One of the best things about angel investing is that it’s a global endeavor.
No matter where you live, you’re probably not far from a founder with a great idea.
And, if you want to, you can play an important role backing startups all over the world.
But before you start sending wire transfers to New Delhi, Hong Kong, or Beijing, hear me out: Investing in foreign startups isn’t all it’s cracked up to be.
In my experience, it matters where you invest. And I’ve found that investing in startups in my own backyard comes with a suite of benefits that foreign investments just can’t match.
I’m not saying you should ignore startups in Silicon Valley just because you live in Boston. (That would be some pretty bad advice.)
But backing companies that are headquartered overseas can be riddled with complications.
First of all, it’s a headache to communicate with founders who are 12 time zones away.
Think about it. Planning a call or meeting with a busy entrepreneur is tricky at best, even if you both live in the same city.
So imagine trying to get a founder to get on the horn in Beijing.
There is not a single hour of overlap between those two workdays. I hope you like taking business calls at 4am!
You’re also more likely to run into language barriers, cultural misunderstandings, market mishaps, legal pitfalls and more.
Narrowing your scope to startups within your own country makes life a lot easier.
Better communication means you’ll get better and more frequent updates, quicker answers to your questions, and, if you’re lucky, opportunities to meet the entrepreneurs you’re funding in person.
Now, there’s a very important difference between where a business is headquartered and where it can operate.
Ideally, you want to invest in companies that are based within your country – but operate globally, or at least plan to do so eventually.
That, of course, is because the global market for any product or service is many orders of magnitude larger than that same market, confined to one country (or worse – one state).
If a startup exclusively markets and sells its products to people in Alaska, that business has an absolute maximum customer base of around 740 thousand people.
Maybe that sounds like a lot of people, but… it’s a mere ten-thousandth of the global population.
Of course, no startup will ever successfully sell to every human being on earth. The point is that you want to invest in startups that will at least try to.
“Act locally, think globally,” certainly applies here.
Check out the video above to see what I mean.
You won’t want to miss it.
5 responses to “Location, Location, Location: Where You Invest Matters!”
March 27 2019