Professor at Stanford | Bestselling Author | Innovation | Venture Capital & Private Equity
Moving to the US could be a startup's best move Relocation to the US significantly increases the chances for international startups to become unicorns, according to our research. For example, 44 Israeli VC-backed startups that moved to the US reached unicorn status. By contrast, only 3 unicorns in a comparable US-based sample were based in Israel. This suggests that Israeli startups relocating to the US are about 15 times more likely to achieve unicorn status. We observed similar trends for other countries: – India-founded startups relocating to the US are 6 times more likely to become unicorns (12 vs 2). – UK-founded companies see an 8.5 times greater chance of achieving unicorn status after moving to the US (17 vs 2). These numbers indicate that the US offers unique advantages for high-potential startups from around the globe, particularly from countries like Israel, India, and the UK. Thank you to the Stanford University Graduate School of Business Venture Capital Initiative for support. Note: all unicorns in our sample must be US-based at the time of their first unicorn round.
Ilya Strebulaev - With my European hat on, I wish I could disagree... (and am working on a solution so this is NOT needed). But sadly... it's the reality at this point in time.
As always, Fascinating data! Since Israeli startups often keep R&D in Israel after moving, what specific elements of relocating to the US do you think most drive the higher unicorn success rate?
Everybody focus on funding, but my personal experience (and having moved from France to USA our company) , the reasons for increased chances of success are : - larger unified market = higher number of "innovators" buyers - buyers sees innovation as potential business advantage, less as a risk - propensity to pay is higher = US customers seek value, not cheap - Labor market is so flexible one can elastically grow without worrying about potential bad hires - Sales velocity : acceptance for terms like pay in advance, or NET30 - A service company exist for each bureaucratic issues = there are things as complex as elsewhere (Sales Tax reporting, Payroll handling, etc.) but there is always a service provider you can offload them too - no need to do by yourself. In general a more entrepreneurial-cheering culture and environment, you feel you can achieve big things no matter where you start.
Would be interesting to compare survival rates and capital efficiency rates too in the context. What this analysis shows to me is that US has the ‘highest stakes’ table in the casino of global capital markets. But like sitting by the casino cash out desk and asking folks with big stacks of chips which table they played on- I can tell you what the answer will most likely be - the highest minimum bet roulette table ;) Getting to unicorn status isn’t really the right goal if it’s not a necessary part of the strategy (like a “winner eats all” marketplace) or value creating if one has burned through billions to get there - but I appreciate it’s a simpler goal to measure and that there is no value judgement made explicitly here on achieving unicorn status.
What do you mean by moving to the US? Many Israeli startups target the US as their main market and relocate part of the team (typically sales, sometimes the CEO) while keeping R&D and the majority of the team in Israel. Is this about full relocation or simply establishing a US presence?
Correlation and causation are two different things. Usually the startups that relocate to the US are the best-of-breed. It would be more interesting to see when these companies relocated and what their commercial and fundraising traction was before and after relocating.
Yes many Israeli startups plan from the beginning to come to the US for their seed/series A to expand their market post product. Its worked out very well 🇮🇱
What on earth does this say about the economic growth systems outside the US? 🇺🇸 Flawed and failing!
Elite business schools joke that their goal is to select people who would be successful without b-school, so schools could benefit from their success. In my original neck of the woods, there is a joke: every joke consists of part of a joke, the rest is truth. It could be that those that moved would have been successful without a move. Analyzing the value chain, could lead to the correct cause-effect. On the other hand, what % of companies that move succeed? What would have happened to those which moved and failed, if they stayed back? :)
Building my stealth AI startup in public 😵💫
2moWe moved from UK > US. Sold for $780M. In the UK we got a term sheet for 50K on 200K. A few months later in the US, we raised $2M on $5M.