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Expanding into the US

The Internet and the cloud have made it much easier for companies to be truly global without the need for on-the-ground infrastructure in different countries. Skype and MySQL are good examples in part because they are pure technology that is fairly language independent (they require their documentation to be multi-national but don’t need to “be there.”)

But for many companies, a purely cloud-based approach may not be possible, and even when it is a “local flavor,” may be required to make US clients comfortable enough to do business. In the extreme case, enterprise-focused solution providers sell directly to companies. Unfortunately for these businesses building a local presence is required and typically quite expensive (I will come back to that, though.) Companies in this situation are faced with the reality of raising “expansion capital” from a venture firm or other funding source to support this level of investment.

What about a company that’s kind of in the middle? They might be based in Germany, France, Italy, Spain or Austria and doing well there. They want to expand their US business but don’t want to spend lots of money. Ideally, their US expansion would effectively be bootstrapped and self-financing.

We want to examine this situation further to go beyond the obvious step of buying a “.com” URL! Not everyone will agree with these points, but I’m writing them from both a pragmatic and an American point of view and some experience in “crossing the pond” in both directions with companies as an advisor.

Here are some steps:

  1. Start a US company. If possible, consider putting your HQ in the US, but if that’s not possible, start up a separate company that your firm owns. This can be a Limited Liability Company, C-Corp or even a partnership. Now you can spend your life getting legal, financial, and tax advice on this, but it’s best to keep it simple (you can change it later if you are successful.) The main point is that you want to be a US business in the US. Also, just do it in Delaware, which is what everyone else does. Again some interesting states offer alternatives, but this isn’t the time to worry about that. Fortunately this process is simple and automated by not just Delaware itself but also supported by companies that do this for you for typically a few hundred dollars and they even act as your local agents for a few hundred dollars a year or less. You should certainly visit the Delaware State site for corporations and also may find this legal site useful. There are scores of online firms that handle the set up and maintenance of a Delaware company and I’ve used three different ones that were all fine. They all have their strengths and weaknesses.
  2. Have a US web presence. And this is not just a “click here for english” on your current site. You should build a unique site in the US and have it hosted there. Although this requires a little more cost and effort it’s very small in comparison to the benefits. You might even find that the costs of service and the quality of support is much better than what you are used to. Now the actual construction of a site requires a slew of choices that go beyond the scope of this report. However we would recommend hosting the site somewhere like Liquid Web. In addition to the web site some combination of online marketing tools like email should be part of the plan as well. Again select a US focused solution from the many out there. Examples include MailChimp, Vertical Response, Blue Sky Factory and Constant Contact. There are dozens of others but these are all very strong players with their own strengths and weaknesses. A blog should also be part of the US presence and will dovetail with the next area. I’m a heavy user of WordPress and find it to be the best combination of power, ease of use, and availability of resources. Some web development tools also include blogging which is probably also fine. I’d take the easy solution if it works and if not just add WordPress.
  3. Do the social networks. There are a few that matter but most importantly get your firm up and running on Twitter and Facebook. Take a little time to understand how to do it and don’t let these get stale from neglect. Watch how leading brands are doing this and approximate that. Also set yourself up on LinkedIn which is where many US professionals will look for you and your background. Be thoughtful about how these networks can help you and your business. Don’t try and move too fast. These are useful not just in promoting your business but also for discovering potential US partners and staff.
  4. Get a US address. You’re going to need one anyway because your Delaware corporate agent (if you go that route versus DIY) doesn’t really provide office management. You need a place to get mail and list as your “place of business” even if you don’t really need a place to do business at this point. Many are familiar with Regus as the leading firm in this space but we would encourage you to stay way from Regus. They are expensive and the atmosphere is mostly not right for startups and technology companies. If you are a financial or legal firm then maybe Regus is for you. Our favorite place in the US is the Cambridge Innovation Center which is just across the river from Boston and on the MIT campus. There are also similar places in NYC and certainly some in SF. Considering travel, cost and time-zones we find the Boston area to be the best location for Europe-based companies. If you want more information and/or an introduction to the CIC please get in touch. As for phones some places like the CIC include a US number in the deal but in any case you will want have a Skype account if you don’t already and plan on using that for your US communication. It may also make sense to get a US cell phone if you will be traveling in the US and/or are often away from Skype.
  5. Find an US resident to act on your behalf. This is a tricky one but what you want is someone who can be your agent when little snafus come up. There are still restrictions that one runs into when signing contracts, setting up bank accounts or filing forms in some places that require a US resident. If you have someone who can act in this capacity without requiring much compensation it will make these easy to overcome. The key here is really finding someone you can trust so a friend or family member in the US can be a good solution. If that’s not possible you should try and find a way to address it. Having a co-founder of the US business is well worth considering.

The next few steps start to include the hiring of US-based staff and that’s a large enough change in scope to demand a separate post. The steps above though go a long way in terms of setting up a real US-based shop.

I’ll end with some common questions:

How much is it going to cost? Of course it’s going to depend on how you do some of these things but I’d ballpark it as follows by item: (1) $500 to setup, then $500 a year for basic administration and filing, (2) site could be $100-500 for tools if you can do it yourself and $5000 or more if you have to hire someone to do it, hosting is about $500-1000 per year depending on the size of your site and traffic, email marketing services range from $30 to $300 per month, (3) most of the social networks are free but it’s worth paying the $240 a year or so for LinkedIn Pro if you are going to want to network, (4) the US address can be as low as $300/year for what is basically a mailbox to $1000-4000/year for a “flex office” which tends to include phone service and a place to sit in the US with access to conference rooms and the Internet. It’s possible to do most of this for under $1000, especially if you can manage to do the website on your own. There are online services that can make these easier that start around $50/month and some email marketing services like MailChimp are even free for up to 500 contacts and scale from there. In the cases where the “flex office” is required the costs are going to be more like $5-6K per year not including travel and may also require opening a US bank account and doing some state filings in addition to the Delaware filings.

What about a hiring a PR firm? Total waste of money. Most firms start at $35K and go up from there. Even a fraction of that is money wasted. If you do most of the steps above you will make huge progress. Even spending on Google AdWords may not be required. On the flip side cultivating some coverage at leading US blogs in your space will be well worth it. For a technology company a mention at TechCrunch or GigaOM is free and worth more. Even businesses that require analyst relations outreach can get that online at much lower cost than what PR firms charge. We’ve been down this road many times and watched lots of money get wasted. Don’t fall for it.

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