There was one important reason why I felt compelled to open up offices in San Francisco: critical mass.
I have been a part of three startups originating from Europe and seen the same pattern repeat itself: coming from a small country like Hungary, establishing yourself in the U.K. is the logical step to expand your business. There is, however, a risk with doing that.
Let’s say you focus on the U.K. market and win it. Chances are that a U.S. competitor will have replicated your idea and made a six-time bigger business. What’s even worse, you may have been reduced to a regional player and given the global play to the U.S. competitor.
But hang on, if this is the case, then why is everyone talking about doing business globally?
Surely, being a SaaS company like Prezi you’d think that we have the best position to do business directly from Budapest where the company was started?
But it turns out that most U.S. buyers don’t like buying Euro-denominated services. The same is not true in the other direction.
Secondly, there is that thing about getting to know the players in your industry, which for Prezi happens to be on the West Coast of the USA. No matter how efficient it is, and even if you’re meeting with some of the most tech-savvy people in the world (such as Google employees), it’s still easier to meet them in person by going to Mountain View rather then connecting over Skype from Europe
It turns out that most U.S. buyers don’t like buying Euro-denominated services. The same is not true in the other direction.
Thirdly, there is that issue that most entrepreneurs continue complaining about: the lack of funding. I remember when I was completing my MBA in Stockholm and learned about “capital markets.” I remember thinking that the concept seemed beautiful in theory, but it seemed to have very little to do with my reality.
My association to the word capital was something that you’d whisper about behind closed doors. To get a meeting with an investor in Sweden, I’d have to go through connections although I knew all the players that I needed to know. There simply weren’t any open forums where I could go and mingle with people who’d openly discuss money and how it can be used to build businesses.
My strongest association for the “word” market came from my visits to food markets with grandma in Budapest. We’d walk from stall to stall, trying to find a healthy looking chicken at a good price, while exchanging courtesies and arguments during the process. People were openly discussing their offers and there were plenty of people to bargain with even if you missed your chance to make a deal during your initial attempt.
After we moved to San Francisco in late 2009, I understood more clearly the origin of the concept of capital markets. I remember feeling positively surprised when I first noted that investors were thinking creatively about how to brand themselves to get to invest in the best startups.
I also saw entrepreneurs “shopping around their ideas.” The difference could be resembled to playing a massively multiplayer game vs. a game of poker. In Europe, there is neither the culture nor the sufficient number of people to exchange ideas about funding for startups. Probably due to the sheer difference in the number of entrepreneurs and investors, meetings are faster, deals more comparable and people are more open with sharing experiences.
This is not to say that there aren’t any drawbacks with being in the United States. The selection process of VCs in Silicon Valley probably skews investments toward easily hyped ideas, but at the same time investors here are also willing to take large risks for a potential return.
With global business opportunities comes the necessity of global business strategies. It’s worth considering how your presence in different locations can improve your competitive edge.
Peter Arvai is co-founder and CEO of Prezi and can be reached at firstname.lastname@example.org.