US Independence: was it a good idea?

I definitely have a foot in the US and UK. I’m a dual citizen. I’m CEO of a global company with makro operations in the UK and US. I play bass in a dance cover band which has both Brits and Americans and we play songs by US and UK artists; but only the songs that are popular here. Fun fact: The song that was successful for an artist in the UK is not necessarily the one that made it big in the US.

So I thought it would be fun to reflect on why I call the US home and believe it is the best place to grow a technology business and how ti differes from the UK.

Rock star

Everyone wants to be a rock star entrepreneur. And they can be. It has never been easier to develop a tech solution and get it to the market; there are now powerful development platforms, hosting partners, app exchanges, and easy access to funding. At the same time, we’ve seen the rise of the celebrity tech entrepreneur, fuelled by films like The Social Network, Jobs, and the TV program Silicon Valley.

This has driven a digital gold rush, reminiscent of the 1849 Gold Rush. Silicon Valley is the destination for pioneers intent on building a tech business. Sure you can build it in Houston, New York, London, or Tel Aviv. But Silicon Valley is where the tech heart beats strongest.

I spent 15 years building my previous enterprise software company with blue chip clients across the world, headquartered in the UK. But it wasn’t until I moved the family, and brought with me the COO, to San Francisco that things started to happen. Within 7 months we had offers of huge levels of investment and an offer to buy the business. We took the exit as it was the right answer for the clients, employees, and shareholders. And then I got the band back out of retirement to launch Elements.cloud.

Now I live in San Francisco where I have become an avid student of “the Silicon Valley way”. Not that it is set in stone, as it is constantly changing and morphing. For example, Silicon Valley used to be the valley between 280 and 101 centered on Palo Alto. But now it includes the City of San Francisco, which has become a hotbed for tech start-ups and incubators. But then COVID killed the energy and vibe. The city is working hard to reinvent SOMO (South of Market) where all the tech companies, including Salesforce Tower, are headquartered.

Weather wonderful. Wish you were here.

US vs UK

I have been struck by how different the Silicon Valley and US market and tech scene is compared to the UK – or even the perspective you have of Silicon Valley when sitting in the UK. Here are some of the reasons you need to be in the US:

Size of market

The US has significantly more consumer and corporate buyers than the UK. The population of the US is 320 million, nearly 5 times that of the UK. Some people make the mistake of thinking that the “United States of Europe” is comparable. Not so. The cultural, linguistic, and economic differences between the countries are barriers to commercial success. Whereas, having 320 million consumers on your doorstep, all speaking the same language and having broadly the same attitudes, using the same currency, and applying the same regulatory controls, makes a vast difference. It means you can support the entire country with one (or two) languages, one data center, one legal entity, one set of contracts…and the list goes on.

Let me give you some numbers to chew on, which illustrate the size of the market:

• Cowboy hats: Take the tiny niche industry of cowboy hats. Just cowboy hats. Not spurs or boots or pistols or whips. Just the hats. Annually 2.8 million cowboy hats are sold. And Resistol, a hat maker in Texas, enjoyed the lion’s share of the market, selling 1 million of those hats. At $85 average per hat, that brought Resistol an income of $85 million that year. For hats. Just hats.
• Fitness studio booking software:  A software platform for fitness studios? These are small businesses with small budgets. How could there possibly be enough demand? One app for booking for gyms, spas, and yoga studios is valued at more than $450 million, has over 250,000 practitioners who use its platform, and an annual revenue run rate of around $100 million. It taps into a (very large) niche market, but one where every participant has the same problems.
• Taxi booking: Uber is the big name, with huge levels of investment at equally huge valuations. Providing taxi booking. Who would have thought?

Attitude

UK perspective: Show me some revenue and we will invest in the US.

US Perspective: Invest in the US and I will show you some revenue.

Those two statements tell you everything you need to know about the differences. In the USA there is no such thing as failure; only feedback. To create something really special means taking risks. And taking risks can sometimes lead to failure. That is acceptable in the USA. But also it is good to succeed. There is no UK “tall poppy syndrome” in the US, nor the stigma of failing. It’s an environment that breeds a very different type of entrepreneur; one that is positive, takes risks, and celebrates success.

Funding

The funding approach in the US is to identify a huge market and bet on a management team to make it big. Not that the money is given away without some thought, but it is true venture capital. It is risk capital. Most UK VC, seem to be as risk averse as a bank, and the small UK market means the bets are small. Although there is some evidence that this is changing. The potential US market is large, so VCs understand that once a level of product traction is gained, then substantial levels of funding are required to scale. But strangely the first priority is not necessarily a clear business model or profitability. Crunchbase, a website that lists information about companies, their funding, and founders, shows some staggering information. Why not take a look at your nearest competitors? It could be an eye-opener or just plain scary.

Proven model

The greatest criticism we hear from UK entrepreneurs is that the US funding approach is not realistic; that companies with no proven business model or idea of how they are going to become profitable, are funded. They say that this is not a credible approach, but the evidence shows otherwise.

This approach was taken by a huge number of companies that have scaled up and then become wildly valuable and profitable, or acquired before they reached profitability. Companies in both B2C and B2B, that include LinkedIn, Twitter, Facebook, Paypal, YouTube, Salesforce, Groupon, Eloqua, Exact Target, Yammer, Airbnb, and the list goes on and on. But the approach is made possible by a combination of the market size, the attitudes, and the funding appetite.

Serial entrepreneurs

Many entrepreneurs have been very successful so they never need work again. But they do. They achieve success after success. Maybe this is because they are financially secure so they are prepared to take greater risks. But they also have proven they can do it, so VCs are falling over themselves to fund them. Entrepreneurs don’t even need to use their own money. The cycle is virtuous, and with every company they build, they are teaching, coaching, and mentoring their employees to be entrepreneurs. And finally, they become investors, either as individuals, syndicates, or VCs.

At an event in Las Vegas, I interviewed Tom Siebel, founder of Siebel Systems, for a video case study. He sold Siebel Systems to Oracle and according to Wikipedia, he is worth $1.8bn. But when we met he was all fired up about his latest venture, which is now called C3.ai At the same event I met Scott McNealy, co-founder of Sun Microsystems, which must have made Scott a billionaire when it was sold to Oracle. But he was manning the exhibition stand with his brother, pitching his latest venture instead of being out on the golf course or in his boat on the Bay.

Education, networking, and support

In the UK, people seem unwilling to give support and advice for free. They want a little piece of the action. This desire to get something for everything, I have coined “Mr 1%”. Out here, advice is freely given with no expectation of compensation. What goes around, comes around seems to be the approach: a form of tech karma. However, not everything is a free ride. When you need solid advice there is a strong ecosystem of advisory firms who know how to bill you!!

Many successful entrepreneurs are willing to share their knowledge and experience. So VCs, lawyers, and advisors are constantly running events to showcase their clients and get entrepreneurs together. It is great education and networking for entrepreneurs, but also good business for the hosts who get to spot the rising stars.

Weather

Last but not least, it is sunny in Silicon Valley for a great deal of the year. It may sound trite, but when you are waking up to clear skies and lunch outside, everyone has a happier and more positive attitude. If you spend your weekends outside, you return to work on Monday healthier, invigorated and recharged. That leads to higher productivity and greater business optimism. How different is the attitude in the UK when you are subjected to grey and cold for over six months of the year? There are clear links between happy people and productivity.

Implications

It is not realistic for every British entrepreneur to pack up and come to Silicon Valley. But, if you are growing a UK or European-based tech company and have global aspirations, then you need to establish a credible team, which means at least one of your senior team of founders based in Silicon Valley, within the first three years of launching.

There are several hurdles to getting established. The first is visas for the staff moving over and the second is the cost of supporting them on the ground whilst they start to build a business. The final one is the time burnt up in the logistics of moving over and getting established.

Growth is important. Profit can come later.

For US early-stage companies, i.e. less than 5 years old, the focus is on growth and momentum. Top-line revenue growth is an important, or possibly the only, metric. Profit is less of an issue as the aim is to expand the market penetration, grow customers, and increase revenue. Dialing back on sales and marketing spend, to make a profit compromises that growth. Plus investors want to see their capital being put to work. They want to see it being spent and turned into revenue growth, so they can invest more.

Big country = big flights = big burn rate

America is a huge country. I remember sitting in San Francisco and our UK office got a sales lead in New York. They asked me to visit the client and were slightly surprised when I suggested that they should go as they were closer. Any sales call or marketing event in another city requires a flight and overnight stay, and internal flights and hotels aren’t cheap. Or you could build sales teams in each of the major cities in the US where you have a market. But that is not a cheap option either.

Don’t be fooled into thinking that you can build a product, throw up a webpage, and watch the customers arrive. There are too many well-funded and marketed products and solutions for you to be heard above the noise, unless you are making some noise of your own. So you will be spending money – big money – on a marketing campaign and direct sales staff.

Credibility – execs in US

Whilst a UK corporate is happy to buy a US product, the reverse is not true. Americans are very patriotic and like to buy from a US company. This must be a US Inc or a US subsidiary of a UK company that is fully – 110% – committed to the US. That means your US organization needs to be headed by one of the executive team and preferably one of the founders.

We were staggered by the change in attitude and results when we relocated some of the executive team to the US. Whilst I was CEO of Nimbus, in the UK we grew the US operation to 15 people – sales consultants and support – with a very credible ex-Accenture US national leading the team. We were able to win pilots and small follow-on projects with US clients, but we were never able to close the enterprise deals. Then I moved out to San Francisco with my COO and we built a small support team. It was like a light had been switched on. Suddenly we were being taken seriously by major US corporations and the deals started flowing. It sounds extreme, but it’s true.

The US clients simply wanted to be sure that we were committed to selling and supporting the US market before they made a strategic software purchase. It was completely understandable if you look at it from their position. You may argue that you can sell to and support the US from the UK by working US hours and changing the spelling on your website. You may think you can give the impression that you are really in the US; it doesn’t work. Lots of things give it away. The office hours are not the same, the public holidays and hence the office closures are not the same, the accents of the staff on the support desks are not American, and the company’s center of gravity is not in the US. To support the US you really need to be in the US. Either do it or don’t do it. Trying to cheat the system or doing it half-heartedly means you will never get the true value for the investment you make in the US.

The downside

If there’s one thing we’ve learned from our three trans-Atlantic moves, it’s that they’re life-changing. Firstly, our parents didn’t take too kindly to the idea of their loved ones moving 6,000 miles away. Regular Skype calls are no substitute for hugs. They needed reassurance, compassion, and invitations for long visits. So the home we chose needed to be able to accommodate them.

Secondly, our children needed support throughout the process. Our son threw a 10-month-long hissy fit before, during, and after the first move. He still refers to the UK as home, several years later. Our daughter, who was determined to be excited by the idea, wanted exact details repeated ad nauseam of what was going to happen on every single day of the preparation. You know your children best, but you may be surprised by their reactions.

Thirdly, moving to the US is like an earthquake – which is probably too poignant a simile given that we moved to California. The shaking of the earth topples weak buildings and only the strongest structures survive. The same applied to the structures in our lives; friendships, hobbies, employment, and homes were all questioned, and many of them didn’t survive the earthquake.

The upside

But that seismic shift brought huge opportunities with it. We discovered that friends who were friends only through habit, weren’t a great loss,. But those who persevered, despite the 6,000 mile distance, are priceless. Hobbies that were continued by rote had lost their appeal anyway. New employment meant new experiences and skills learned. A new home was a breath of fresh air.

But there was more. Moving all of everything we owned into a 40’ container provided an opportunity to clear out unwanted clutter. We decimated our wardrobes and toy chests. We donated the contents of the cellar to the family, charities, or sold it on eBay.

We’ve made new friends in Silicon Valley surprisingly quickly and are inspired by their varied experiences. We’ve found new hobbies in California that are made possible by the climate. We’ve acquired new skills, and we’re living in a home where we seem to live outside as much as inside.

Most importantly, each trans-Atlantic move has made us appreciate more keenly the place we’ve been about to leave. Before leaving Britain, we wrote a Bucket List of places we wanted to see that we wouldn’t necessarily come back for. We’d planned to return for Christmas and family events, but on those occasions, we wouldn’t have time to see, for example, summer solstice at Stonehenge. It’s a fact of expat life that each time you return to your home country, your time is filled with visits to family and friends and there’s no opportunity for sightseeing.

So what’s on your bucket list?

A final thought

Oh, incidentally, if you don’t grow your company in the US, consider the possibility that a US company with 10x or 100x your investment will launch a similar product to you. With that investment and the momentum from their US market, they will arrive in the UK like a tornado destroying everyone in their wake – including you.