Cookie Cutter Venture Capital

Last week I wrote about the cultural difference between entrepreneurs in the Nordics and in Silicon Valley. This week I want to talk about the cultural differences between investors. In each country the investors and the investment climate shapes how startups get funded and in turn how they end up looking from an investment perspective. For example, if there is a lack of good seed and angel funding in the country the startup comes from, then the cap table will get quite crowded with friends, family, and fools.

Gísli Ólafsson
Gísli Ólafsson

The same lack of investors at an early stage may lead to the entrepreneurs to be required to give up control of more of their startup than otherwise, as the investors have a stronger case for lowering valuations and asking for larger share of the company, since if they don‘t get it, the startup will die an early death.

We see these differences even between the Nordic countries, but of course the difference is biggest between the Nordics on one side and Silicon Valley on the other side. I like to explain it that each country has a different cookie-cutter that is shaped based on the different investment culture and environment. If you looked at the cookie-cutters from the Nordics, most of them would be similar in shape, yet with small differences. However, when you look at the Silicon Valley cookie-cutter, it looks quite different from all the others.

These differences lead to the fact that when a company attempts to raise capital from a location other than where they came from, investors often dismiss the opportunity, simply because it does not fit their “investment template”.

A commonly referred to example of this is that Silicon Valley investors usually want companies they invest in to be “located in the Valley”. Many foreign startups therefore put up an office (often temporarily), simply to enable the VC to mark that off their checklist of template matching.

While having a presence in the Valley is certainly an important step in molding a startup into the Silicon Valley cookie-cutter template, there are a larger number of cultural differences that need to be worked on before a startup is Silicon Valley investor ready.

At Beringer Finance we spend most of our time helping startups make the transition from the Nordic investment environment to the one in Silicon Valley. Taking startups, across the bridge we have built between the Nordics and Silicon Valley, is mainly focused on helping the startups and the entrepreneurs adapt and mold their startup into what the investors in the Valley are looking for.

The truth is that even if you are able to leverage your network to open up doors up and down Sand Hill Road, the effort of putting on a roadshow is a complete waste of time if this cultural fit has not been addressed before you arrive. Sadly, we have seen too many companies that have not been successful in their attempts to come over to the Valley to raise capital, simply because of this.

Having spent the last decade working on similar cultural bridge building within the humanitarian community, this is an area which I love to work on. The humanitarian ecosystem is certainly different from the startup and venture capital ecosystem, but the lost opportunities due to cultural misalignment are just as many.

I would love to get comments from entrepreneurs and VCs with great examples of cultural differences they have seen between the cookie-cutters of different investment cultures.

Gisli is a Partner & CEO USA at Beringer Finance – his Twitter handle is @gislio

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