Local Maximum Versus Global Maximum: Lessons for non-US Startups

No question on whether I am a fan of international founders, international markets and international startups. Some of my best investments are with foreign founders. My entire career has been spent globally and I continue to travel all around the world trying to help and find international startups.

Yet there are some major challenges that these local startups face. These are some general observations:

1. They are too focused on local maximum and think that starting in the local market is the right bridge to get to a bigger market. Usually this is not the case. The lessons they learn are not just not applicable elsewhere. And if the market is small (ie. sub 10M people, you are capped out and can’t get critical mass).
2. They don’t do their homework to learn about equivalent business models in other markets. This is important to learn lessons from other companies, whether successful or not. There is no excuse for this as there is a wonderful tool called Google.
3. Because of this, many founders face the “Hometown hero” or “High School Hero” syndrome. They are legitimately one of the top founders in their market. But they have no idea what the global standard and level is. Thus like the High school hero, they end up missing the mark of what is required at the top competitive level. It’s like the local high school basketball team competing against an NBA league team.

As a VC investor, we want to invest in a business and founder that can compete globally. And in a big competitive market like the United States. The best founders regardless of the country they are from, understand the risks and are willing to do the hard work. But it’s challenging to do this when you have no idea what the actual competitive level is.

Out of my 400+ portfolio, a third of them are from outside of the USA. The reality is only a third of them from my sample set were able to really rise to truly compete. Most end up being demoralized by the competition, demoralized by how really hard it is and of how behind they are compared to the best of the best. Whatever my criticisms of Silicon Valley are, there are thousands of amazingly experienced and strong founders out to conquer (metaphorically speaking of course).

As Naval says, “If you want to be successful, surround yourself with people who are more successful than you are, but if you want to be happy, surround yourself with people who are less successful than you are.”

The best founders find the competition invigorating and really step up. They do the hard work, they build a community and network of fellow awesome founders and this raises their game. And I can point to innumerable international examples from my portfolio like Shippo, RapidApi, ManyChat, Printify, Aircall, Bigfinite, Monkeylearn, Cube.js among others that have surpassed anyone’s expectations. So for all non-US Founders wanting to come and build a big global business from Silicon Valley or the other centers of tech in the United States. If you are willing to do the work, you absolutely, no question are capable of doing it! Just depends on how much you want it.