Could Covid-19 Be An Opportunity For International Startups In New York?
For years, international founders invested heavily in U.S. expansion. Now, New York, one of their top destinations, has been hit hard in the pandemic. How is the city's global startup ecosystem dealing with the challenges?
When COVID-19 struck New York, many foreign entrepreneurs found themselves trapped in the city. “Everything suddenly moved online, but there was such a mess with the flights: many founders couldn’t go back home,” said Anastasia Lykova, partner at the NYC-based Starta accelerator, which focuses on Eastern European startups.
Some countries also closed their borders for all incoming travelers. Entrepreneurs from Tunisia, Mauritius, and India haven’t been able to leave for weeks, according to Giulia Imperatrice, program director at French startup accelerator NUMA. “But none of our founders gave up, and all kept working on their projects,” Imperatrice said. “The morale has always been very high: all of them are now back in business, some hiring.”
New York, a popular destination among international tech companies for its high concentration of B2B clients, has been especially vulnerable to the pandemic. NYC-based startup development organizations had to rethink the ways they helped foreign founders bridge the cultural gap.
Normally, international entrepreneurs learn from their in-person experiences, such as investor pitches and client meetings. All of this became impossible during the lockdown. Luckily, some organizations were prepared.
NUMA, for example, had already been running a part of its program online. “We just switched to the virtual model completely and started developing our mentor community,” said Imperatrice. “Now, apart from NYC, we have mentors in California, Texas, and other states.” Along with Zoom, NUMA is using a Metaprise platform, created to support startup networks.
Raising capital in the pandemic
COVID-19 eliminated some disadvantages faced by international startups, such as lack of knowledge about challenges specific to the U.S. market. “Challenges across the border are now very similar: corporations aim to digitize and cut their costs,” said Imperatrice.
Some international founders managed to raise capital in the U.S. despite the pandemic. A few recent examples include Israeli recruitment solution JobFul, Austrian meeting solution Meetfox, and Vienna-based remote teaching platform GoStudent.
“The pandemic hit when the U.S. investors had plenty of money in their accounts,” said Florian Krisch, who is responsible for startups at Advantage Austria, the country’s official trade promotion organization.
According to Krisch, everybody has the urge to invest and wants to get a stake in the COVID-19 champions. The main areas of interest are cloud computing, biopharma, gaming, and the future of work.
Startups that demonstrated their resilience in the crisis also proved that they are a good investment. “Here, some foreign tech companies might even have an advantage: generally, European startups have healthier balance sheets when they are ready to expand their business into the U.S. market,” Krisch said.
“Europeans might not be as great at marketing and advertising as their U.S. peers, but in the pandemic it’s your cash flows that matter,, not just aggressive marketing,” Krisch added. “This crisis tested the viability of many startups and helped separate the strong ones from the weak.”
What’s next for international startups?
COVID-19 has been a steep learning curve: international founders made a real effort to pitch to U.S. investors on Zoom, look for new clients online, and push their boundaries. Surprisingly, this paid off. “Some of our startups, such as the London-based PitchMe, tripled their revenue,” said Anastasia Lykova of Starta. “We also learned a lot and realized that there are two types of startups: those for whom a crisis is an opportunity, and those for whom it’s a curse.”
In the pandemic, Starta also launched a pre-acceleration program for foreign founders thinking of moving to the U.S., covering immigration, taxes, and other issues. According to Lykova, more U.S. advisers and investors are now interested in international startups because of their potential on foreign markets.
Most likely, the virtual business model is here to stay. “Online communication worked well for us, the mentors are very responsive, so we’ll probably keep it virtual in January,” Imperatrice said. “But events are something we strongly believe in. Hopefully, things will get back to normal.”
The U.S. is still very appealing to international startups, Krisch believes. “Unless something unforeseen or largely destabilizing happens, international startups will be interested in this market, despite the tense political situation and the ongoing healthcare crisis,” said Krisch. “But entrepreneurs across the globe have now realized they should be aware of black swan events like COVID-19, and they need an emergency plan.”