GrossumJourney: Startups' Environment in the USA
September 13th, 2016
Here at Grossum, we talk to startups from all over the world and all are unique in their own way. So far, we have clients in 24 countries and the variety of cultures and differences in startup ecosystems in their countries is astounding. So we got curious and decided to find out more about these peculiarities. We didn't want to just go online and search, but instead, decided to ask real people to share their knowledge about their own culture.
So here we are – at the mere beginning of a journey across the world of startups. In the coming month, we will virtually travel from the USA and Denmark to the Netherlands and Germany to find out about the life of startups and the business environment in those countries.
Our #GrossumJourney starts in the United States of America and we have talked with three of our experts in the startup business. We asked them same 5 questions to let you see the differences in opinions within just one country. Of course, I will be waiting for even more insights from you, our dear reader.
In this issue of the #GrossumJourney:
- Is there support for startup entrepreneurs at the state level?
- What do you think about working with international teams in the context of globalization?
- How popular is the idea of startups in the USA? Is there motivation to launch startups and are startup owners encouraged to do their business? Is the business open to startup ideas and approaches?
- Are there favorable conditions for startups' growth? Are there any cultural mentality specifics that help or hinder startups?
- How is the USA, as a startup environment, different from other countries?
- Meet our experts
James York: Yes. New York State offers a program called Start-Up NY, which offers new companies the ability to enjoy a 10-year tax-free period. It’s not for every startup, however. To qualify, you have to meet certain criteria as a business, be active in particular sectors (usually hi-tech, research-intensive verticals), and set up your office within one of the State’s designated tax-free zones, which are usually at a university or college. There are other incentive programs for new businesses and startups, but Start-Up NY gets the most fanfare because of its zero-tax possibilities. Unfortunately, due to the limited scope of companies which can participate, most of the app or platform based startups you’ll encounter in the NY community can’t take part.
Pierre Yurow: I’d say that sometimes, in countries like Finland, Denmark, etc. the Government does support a wider range of startups, but it is mostly focused on cleantech, healthcare, and other areas important to them, as it is the case in the US. Sometimes not, like in countries such as Russia, which offers more broad support for startups.
James York: Despite the clear and tangible benefits that globalization has brought there is still a bias in NY and the US overall for working with co-located teams, even though the makeup of those teams do comprise members from all over the world. I think this bias towards wanting everyone to be in the same room is a mistake. Working with international, distributed teams, means being able to access a global talent marketplace that is broader and deeper than any local ecosystem could ever be. It also enables young companies to leverage the differences in scales of economy to ultimately do more with less, without compromising on quality or talent. Many people I speak to here have had nothing but horror stories to share when trying to work with contractors or foreign teams. My experience has been the polar opposite having worked almost exclusively with distributed international teams, in one form or another, since 2011. For me, it comes down to whether or not you are able to forge a relationship with someone, despite a geographical difference between you. Either because of budget concerns or my physical location at the time, I’ve grown to become adept at this skill. However, for many people here in NY that’s not the case, and being physically present still means a lot – even if you still end up using Slack to chat with your colleagues, who happen to be sitting across the room from you.
Tawhid Khan: Sometimes it takes time for people outside of the US to explain the context of the project, which is very important because most of the projects focus on acquiring users from the USA, so you have to understand the culture, context, people, social and lifestyle here.
I know the cultural aspects of many startups here in Silicon Valley. Some of them prefer to have their team here at the same place. Even if they hire an external team, they want to keep their team within the same city or timezone, or at least a country, so that time zone won’t be too much of an issue.Some “early stage startups” are okay with hiring a team member or a team offshore because of low budgets. Granted, often, if the founders are from India, the offshore team is probably going to be from India as well.
I personally like working with international teams, as long as we can speak the same language and can adapt to each other's’ cultures so there’s no misunderstanding.
Pierre Yurow: International teams provide many benefits to foreign economies (from the US point of view) and the US is open to it, although the US workforce has to get used to it.
How popular is the idea of startups in the USA? Is there motivation to launch startups and are startup owners encouraged to do their business? Is the business open to startup ideas and approaches?
James York: Startups are tremendously popular in the US. For a generation of people who are disenfranchised with the traditional 9 to 5 and are burdened with nearly insurmountable levels of student debt following university, the idea of working for or founding a business that could also be your own personal lotto ticket is an option that is difficult to ignore. Being a founder also carries a certain level of prestige here (as it does in many communities around the world), and has become a viable career option for many people despite the challenges that path entails.
Because of the success of tech startups, overall, and Silicon Valley, in particular, the US government itself is slowly getting up to speed and is growing its support of entrepreneurs and the startups they found. All of that is good for the economy and the ecosystem.
Pierre Yurow: It's part of the culture to be entrepreneurs and startups are therefore widely accepted and businesses are open to it.
Tawhid Khan: The very idea of a “startup” was born and is owned by Silicon Valley, but even with that put aside, startups are the heart and entrepreneurship is the soul of the American business culture. Such big companies like Apple, IBM, Microsoft - they all started in a garage. All that to say, the idea of startups is crazy popular here.
That said, I don’t see too many motivators here. I think the government should do much more for the entrepreneurs and small businesses when it comes to financial aid and networking. Other countries are more proactive in this area. As far as I know, Israel has great funding programs for startups.
Another important thing. There are, however, organizations that help startups from their countries. For example, I have met people from such organizations like TIE (The Indus Entrepreneurs) that are very active in their work with Indian-US entrepreneurs. I also have a South Korean friend and that’s how I know that their South Korean government helps Korean-US entrepreneurs by providing free workspace and a lot of other benefits, like financial aid, etc. This organization is called KIC (Korea Innovation Center).
At the same time, the US isn’t as encouraging. Granted, it also depends on the state, for example, California isn’t a very friendly place for small business (they start charging money starting with the first year called Franchise tax, so whether the business is making money or not, startups have to pay $800+ to California and not get much aid from the State in return). This is one of the reasons many startups register their corporations in Delaware or Nevada - their state policies are far more friendly to the business.
If we’re talking about big business’ openness to startup ideas, a majority isn’t very open yet, but some are getting into that culture. For example, Google launched a new program for their employees where if employees get a good startup idea, Google will continue paying them their salary and allow to use workspace and resources to continue working on their innovative ideas. Many other companies - Intel, Google, Microsoft, etc. - also offer funding and venture capital programs.
Are there favorable conditions for startups' growth? Are there any cultural mentality specifics that help or hinder startups?
James York: The US has the reputation of being the global leader in technology and startups. As a result, the culture of startups here is tremendous and the communities which have developed around them are deep, and everyone tends to be helpful. There is a certain comradery amongst the tech community and, while there is certainly competition at the company level, individuals tend to remain accessible and have a sincere desire to help their peers and give back.
The biggest cultural block I’ve encountered that actively hinders many startups’ growth, is the perception that strong teams need to be co-located teams. I don’t believe this to be true and can point to many European startups were distributed, international teams are the status quo. I can only do that for a handful of American companies, by comparison; and I believe that if that attitude were to change the percentage of US startups that are successful would increase.
Tawhid Khan: In California, especially in the Silicon Valley, startup IS the culture. There is always something going on in the private sectors, although the government isn’t as active and sometimes hinders development. For example, health insurance is very expensive and there’s no much benefit for startups other than taxes.
Pierre Yurow: Accelerators, VC funding, and the overall investment of funds in VC and accelerators make it more possible.
James York: The US, as a startup environment, is different from other countries in that “you’re already here.” Having lived and worked in Europe, I can say that nearly every company and entrepreneur I’ve met or worked with there has the US somewhere on their roadmap. The scale, the size of the economy, and the availability of a culturally homogenous single language market make it very alluring, no matter where you are in the world… 9 times out of 10, whether immediately or down the line, chances are that you’ll want to come to America.
When you are a startup or entrepreneur abroad, you tend to see your home market and adjacent markets not just as opportunities (as everyone would), but also as testing grounds to vet and hone your idea and your business at a national level. Your go-to-market strategy necessarily encompasses how to shift and scale what you’re doing in one market in order to access the next. But here in the States, your focus tends to be on getting from one city to the next. Your immediate goal is often to be the biggest player in X or Y city, not X or Y country. Or how to move from one vertical to another. In most cases, it’s only when you’re really large that you, as a US startup, begin to think of scaling across oceans.
So how does that translate to a tangible difference? Simple. Size and scale. A “small” startup here can be a major player somewhere else in the world based on similar revenue and metrics alone. In other words, the pond you play in dictates how big of a fish you are.
Tawhid Khan: The US is the place where innovation happens. Of course, there are many other countries that are coming up these days to make their footprints in a startup world and offer amazing benefits. They also have their programs within the US for their nation’s US citizens. California is definitely #1 in this regard, but there is also New York that’s becoming another startup hub, as well as Illinois, Texas, and Virginia.
Pierre Yurow: I would say that the US is more open to risk, as well as expecting bigger rewards.
James York is an independent business growth consultant based in New York City. He focuses on helping startups and young businesses in New York and Europe with their digital marketing, business operations, and overall service design. He’s part of the Startup Wise Guys mentor network and has founded two startups of his own. Check out his website here.
Tawhid Khan is an award-winning interface designer. Creativity and Innovation – with these two key strengths, he is carrying a very diverse background working on many different platforms like Web, Mobile, Tablets with very diverse industries including Financial, Social Media, Network/Tech etc. and also worked for some major top fortune clients like Oracle, FutureWei, Fiserv, eBay, Disney, AT&T, Juniper Network, Accenture, Wells Fargo etc. His website can be found here.
Pierre Yurow is a mobile industry and Silicon Valley veteran with an extensive track record and author of four patents pending. Mr. Yurow is an active Angel Investor in Mobile focused startups across the emerging markets. He was the Chief Executive Officer, Head of Innovation and Co-Founder of Spectrum Mobile Ltd. He was responsible for the daily operations, new business development, and the corporate strategy, product development, design and management of the global technology infrastructure. See his website here.
Keep an eye out for the upcoming #GrossumJourney to the Netherlands, Denmark, and Germany!
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