Lessons from the ups and downs of investing in international startups

Marvin Liao, a former partner at 500 Startups, has been a pre-seed and seed stage investor for more than seven years. In this article for The Vertical, he shares some tips for international founders on how to succeed in the U.S.

I’ve closed over 414 deals, and about a third of them with founders from outside of the U.S., including Brazil, Argentina, Egypt, Russia, Poland, Estonia, UK, France, Spain, New Zealand, and Canada. I should add that I’m a big fan, as most of my top-performing investments are with founders from overseas. 

When it comes to talent, technical skills, and ambition, in general there is very little difference: a founder is a founder. Yet I’ve definitely noticed significant, characteristic differences in founders from the U.S. versus ones from elsewhere. 

 Most foreign entrepreneurs have some major  areas of improvement in common:  storytelling and communication skills, sales and marketing, and global scaling mindset.  Why are they so important to early stage VC and angel investors in the U.S.? 

Storytelling and Communication Skills

A founder’s ability to share and communicate their vision to investors, employees, and customers is literally alchemy. You’re turning air into gold.

Storytelling and communication skills are critical when a startup is raising pre-seed or seed funding. There is barely anything resembling a business at this stage. 

Credit: Marvin Liao

Sales and Marketing Skills

As a Canadian living in the U.S. for over 21 years, I’ve come to realize just how crazy good Americans are at this. It’s no surprise when you have a society so commercially oriented and over-marketed. It’s estimated that the average American gets exposed to around 4000-10,000 ads per day.

No other country has ad exposure like this, especially places like Central and Eastern Europe that only became capitalist and developed commercial cultures 40 or so years ago. In terms of sales and marketing skills, foreign founders tend to come up short, and I’m talking even founders from Canada and the UK.

Global Scaling Mindset

This is something in the air of New York or Silicon Valley. Founders here think global domination, and they think big. 

The good news is that all these skills can be learned. There are so many resources available, whether it’s courses on Udemy, YouTube, or Teachable. There are some good frameworks and books as well. I strongly recommend that any founder should take advantage of these invaluable tools. 

Environment matters

The lesson I’ve learned in the process of investing in so many startups is that the environment really matters. That’s why Silicon Valley, New York, and Los Angeles, among other places, are the hottest startup hubs.  

While it’s possible to develop a massive business from anywhere, it’s very helpful to be in the center of a tech founders’ network, such as Silicon Valley. Being around other high-powered, ambitious founders helps drive up your skill level and professional performance, and they can serve as a valuable support system too. For international founders, the experience of being in the right environment or, at least, willingness to relocate, is crucial if you want to win trust of  U.S. VCs.  

Timing is important

My investing successes happened when I was able to find that unique blend of a mission-oriented founder going after a fast-growing and large market at the right moment in time. Timing is very important. You can get the founding team right, and the market right, but if you’re too early or too late, you just never win. I found this out when I invested in 3D printing back in 2014-2016, or Bots in 2015. The timing was just off, even though I believe the founders’ business model was viable.  

Reading the founders 

The other big challenge, and where I’ve hit some stumbling blocks, was when I didn’t read the founders correctly. This is the hardest part to figure out at such an early stage of startup investing. For many U.S. investors, reading foreign founders can be difficult, and that is why it’s sometimes harder for international startups to raise capital .  

As an investor I want to know: Are these founders doing this startup for the right reasons and are they prepared to stick with it in the long run? Do they have a sense of urgency and want to go big? Are they able to develop insights about the market, industry, and their customers? Are they able to be thoughtful, decisive, and action-oriented? Can they build a strong team and motivate them? Are they ultra competitive and do they want to win — ethically, of course? 

All of these questions can be hard to answer, but they are critical to get a good sense of an investor. And getting one or two of them wrong could easily lead to failure. 

Startups are hard and success is rare. Founders who are willing and able to overcome all the challenges are literally worth their weight in gold. Seeing that is why I’ll be eternally grateful to all the awesome founders who let me work with them and invest in their projects. In my view, any success I have as an investor is only thanks to them. 

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