How Can Non-US Startup Founders Raise Funds from US Investors

This Saturday, we hosted our online event on Zoom, titled “A masterclass on raising funds from US investors.” The session was hosted by Anshuman Sinha, angel investor and CEO of Startup Steroid, featuring Manoj Deebak, an Indian tech veteran, and startup mentor.

“Hello, everyone. Thank you for tuning in to today’s Startup Pulse podcast. I’m your host, and I’ve been living in the US for the last 25 years. Over the past decade, I’ve been deeply involved in the startup ecosystem as an angel investor, managing two funds and collaborating with a network of 75 investors here in the US,” our mentor Anshuman Sinha made the introductory statement while launching the show.

Anshuman Sinha supports early-stage startups and is passionately and actively involved in the startup community. For more than the last one and a half years, he has been passionately hosting webinars and podcasts relevant to startup founders.

“In this podcast, we aim to provide valuable insights through a startup masterclass, interactive Q&A sessions with guest speakers, and engaging interviews with industry experts,” Anshuman added.

New to “Startup Pulse”? It is an online startup meetup platform that organizes online sessions discussing the complex topics of the startup world. “Startup Pulse” is on a mission to solve the problems of startup founders one meetup at a time and to build a stronger startup ecosystem.

After a brief introductory session, Manoj Deebak, founder of Testware Informatics Pvt Ltd, started with relevant queries seeking their appropriate answers from Anshuman Sinha.

During the session, we address a series of questions prepared by Manoj to guide startup founders in raising funds from global investors. The main goal is to provide clarity and insights to founders seeking funds, ensuring they leave the session knowing how to approach US investors.

In this insightful conversation, Anshuman Sinha, Co-founder of Startup Steroid, shares valuable insights on funding and startup dynamics. The discussion begins with Aman Kumar’s question about the importance of having co-founders for securing investment. Anshuman emphasizes that while solo founders can get funded, having complementary skills in a team enhances the chances of success. He stresses the significance of varied skill sets, such as a combination of technical and business expertise.

Here are the key excerpts from this podcast interaction:

Manoj: Can you walk us through the typical process American investors follow when considering investments in foreign startups?

Anshuman: Typically, American investors approach foreign investments with factors such as market potential, governmental restrictions, and securities laws. They will also likely review each startup’s business plan, product/service, and market strategies. Additionally, there is increased scrutiny towards startups involving sensitive technology due to the Foreign Investment Risk Review Modernization Act.

Manoj: What are the key criteria American investors look for when evaluating Indian startups for investment?

Anshuman: While this may vary depending on the investor, the common criteria include the startup’s product or service, the potential size of the market, the team, competition in the market, and revenue projections. These insights are usually obtained through the business plan and pitch of the startup.

Manoj: Are specific industries or sectors more attractive to American investors now?

Anshuman: The interest of American investors tends to vary over time based on trends and market potential. However, I don’t have specific data to indicate which industries are most attractive.

Manoj: What documentation or materials do American investors typically require from Indian startups seeking investment?

Anshuman: When considering an investment in a startup, American investors typically require a robust business plan, financial projections, market analysis, details about the product or service, a demonstration of the product if possible, and potentially legal documents regarding the company’s formation and governance.

Manoj: How important is it for Indian startups to have a presence or operations in the US when seeking investment from American investors?

Anshuman: Certainly, having a presence or operations in the US can be beneficial when seeking American investment. It increases credibility and can make for smoother communications. But it’s optional as long as the investors see potential in the business.

Manoj: Can you provide insights into the differences in expectations or preferences between US-based investors and investors from other regions?

Anshuman: Expectations and preferences can vary widely based on the investor, regardless of their location. Researching and understanding each investor’s preferences and expectations is always best.

Manoj: Are there any legal or regulatory considerations that Indian startups should know when seeking investment from American investors?

Anshuman: Yes, startups must be aware of any potential governmental restrictions and comply with securities laws. There are also considerations around tax implications, both in the US and India.

Manoj: What are some common challenges or obstacles that Indian startups may encounter when raising funds from US investors, and how can they mitigate them?

Anshuman: Some potential challenges could include regulatory hurdles, cultural differences, understanding the specifics of contracts and deal structures in the US, and the sometimes-extended timelines for securing foreign investment. Entrepreneurs can mitigate these challenges through diligent research, seeking the advice of others who have successfully navigated the foreign investment landscape, and acquiring legal counsel experts in international investment.

Manoj: How do American investors typically prefer to communicate and collaborate with foreign startups during the investment process?

Anshuman: This can vary widely, but digital communication modes such as emails and video conferencing calls are standard. Additionally, American investors may prefer face-to-face meetings, but it depends entirely on investor-individual preferences, the nature of the business, and current pandemic-related travel restrictions, which may influence this.

Manoj: Can you share any success stories or examples of Indian startups that have successfully raised funds from American investors, and what factors contributed to their success?

Anshuman: There are numerous success stories out there, but with specific names, it would be easier to provide examples.

Success factors generally include:

  • A robust business plan.
  • A strong team.
  • Product-market fit.
  • Addressing a significant market need.

Key Takeaways 

American Investment Approach: When evaluating foreign startups, American investors consider market potential, governmental restrictions, and securities laws. Moreover, American investors prefer investing in companies whose offices are located within the US.

Key Criteria for American Investors: The most common evaluation criteria are the startup’s product or service, market potential, team, competitive landscape, and revenue projections.

Startup Documentation: American investors typically require a business plan, financial projections, market analysis, details about the product or service, a demonstration (if possible), and legal documents related to the company’s formation and governance.

Investor Expectations: Investor expectations and preferences can significantly vary depending on the individual, and it’s essential to understand each specific investor’s preferences.

Legal Considerations: Indian startups must know governmental restrictions, compliance with securities laws, and potential tax implications in the US and India.

Common Challenges: Potential obstacles for Indian startups include regulatory hurdles, cultural differences, understanding US contracts and deal structures, and extended timelines for securing investment. These can be mitigated through research, seeking advice from experienced individuals, and obtaining specialized legal counsel.

Communication Preferences for American Investors: Modes of communication can vary, but digital methods like emails and video conferences are standard. Some investors may prefer face-to-face meetings, depending on the situation and pandemic-related restrictions.

Success Factors for Raising Investment: Key contributors to success include having a strong business plan, a solid team, a product that aligns with market needs, and the capability to address a substantial market demand.

In Conclusion

We thank Anshuman, Manoj, and the attendees for wholeheartedly participating in this exciting conversation. This information proves valuable for Indian startups aiming to raise funds from American investors.

A thoughtful approach tailored to align with the investors’ criteria and expectations is crucial. While the journey may entail navigating through various legalities and cultural nuances, the rewards can be substantial for startups that adeptly present their value proposition, demonstrate market potential, and effectively communicate their vision while pitching their startup in front of American investors for raising funds.

We encourage startup founders to participate in our virtual Startup meetups, where they can engage in dynamic sessions, exchange insights, and have meaningful conversations with industry experts.

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