, etc.

• Easy and fast shipping• Note: Costs are going up!

• Amazon Prime subscription a strong incentive to stay in Amazon ecosystem• Failed for Jet.com

• Rise of discount online stores• Like Gilt, The Clymb, LeftLane Sports, etc.

• Hyper dynamic pricing• Especially around big shopping days like Black Friday and Cyber

Monday

Special Focus: Canada

• E-tailing in Canada has evolved slower than in U.S• Online commerce 6% of total retail spending vs. 9% in U.S. (2014, Forrester)• Reasons (by e-tailers and experts):

• Transportation costs (geographically bigger than U.S. but only 11% of population)• Web access & infrastructure a little lacking• Ingrained shopping habits• Lack of selection

• Forecast: 10% in 2019• Canadian shoppers are buying beyond national borders

• More than half of the online spending is with sellers outside Canada• Canada requires duties be paid on online purchases of CA$20• Lately major moves by U.S based online retailers (Amazon, Best Buy, Wal-

Mart)• Amazon #1 (both .ca and .com), Wal-Mart investing heavily

• When entering Canadian market – some real thought on operations and logistics is needed (including returns!)


Global Access Program - GAP



Monthly Silicon Valley Events:Something for Everyone

• Pitching events• VC Taskforce• Pitch-force• Shark tank• Etc.

• Entrepreneurial Though Leaders –seminar (weekly)

• Mobile Mondays

• Industry-specific• Connected cars, AI, machine learning, server-side programming, front

end, mobile, health tech, sports tech, etc.

• Check: meetup.com


Reading


Listening & Watching

• How to Start a Startup by Sam Altman

• Podcasts• This Week in Startups• 20 minute VC• Startup Podcast (by Gimlet Media)• a16z• Pitch• The Full Ratchet• Venture Studio (more New York –focused)


Thanks!Thuong Tan, Tekes, [email protected], Twitter: @tonxuHartti Suomela, Finpro, [email protected]

Follow also@TekesStartup

mailto:[email protected]

mailto:[email protected]