Alex Poe
Irina Achim
The American startup scene is very different from the European one. Whereas European investors focus on SOM - the market a startup can tap into in the very short term, American investors are all about the TAM - the total available market. If that’s big and juicy enough, they will stand by your side while you take a stab at dominating it.
That emphasizes larger ambitions, but more importantly, the experience of having patience with the early failures in a startup’s road towards PMF (product-market-fit).
For American investors the SOM is almost irrelevant because they know how fast things change in the short term.
European investors also rely heavily on metrics, even at the pre-seed stage. I remember receiving the question ‘What multiple should I put on a $20k revenue to determine your valuation? The standard is 10x.’ That’s just insulting.
In the US the focus is more on the team at the early stage. Having industry experience or being a serial founder here really matters, as well as having complementary roles in the founding team.
Ideally your founding team’s formula should sound something like: CEO-CTO or CEO-CPO-CTO, CEO-CTO-COO. That translates to: Sales & Product, the two most important focus areas early on. Beware of having teams with all of the members focusing on the same role, like a team of 4 engineers. Not that such a team can’t strike it big as well, just that they would have a harder time fundraising early.
I remember one of our mentors, Oscar Kneppers, describing that magic team formula as the 3H: Hustler-Hipster-Hacker.
And yes, in the US you spend more than in Europe, especially on salaries and especially if you’re based in the Bay Area or NYC. But that also means you raise more, which in turn pumps up your valuation.
Does that also increase your burn rate? Yes it does. Does that put even more pressure to raise sooner? You bet.
But it also pushes you to reach PMF faster. More importantly, the value you get as a founder from being in this ecosystem and integrating within this network far outpaces the risk of, well, crashing and blowing up to smithereens. At least it does for me.
Pursuit of happiness, buy the ticket, take the ride.
We spent the summer of ’23 in Romania focusing on traction and product, with the plan of returning to the US in the fall. We sent our 7th application to Techstars somewhere in June. To be perfectly honest, we did it more for the exercise of going through the questions, which is very valuable and I highly recommend it.
The macroeconomic environment made it a particularly tough summer and we were also going through a pivot from corporate learning to sales enablement. Eventually, after many tries, we had a customer deal come through and used the proceeds to buy a Hail Mary plane ticket to New York.
At 4 am on September 9th we woke up to go to the airport. I still had Sandman dust in my eyes when I picked up my phone and screamed ‘We got in!’ Champagne poured over the Atlantic, engines blazin’ towards the United States. Techstars, here we come!
What followed our acceptance into Techstars you can read in a new diary entry that will be online next week.
Till then you can follow me, Gabriela and Chambr on our Linkedin accounts.
And if there is anything you would like to know about being accepted at Techstars, feel free to ask us.
