Belgian and other European start-up entrepreneurs do well to launch in the U.S. as soon as they have a product or service ready for the American market, says Angelos Angelou, Founder and CEO of the International Accelerator. The International Accelerator is unique in the Austin ecosystem in that it works exclusively with foreign born entrepreneurs.
If Austin has become a major tech hub in the last decades it is to no small part thanks to people such as Angelos Angelou who helped build out the city’s entrepreneurial infrastructure. Angelos was – among other things! – a key actor in the effort to establish the Austin Technology Council, an angel investor in several local tech startups and he founded the International Accelerator which he continues to lead today.
On the eve of SXSW2019, as Austin is bracing to receive hundreds of thousands of visitors for what is still one of the most important tech trade shows in the world, the following conversation ensued between a foreign-born communications consultant and a foreign born investor on why entrepreneurs from abroad should put Austin high on their list of locations from which to possibly launch their venture in the U.S.
Jo: Let’s start with the beginning. Why makes Austin an attractive beachhead for entrepreneurs looking to expand in the U.S.?
An ideal beachhead for foreign start-ups
Angelos: There is a variety of reasons because Austin has a lot to offer. There is the cost of living and the cost of doing business which are low in this state, especially when you compare them to what you see in Silicon Valley and the Washington DC – Boston – New York City corridor. There is the central location with two time zones on the west of us and one on the east. That really helps if you have one team of people having to engage with stakeholders that are spread across the country. And then there is the workforce. Texas has outstanding private and public universities; the Austin institutions of higher education have at any given time 400,000 students in enrollment.
Of course not all is perfect, not here in Austin and nowhere else. Traffic is picking up, meaning that the city will have to invest in new infrastructure sooner rather than later, and real estate is becoming more expensive. However, if you look at the aggregate score of Austin on all of the criteria that matter, Austin continues to score very high, and since we have more start-ups per capita in Austin than anywhere else in the U.S. I seem to be not the only one giving Austin such high scores.
Jo: You probably know which point I will be raising next. The capital market is not what it is at the West and East Coast.
Angelos: No, it is not. But let me push back at least a little bit against the people who are decrying the shortage of funding in Austin. We are seeing a record year in venture capital funding in Austin with each month one billion dollars of venture capital being invested in Austin companies.
Jo: The venture capital funding rounds are getting bigger indeed. But seed funding is not surfing that wave, is it? Are the early-stage start-ups not at risk of being left behind?
Angelos: You have a point, but this is an issue across all markets in the U.S. It is indeed in general easier to raise funds in series B and C rounds than it is to collect seed funds. But did you know that we have in Austin one of the best developed angel networks in America? As I said, nothing is perfect in Austin, but even when it comes to angel investing, we have the numbers to back up the claim that we have a solid ecosystem in place.
Learning to invest
Jo: Let’s talk about how the International Accelerator stands out in the landscape of Austin accelerators. You proud yourself of being the only accelerator that specializes in catering to foreign born entrepreneurs. How are the needs of these entrepreneurs different from their domestic counterparts?
We make the entrepreneurs understand that they need to invest rather than hoard the money they raised.
Angelos: Foreign born entrepreneurs arrive with unique luggage. We help them with the language in the sense that we literally help them translate their marketing messages in one that will resonate with an American audience. We also counsels them on cultural issues. I am perfectly suited for this because I am myself foreign born. The large majority of the other investors that are connected to the International Accelerator are foreign born. We feel their pain and understand how they think and where we need to redirect them.
In the U.S., business is done in a very transactional manner. People meet with one another, discuss what kind of value exchange makes sense, and then draw up a contract. In many other markets, for example the European one, you have more of a trust economy where there is a lengthy time to warm up to new contacts and then once that trust has been established, people feel comfortable to start working together. This approach does not really work here however. There is also an astonishing lack of knowledge of the competition that we see with a lot of the foreign born entrepreneurs.
Jo: I see that myself when I talk to Belgian or other European entrepreneurs. People are not always doing their homework sufficiently well before they set foot on American soil.
Angelos: No, they don’t and that is a pity. Start-up entrepreneurs would do well to invest in research, and that brings me to my last point, their reluctance to invest the funds they have raised. Foreign-born entrepreneurs tend to be very frugal. We need to explain to them that they can only expand successfully in this market if they actually invest their money.
Jo: Belgian start-up businesses have at any rate a reputation for being frugal. What are the drivers behind this frugality? Is this a typical cultural phenomenon ?
Angelos: It is not a Belgian issue. I see it with all foreign-born entrepreneurs. In the U.S. you have a business culture where you are allowed to fail. You might fail the first time, you could even not make it the second time around, but third luck is a charm, as we say here. But when you are raised in a culture where failure is no option, you will be afraid to stumble, and to protect yourself from failure you will, among others things, hoard the cash you raise.
I have seen it happen very often. [sighs] A start-up entrepreneur raises funds successfully with one of the capital venture firms in town, but two years down the road he or she has not met any growth objectives because the money has not been invested sufficiently, in product development, market research or marketing for example. So the company is not meeting its full potential because the money has been sitting on the savings account!
Getting to the U.S. as soon as they can
Jo: I see. Back to the Belgians, if you allow. You have no Belgian companies in your portfolio for the moment.
Angelos: No, but we had Belgian companies in the last years. The ones we had actually choose to not make the step to expand in the United States but preferred to stay in Europe.
Jo: What are your thoughts about their decision to stay in Europe?
Angelos: It is up to the entrepreneurs to make the decision whether they are going to be investing in expanding into the U.S. or not.
Jo: Spoken like a true diplomat. But I presume you do not recommend they stay put.
Angelos: No, I don’t. My advice for the Belgian and other European start-up entrepreneurs is actually simple: if you have a product or service that is ready for the American market, get over here as soon as you can. The American market is a very competitive one and there are a lot of disadvantages to arriving late. The strategy to grow internationally from your local European market will prove much harder to accomplish than growing internationally after achieving success on the vast American market.
Belgian entrepreneurs need to decide whether they want to play for Barcelona or on their local team.
I know soccer is big in Belgium so let me finish my thoughts on this with a soccer analogy: At the end of the day Belgian entrepreneurs need to choose whether they want to play on the Barcelona team or for a team in their national league. The International Accelerator can help them enter the Barcelona team.
Jo: One final question: you have a reputation of being very close to the entrepreneurs you help.
Angelos: I welcome them into my home, literally. Every entrepreneur who enters the program ends up living with me for three months.
Jo: Excuse me?
Angelos: You heard that correctly. I want and need to understand who they are, as entrepreneurs and as people. This approach has served me well over the years and works well for them as well. Sometimes they stay a bit longer than three months, and the house becomes crowded, but that is OK, we always find a way to manage. [Laughs]