Seeking US Funding: The 3 Biggest Challenges for Europeans

Share on facebook
Share on twitter
Share on linkedin
Share on whatsapp

For companies domiciled in Europe, the rich ecosystem of investors in the US is very enticing! After all, $130 billion of VC funding went into US startups in 2020 is over three times the $41 billion VCs invested in Europe. Angel investors in Europe invested $11 billion in 2020 vs. angels in the US who invested $25 billion. It’s no wonder European startups want to pitch US investors and Seeking US Funding.

It’s not easy, though.

There are a myriad of challenges to overcome before you can close a cross-Atlantic deal.

From a completely different set of corporate governance laws, higher tax rates and currency fluctuations that add cost and risk for investors who can otherwise stay in one currency.

Corporate Governance

Starting with corporate governance, European companies are not subject to Delaware law as most investors prefer. Each country varies but some have automatic labor unions for all new companies, multiple oversight boards with different roles and responsibilities and perhaps far more stringent regulations on companies doing business in anything from data services to agriculture. The variations between countries mean that investors likely focus on one European country, if any. Look for investors with a track record of investing in your country already.

Taxes

Perhaps the most critical element of law investors seek to understand is tax law. European companies are subject to a layered set of tax laws, completely different and generally higher than in the US. Besides corporate taxes, investors may face further taxes, rules and restrictions on capital transfers and may be subject to automatic withholding from foreign tax authorities.

Currency Risk and Exchange Rates

Lastly, US investors are not used to thinking about currency risk and exchange rates. Besides opaque exchange rates and fees, the variability between currencies creates anxiety in people not used to managing cross-border financial transactions. This variability may offer value to sophisticated investors seeking to hedge their US dollar holdings with Euro-denominated assets, but the risk of an angel and venture capital dwarfs the risk of currency fluctuations, so such investors are not usually willing to accept high risks, typically preferring CDs or bonds over equity of any sort.

Unfortunately cross-border investments are quite challenging, but they are always possible.

When pitching investors, it’s good to focus on those who know and trust you and those with deep knowledge of your industry who truly understand the pain you solve. Some of those folks might be across the pond, but if they love the idea enough and want to change the world, they can find a way to overcome the hurdles. It’s just very rare. Look for investors who are already active in the target region.

Learn more about Entrepreneur and CEOs coaching on Aspire360.

Ready to grow faster?

You deserve the best team possible behind you as you pursue your goals in life and work. That’s why we provide access to top-tier talent that can help with everything from starting a new company, raising capital, or scaling up an existing one.

Aspire360 is a community of experts who are here to support and guide you. We’re not just another service provider, we’re your team. Our members have been through it all before – they know what it takes for success and will be there every step of the way.

Share on facebook
Share on twitter
Share on linkedin
Share on whatsapp

Leave a Reply

Your email address will not be published. Required fields are marked *

Recent Posts

BOOK your free demo now

We help startup CEOs build better businesses through support and coaching, and right now you can try us out for 30-days FREE!

join now

We help startup CEOs build better businesses through support and coaching!

Thanks for joining our waitlist. We will get in touch with you as soon as possible.

INTERESTED IN PRIORITY ACCESS?

Get early access by referring your friends. The more friends that join, the sooner you’ll get access.
Share on twitter
Tweet
Share on facebook
Share
Share on linkedin
Share
Share on email
Email

BOOK your free personalized demo now

We help startup CEOs build better businesses through support and coaching, and right now you can try us out for 30-days FREE!