India is home to around 38000 startups making it the third-largest in the world. Though it is giving birth to unicorn startups and there has been a significant development of incubators and monetary initiatives to help seed the entrepreneurial spirit, it still has to travel a long road to create a more startup-friendly ecosystem.
Why do startups want to relocate to the US?
The fuel of any venture to begin is to secure funding, where the path to get one is a bumpy one. This is because in the US the startups can receive funding based on a strong business proposition made without revenue or a set business model. Startups there atleast get the opportunity to prove their value proposition and test products before releasing them to the market. Whereas, on the contrary in India the access to funding is limited resulting in startups stressing on monetisation, revenue, and lean operations even though having an interesting business concept on hand.
Startups in India receive funding only when they have a working product and a proven business model with its proof being revenue. Without any cushion of funding, many Indian startups find it imperative to relocate their business to the USA. Moreover, the cost of customer acquisition for an Indian startup to operate on American soil is inexpensive, since the consumers’ loyalty and repeat business depends upon a simple mantra of superior customer service, this strategy will help to generate revenues first. The startups, especially those operating in enterprise tech, find it difficult to scale their business in India since several family-run businesses find it hard to trust the solutions of a young startup. Also India lacks funding for young technology startups in India that in the US is abundant.
Much said about the pros of relocating business to the US, here are some of the blunders you might make while relocating the business there.
In the US startups can receive funding based on a strong business proposition made without revenue or a set business model.
The Top 5 Blunders to Avoid While Relocating Business to the USA
- Insufficient Market knowledge: The presence of tech moguls and customers entices startup founders to bring something new to the market and makes it the largest playing ground. But the first mistake which Indian entrepreneurs tend to make is which city to choose? While entering a new market the entrepreneur is initially a salesperson and needs to meet with the customers and investors of that region to gain their early attention before relocating full time. For instance, If the startup is in enterprise tech then Silicon Valley is the city; if the startup is in health tech then North Carolina is a better city.
- Not knowing the marketing methods: This goes without saying that cultural differences are significant and it is reflected in marketing content. The USA is a country of low context culture meaning that they communicate information indirect, explicit, and precise ways. Entrepreneurs need to research more and look at similar ads for products similar to yours. If we are opting for print marketing for a startup based in Silicon Valley, then the approach should be to connect with the tech publications and media.
- Not Knowing about the costs and taxes involved: The cost of relocation from one country to another is a must to consider as there are several hidden or secondary costs involved. Relocating to a new location would also mean considering the overhead costs that will impact the routine business operations. Things like lease, mortgage payments, utilities, shipping and wages will impact the cost. When moving to new countries, it is important to assess the tax situation of your new location. Depending on where you are relocating, taxes could have a huge impact on the profitability of your organization.
- Not considering the growth capabilities: The entrepreneurs must think about the long-term scenario of the business. For instance, if the business is on a growth path and has plans to increase the employee size in the next 3 yrs, then it is important to assess the labour pool to support the growth of the business. It is easy for an enterprise tech startup or an e-commerce startup to find developers, digital marketers, etc. but would be difficult to find professionals in farm science for agritech startups. Growth capabilities do not limit to human capital but also apply to the growth of the facility space or even the capacity of local shipping companies.
- Not doing a check on the scope of products and services: Say here we take a SaaS-based enterprise tech startup where there can be two possibilities i.e. create a better product that is already available in the market like developing better CRM solutions or better accounting software or marketing automation tools. The second possibility lies in building something in a completely new category which can be risky with its pitfalls disguised as opportunities. The companies in the first possibility do not require to relocate, it can be started in India with local hires and talent and selling high-quality remote services to middle-sized companies around the globe. The second option is ideal for targeting the more advanced SaaS software market in the United States.