So, You Want to Move Your Startup to Silicon Valley. Now What? Entrepreneurs should be very careful on how and when to make such a dramatic move, and be very clear on the 'why.'
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Since publishing my first blog post I have heard overwhelmingly positive feedback from founders and entrepreneurs. The follow-up question from many of them: "Who moves to Silicon Valley, when should we do it, and how does a start-up operate like that?" I consider myself somewhat of an expert on this subject since I led three companies with dual US/Israel offices (Waze, Intercast and Deltathree) and I can proudly say that I have made every mistake possible…
The reasons for a move are clear, but not many people understand the challenge. Splitting up a small company across 7,000 miles, a 10-hour time zone difference and a ~24hour+ connecting flight is one of the worst things you can do as it adds tremendous execution risk. But the only thing worse is not doing it. Between the execution risk (that is within your control) and the risk of not being there (which becomes out of your control), I choose the former. I want to choose the risk I take.
Since it is so challenging and dangerous, one should be very careful on how and when to execute the change, and be very clear on the "why":
If your core market is the US, it is critical to be there for product feedback. In general, except for very few cases, the US market should be your first. If you are successful there you can be successful anywhere else - but success in another market is not a predictor of US success. No matter how flat the world is, living in market gives you a different, more informed perspective.
You will raise more money, at a better valuation, from better investors. Silicon Valley is a unique place. The odds of raising money from a Valley firm if you are based in a foreign country like Israel are very low. If you do raise while located in Israel, you will be pushed to the Israeli partner (or whoever is local to you) and you lose the value of the US firm. In addition, the US valuations are higher and you will raise more money for less of the company.
Your media coverage will be greater in number and in influence. The tech press is mostly SF-based and easy to approach more casually when you're there. When you are early stage, an in person meeting with the Founder/CEO and being infected with their excitement is the best way to get noticed, and thats what your Bay area competitors are doing...
Related: A Unicorn? In Israel? (LinkedIn)
Your network, partnerships and contacts will accelerate dramatically. It's hard to explain, but Silicon Valley is similar to Israel in size, informality and interconnectedness. By living there you will meet many more experienced industry people who are happy to help introduce, connect and mentor. Some of my best connections where parents of kids in my daughters class.
The odds of being acquired and size of transaction grow in your favor. You must know the people who are your potential acquirers or partners. Everything in the world is personal so knowing the right people ahead of time is key.
I could continue on the "why" but let's assume you agree if you are reading this…
- You must be the CEO or Founder. This is critical; a founder or CEO should be able to take ANY meeting and go in-depth into ANY subject matter on their own: Demo, Product, Technical, Business, Investment, Industry, Strategy. They should also be able to make a decision on the spot. (If you need several people in the room to answer 90% of the questions then you are the wrong person anyway and shouldn't be a founder…) This person will need to handle:
- VC meetings – from associate and up
- Partner meetings – technical, demo, product, business development, corp dev, integration, feasibility
- Media Interviews – demo, product, industry, competition, trends
- Presentations – conferences, meetups, events
- Sales and partnership meetings – product value, features, pricing, POC
- You must have excellent and deep relationship with the other founders. This person cannot be a new hire. At Waze, I moved to the US after 18 months of working together with the team in Israel so we already had a pretty good relationship and trust between us. THIS IS KEY. DO NOT UNDERESTIMATE IT. The Founders and I still had our share of misunderstanding but overall they were contained and we could openly discuss our issues based on the relationship we had developed.
- You cannot hire "an American BD pro" to run your US office. They will be sitting out there alone and have no idea what's going on with the company. There will be constant misunderstanding, miscommunications and frustrations. Only a founder/CEO native to the company's start will have the trust of their team back home.
- You must be fluent in English, preferably having lived in the US before, plus some experience working with Americans.
- Your job description will include flying back and forth every 4-5 weeks.Nothing beats the face to face time and you MUST preserve your relationship, bring your feedback to the team, hearing their feedback, eating dinner together, going out and maintaining personal bonds etc. It sucks but that's life (direct flight anyone?)
When should I move?
This is a complex question. In general, the earlier the better. Several rules of thumb:
- Do not move until your team has built trust and the company DNA is clear. You should have, at minimum, a working prototype you are happy to begin showing around.
- You should not move if you are in stealth mode – it's cheaper to be stealth in smaller countries
- Do not launch from Israel or your corner of the globe – plan to be in the Valley already before launch to leverage press, relationships, and interest. You can only make a first impression once.
- Raising A round - You can probably raise an angel round without physically being there but the odds of raising an A round from a top tier investor is very low unless you are local. Make sure you are well established and connected before you start your A round search. It is much easier for investors to swallow "I live in Palo Alto and the tech team is in Israel" than say "I will move after I raise my round and can only meet on the 29th"
What do I do once I am there?
So, you finally moved. You are walking about San Francisco or Palo Alto, so now what? Here are a few tips:
- Try to hire a diverse team of Americans and folks with a different background than the founding team (in our case, non-Israelis). As a start-up it's always very hard to recruit people, but this challenge multiplies when you are a bunch of foreign talent without a reputation among peers in the Valley. Make sure your first few hires are very well connected in the tech scene. You want to be out as much as possible, whether at meetups, events, conferences etc. You are looking for experienced people to learn from - they won't come to you. My first hire was Di-ann Eisnor – a super connected entrepreneur who quickly became a pseudo-founder of the company. It's a miracle that I managed to hire her (had to lie and cheat to get her on board but that's for another post) and she was key in making Waze what it is today. It is very easy to sit alone in an office in Palo Alto every day and not meet anyone; then you might as well have stayed at home.
- Socialize! Silicon Valley is an informal network of people. There are lots of events to go to and people to meet. Thats why you are here! try meeting other entrepreneurs, meet investors, meet bloggers, just meet and talk about what you are doing. Such a random meeting with Brett Bullington led to an intro to Di-ann which changed the company and put us on the map...
- When you rent an office, make it super cool. It is very hard to recruit people to work for a little-known foreign company, especially in the beginning when there is nothing there, at least have a cool office that seems part of the scene. At Waze, we rented a storefront in Palo Alto on Hamilton – super cool and inviting. We paid more than we should but it was worth every penny to fit in with the "cool kids" via a cool address.
- Don't hire corporate people with big resumes. Hire people who have been around start-ups and know what it's like. Fancy executives will only cost a lot and add more confusion to the team. Make sure they are worldly and curious – i.e. they've traveled a lot, lived abroad, are second generation immigrants – they will fit in better.
- Constantly use your product. When I moved to the US, I decided to live in Los Altos (our office was in Palo Alto) so I would have a 20 minute commute to dogfood the latest build. This was critical; our product sucked in the US and only my constant testing and feedback as someone who understands the tech, strategy, competition and goals – plus being someone the Israelis would listen to - made it mature.
- Public Relations - one of your primary goals once in the US is to get media coverage for your company. This is a facilitator for everything you need ( fundraising, partnerships, recruitment etc). In general, the press want to talk to a CEO/Founder when you're early stage. You cannot outsource this to an agency. I recommend having one of your first hires be a PR/Social media person; they will get you coverage but are usually well connected in tech-related activities and can help plug you into the Silicon Valley (or Bay area as the locals call it) scene.
- You are here to make relationships, meet people and preach the gospel.You must know the App Store editors of your category, your potential partners, the partners at the VC's you like, the reporters that cover your space etc. Silicon Valley is one big Kibbutz – make it happen (and lean heavily on your first hires for this)!
- If you have a family, do not move into your nationality's corners of the Valley (for example, Israelis who flock to Sunnyvale.) Spend the money and move into Palo Alto/Los Altos/Menlo Park. The people you will meet at school will be key contacts – it's an unbelievable and unavoidable network. Break out of the circles that are familiar and try and meet as many locals as possible.
Company Structure After the Move
Different things work for different companies but I recommend:
- Never split Product and Engineering. They must sit together for speed and efficiency. Hiring great PM's is extremely hard in the Valley even among the hottest companies, and for a foreign company it is much harder. Leverage the fact that there are great PMs in Israel these days (or other core roles in your market) and you have the home court advantage, personal network and connections there.
- Try and have each function isolated to one geography and one time zoneso you never have people "waiting" for someone across the world to do something. Make each office independent where you are the glue (i.e. PR does not need approval from someone in Israel or a PM is not waiting for your review to start coding).
- Your schedule will suck. Get used to early mornings. You will have to keep early hours to spend the time with the team. Make it work. Use Google Hangouts or whatever you can. Remember – if you do not have these calls (even if there is not much to update), people will wonder what they don't know or what else is going on and ideas will drift apart.
- Nothing beats face to face. At Waze, every new hire MUST fly to Israel early on and spend a week working there. Nothing can replace spending time together, going out as a unit and feeling like a true part of the team early in your tenure. It also helps with the pre-conceived notions about Israel and everyone falls in love with Tel Aviv. It's expensive but a must. We used to have management meetings face to face roughly every eight weeks in Israel and I flew every four weeks so we could keep the face to face time going. This is hard on the families and kids. Luckily for me, my wife Lisa is Super Woman and handled my travel on her own with no complaints (note: Super-Person spouse is a key requirement for success.)
- Get your Israeli team to the US often – make sure they experience the product in market, go to events and learn what's going on. When you come from Israel, Google or Facebook seem like magical places that are out of reach for the average kid out of school. When you live here, your kids play with the executives' kids from these companies, you have meetings on campus, things become much more approachable, or within grasp… Behind every great brand are a bunch of people just like you and me.
So what about New York? As of late, NYC has become the preferred place for Israeli start-ups in the US. It is much easier to manage in terms of travel, time zone, direct flights etc. It probably makes sense for ad-tech companies or media but in general, Unicorns are created in Silicon Valley in a disproportional manner. Twice I had offices in NY and looking back, those were major mistakes. It is extremely unlikely that any startup will be successful so anything you can do to improve your odds is important. Go to the Valley!