Ask HN: Has anyone founded a startup outside of the US? How was it?
I’ve always been curious as to why many start ups are founded in the US/Silicon Valley.
Can anyone speak to the pros and cons of founding a startup internationally?
Can anyone speak to the pros and cons of founding a startup internationally?
1. Money.
VCs are inexperienced - they know how to manage money and regional economics but not startups. The startups they analyze (e.g. Grab, Razer, SEA, Lazada) are rather fragile and only in today's recession do you see what's wrong with their strategies.
Corruption is high, so there's less trust. Money comes in tranches. If you get a $150k investment, that may be in three parts of $50k, where you have to basically have to pitch thrice to the same investor.
Angels often come from robber baron backgrounds; they don't understand that talent is rare and that negotiating sick leave or discriminating against pregnant women can kill startups. Many of these invest in startups like it's a Ferrari; they don't care about ROI, it's about prestige and ego. There's a saying that A students work for C students.
Investors also tend to dip their hand in the product heavily. I've worked on projects where things like forums, chat, translations, etc were all mandated before the investment could come in. Raising money is the biggest distraction and it can be a year before you even work on what the user wants.
2. Fragmented market.
US is a huge market of 300M people. It is simple and just works. Business models like Amazon can leverage that for economy of scale.
SE Asia has multiple countries, with different Constitutions. Some former British, Dutch, Portuguese colonies. Some never colonized. Protectionism is high because of this anti-colonial culture; a foreigner trying to set up a company in Indonesia needs a crapload of money, a major local shareholder, and roughly have to be ready to operate for a year there.
Then you have visas. Singapore's is looser, but they don't have the population nor the land. Every country in the world probably has looser visa laws than the US, but the US has plenty of internal talent.
A common strategy in SEA is to expand into multiple countries because it's hard. US countries have little interest in expanding into here, unless it's something like Stripe which needs legal presence. East Asia is very interested in SEA expansion though, because they have low ROI investing locally. These countries cannot spend $20B building Alibaba for SEA because you can't just hire 1000 people in 8 countries here - labor laws corporate laws, etc. So they'll happily buy out an established competitor for $150B or something.
The downside is related to investors above - as early as Series A, an inexperienced investor might force a startup to open in 3 countries. Many have died from overextension and scope creep.
3. Talent.
We don't have ivy league. We don't pay as well. There has been brain drain. Some people do move here because of the eternal beach weather. But talent is hard and fairly expensive. A mid level engineering manager is often paid more than the CEO of a logistics company. Living costs are low, so people can just quit on a whim to watch their kids for 3 years or so. The laws also favor workers heavily; firing people is extremely difficult.
A good number of talent comes from management consulting or ex-Rocket. Management consultant founders are often inexperienced in the early product loop. While ex Rocket may be inexperienced with bootstrapping. Rocket is entirely at odds with YCs style of "ramen profitable". A Rocket company often has terrible culture and huge burn but they're growing 10% week on week well into Series D.
Many managers in the region come from an East Asian culture of working 996. Compare to the Bali culture of work hard play hard. So there's a work culture clash too. If you're not deliberately designing your culture, it's likely to implode.
Pros?
Well, I think if you're aiming to bootstrap, it's a terrific place. Endless beaches, cheap and good food, sunny weather and tropical rainstorms. Better if you're an indie game dev or doing SaaS and need no physical presence.