ACTIVIST VC BLOG
If you’ve read this blog for a while, you are likely to know that the two key principles of Nexit investment strategy and operational model are:
- The Activist VC methodology and
- The Transatlantic Bridge
This blog post is about the Transatlantic Bridge.
Why go to the US?
The US is by far the most important market for the growth and value generation of many startups – as well as for successful high-value exits. But it is also an extremely competitive market and operating in the US can be very – even dangerously – expensive. For this reason, the US is not the right place for everybody or every time.
Nexit has been a transatlantic VC from Day 1– we opened offices in the Nordics and US when we started operations. In our nearly 20 years in this business, we have helped numerous companies make the leap from the Nordics to the US market in all aspects of the process:
- Entering and getting established in the US
- Scaling the business
- Attracting new funding
- Achieving a great Exit
We will give some examples below.
1. Entering the US
It is important to get the basic things right from the beginning.
- If you come to the US, then where? The West Coast and specifically the SF Bay Area has a lot of pull, but it also is the most expensive and competitive area.
- We know which accountant to pick, which bank works for you, and so on. While this stuff is pretty mundane, doing it right saves time and money and lets you keep your eye on the ball: running your business.
- And we can introduce you to the right lawyers who can tame the visa jungle for you, understand the Nordic mindset, and not quite break your bank. It is easy to underestimate the importance of some of the legal matters, especially immigration.
- The US Flip is a subject we have already written several posts about. Here are links to the posts about the reasons, the execution, and some of the legal differences you might encounter.
These practicalities might sound boring but if you do not take care of this stuff early enough, you may face a huge bill down the road.
2. Scaling in the US
Scaling in the US will be much faster if you gain access to the right people and relevant business networks.
- In some cases, we have assumed a short and temporary operative role within a portfolio company after a flip to make sure their US business is running on all cylinders from the very beginning. Key things we can help achieve here is recruiting the right permanent team members.
- In some cases, we have also been able to help the portfolio company significantly in building and expanding customer relationships and finding the right partners and channels.
It is noteworthy that Nexit has had its other founding partner Michel Wendell permanently in the US from our day one, and he is there to work with the portfolio companies. Things happening in the US can be difficult to monitor and steer remotely as some issues may not be easily visible from Europe. This way we can ensure any issues are reacted to and resolved fast.
3. Attracting US Funding
This is one area that we are proud of: more than 50% of Nexit portfolio companies have funding from a US VC or CVC.
We have established a strong network amongst US investors interested in European deals. Finding the right partner from the large but extremely competitive US funding market without a good partner can be extremely challenging. Like with everything in the start-up world, we have also made some mistakes in picking co-investors, which is why we are so much better at it now!
4. Achieving a great US Exit
The US is THE PLACE for making great exits – there are far more exits in the US and their valuations are much higher than in Europe. See details from our previous blog post The Great M&A Game.
We are proud to say two-thirds of the exits of Nexit portfolio companies have been in the US. Our portfolio companies have been acquired by companies such as Google, HP, Akamai, Sybase, and NVIDIA.
In helping our portfolio companies create these exits, we have developed deep insight into the exit market and cultivated an extensive network of top-notch investment bankers, lawyers, and other professionals that can have a huge impact on the outcome of the exit process.
The Transatlantic Bridge Process
We have several successful cases of helping our portfolio companies cross the Transatlantic Bridge. The most recent (and one of the best!) is Ekahau which we helped in all aspects mentioned above:
- US Flip: We moved the company headquarters to the US for better access to the right markets and players. The US was clearly the leading WiFi market where success and a strong position in the value chain are made. Ekahau started its operation in Nexit’s Silicon Valley office but was quickly shifted to the East Coast.
- US Funding: we helped Ekahau find US investors, including Stanley Black & Decker, 3M company, and Horizon Venture Debt.
- US Scaling: Roughly 60% of Ekahau’s revenue came from the US market, which was important for securing the global lead position in the market.
- US Team: While the CEO of Ekahau came from Finland (Mika Hakala was a Nexit US Bridge veteran, having earlier led the US office of Hantro), we had a strong role in building the US team that then grew the company fast.
- US Exit: one of our dozen successful exits to the US – the prime exit market for VC funded technology companies. Nexit played a key role in building the exit in many ways, including positioning the company for the exit and choosing the right banker. And there’s a small but important detail: Our Sami Karppinen set Ekahau on the trail of Ookla by recognizing the strategic fit in late 2017 and encouraged the management team to pursue this connection.
A friendly reminder
Having been in the US for nearly two decades, we know how to start, run, grow, and exit a business in the US. Even though we can provide a lot of advice and even a fair bit of hands-on support, you are responsible for getting things done.
No VC takes that burden away from you.