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IT startups need to look outside Europe to grow their business, says venture capital partner

European IT startups must look further afield for investors to rapidly grow their business, venture capital partner Andrew Romans told the Startup Village 2015 event

Industry experts in Moscow advised startups to look outside Europe to grow their companies.

Speaking at Startup Village 2015 in Moscow, Andrew Romans, general partner of Rubicon Venture Capital, said: “If you want to win the world you have to win the US. Can Russian startups make it in Europe of do they have to go to the US to fins funding? It’s like an actress wanting to go to LA to kick start her career. The same with San Francisco and investors – you need to be somewhere with more ecosystem.

“However, most European venture capitalists should go to London as it is the most evolved ecosystem with lots of angel investors there. But then there’s a company like Alibaba that is happy with its domestic market and that is really working for them.”

Frederic Oru, chief operating officer (COO) of startup advisor Numa, said trying to raise a large amount of money is harder in Europe than in the US: “You need about six to seven investors in Europe to raise the funds, whereas in the US you’re more likely to get one investor put that money down.

“Many ventures capitals have told me it’s a safer place to grow your company in Europe, with more investments from several avenues but smaller amounts. It is possible to grow a company outside the US, but there are challenges to it.”

Oru said that, because Europe is not a consolidated market and there are restrictions across borders, it can be a challenge for startups to grow in Europe: “Russia is big but not big enough for startups to thrive. People don’t know how to adapt to the Russian system, so they don’t dare to come and invest – but slowly they will.

“If anyone thinks their market is enough, then they are making a mistake. Most companies should try to be global from the beginning, no matter where you are based in the world. Think global, instead of just thinking about your own market.”

How to grow your company

Oru advised giving away a percentage of your company in return for advice to be able to grow the business: “If your company is still really young, then think about giving say 5% to an investor for no money in, but for an advisory board in return. Then later on you can ask them if they want to put some money in.

“Not all companies are trying to get to the billion dollar evaluation, but all are trying not to die. The company dies when you run out of cash. If you have an evaluation that is too high then you’re going to screw yourself.”

He said finding an investor is important, but not as important as building a solid and reliable team: “If you try to raise money and you have a bad team then you will fail. You need a real internal strategy and a team that really understands the cultural differences between countries.”

Romans simply advisedfounder a company that makes money”.

“You don’t need investors to make money straight off, you just need a good idea that makes money. Investors want to invest when they see you have an idea that instinctively makes money,” he added. 

According to Romans, companies do not always need an investor to grow: “Get a customer to gradually pay for what you are making them," he said. 

"For instance find a customer who will agree to give you say $40k a month to build what they want and then you have a happy customer at the end but you own all your intellectual property because you didn’t part with any of it. You don’t always need an investor.”

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It seems like good advice to go to the UK. Trading the Euro, or Pound, for Russian currency is more straightforward than a USA - anyone trying to trade dollars for Eurasian capital is going to lose money on currency exchange. Then consider the cost of the trip, not just in dollars but in time lost and jet lag.

Overall, I like the idea of going to other markets for fundraising - I just suspect they should be near the same continent!
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