@GeeknRolla: European start-ups seeking US investment – is it worth the trouble?

It’s what most start-ups dream of: securing big money investment from one the top VC houses in America. The chance of a bigger exit, bigger returns and some serious prestige are just some of the reasons that lure UK businesses to New York and Silicon Valley in search of funding.

But here’s a cautionary tale from entrepreneur Alicia Navarro, co-founder and CEO of fast-growing London-based affiliate marketing start-up Skimlinks. She actively sought US investment after receiving seed funding in 2008, only to find that the realities of securing funds from across the Atlantic are not as straight forward you might think.

In the end, Skimlinks raised $1.5 million in series A funding last December in a round led by the UK’s Sussex Place Ventures. But at GeeknRolla on Tuesday Navarro still had a few thoughtful things to say on the pros and cons of UK start-ups aiming investment sights on the US of A…

The increased likelihood of a big exit is the most obvious reason to look towards America, says Navarro, “But it’s actually a bit of a numbers game: it’s not that if they invest in you you’ll get a big exit – it’s more that they will only invest in you if you are already going to get a big exit.”

She says she also wanted a US deal because of the increased credibility with clients, more prestige in the business community, more press coverage and pride: “I wanted to prove that I could. You’ve got to resist the sparkle and the lure of these people.”

Navarro advises start-ups to be aware that American VCs are “only interested how scaleable you are – they’re after a massive return.” Sequoia Capital consider selling a business for $100 million to $200 million “a failure”, she says, so the stakes are high.

The other problem with aligning your business to VCs’ ambitious targets – as Zyb/Vodafone’s Tommy Ahlers highlighted earlier at GeeknRolla – you lose some control of where your start-up is going. “I’m ambitious for my business but I like the idea of having some control,” she says.

And don’t expect to secure that big-money US deal and expect to keep living and working in the UK – VCs will expect you to move to the US, Navarro says. “Already half our market is in the US – it shouldn’t theoretically matter where you are based. But if you are ready to go the US, you should really think about what it is that’s making you make that decision.”

But if that doesn’t deter you, here are Navarro’s tips for chasing the American dream:

– “Approach them with a realistic big vision.
– “Let them get to know you”
– “Do research on the less public stories” – what really tells you about a VC is the story they don’t want you to know, the company that didn’t work out, she says
– “Be preprared to prove your market size (projections).”