The Trump presidency is bringing significant changes to America, and East European startups are not immune. In fact, they’re feeling the brunt of the new turbulent landscape. But this is not a reason to be intimidated and to shelve plans to come to the U.S. As the rules of the game change, foreign startups simply will need to adapt and change their strategy, and might have to be ready to bear some extra costs.
In general, all foreigners are experiencing greater pressure in various ways, but Russians face a double whammy due to geopolitical tensions and the fact that the political Brahmins in Washington D.C. deem Moscow to be Enemy number 1. Ukrainian startups and those from the Baltic States, which are of course countries that Washington D.C. is committed to maintaining friendly relations, are in a more favorable position.
Ukrainian startups and those from the Baltic States, which are countries that Washington D.C. is committed to maintaining friendly relations, are in a more favorable position.
First and foremost, the new American landscape under Trump is impacting immigration, which is now a major sore topic for all foreigners who want to live and work in the US.
Startups from the East accelerated in New York
“The situation is more difficult compared to the previous batch in 2016,” said Katya Dorozhkina, co-founder of Starta Accelerator in New York City.
Starta Capital was established as an investment company in Moscow in 2011. Several investment vehicles were created starting from 2013 before an acceleration program launched in New York City in 2015.
“Out of 10 startups in the current batch, half had serious visa problems. Some got denied, and we had to solve this problem by contacting our local New York congresswoman so she could file a petition on the startups’ behalf, as well as reaching out to the Russian-American Chamber of Commerce asking them to write supporting letters to the U.S. embassy in Moscow. It took a few weeks to sort out, but we did it.’’
Starta Accelerator presents itself as a ‘bridge’ between the tech and financial world of the US and the former Soviet Union, providing East European startups with investment, workspace, and coaches who focus on business development, product adaptation, pitching, sales and marketing.
Starta is itself relatively new in New York, established in 2015, and has already helped 26 tech startups from Russia, Ukraine, and Belarus to move to the US. Its third batch just graduated on May 17, while a new one begins in August. Starta is planning its ICO (Initial Coin Offering) in June, looking to raise $1.5 million to support the further development of the East European companies in the US.
While the US media and political establishment exacerbate the toxic atmosphere concerning all things Russian, for the most part, Americans are pretty good at ignoring such irrational behavior. Dorozhkina encourages Russians not to be intimidated or discouraged, and to focus on finding the right partners in the US. They are there; you just have to go out and find them.
“Since we’re a business accelerator that brings in strong tech companies that then become US companies, as far as American investors and others in the business are concerned, this is all about making money. If the investor is smart and understands where the money is, they don’t care about politics,” said Ms. Dorozhkina. “Investors look favorably upon Starta, and see the difference between us and other accelerators. It’s all about targeting the right investors.”
Cultural challenges
Cultural attitudes are of course another challenge, especially with communications.
“Americans are very tactful and if they don’t understand your accent, they will still make the appearance that they do understand; they’ll nod and even say ‘cool’ but that doesn’t mean they really understand what you want to say,” said Eugene Lobachev, a founder of Suretly, the innovative Moscow micro-lending app.
“It took us about month to start understanding how people communicate here in terms of business, how to schedule meetings and ask for help. There’s a difference in how people do business in Europe and the US,” said Mikhail Ezhov, a co-founder at Anryze, a Ukrainian company with a solution that helps financial institutions with compliance.
“Here’s the solution: We participated in lots of events and meetups, talked to our advisers and mentors and finally found the way how to communicate more effectively,” added Ezhov. “I think it’s an issue of time. Some people need one week to understand what’s going in, some more.”
Certainly, it is no surprise that the American mentality and system are different than what one had at home in Eastern Europe. But the time zone difference can also be an issue for East Europeans — they have one foot here, one foot in Russia, or Ukraine or Belarus.
“These startups have moved to a new country and operate in two very distant time zones, which means that they sometimes work 24/7 to cooperate with their R&D team back in Russia, Ukraine or Belarus. They have to learn to adapt to the local life and social culture. Find an apartment. They learn how to register a company, learn the laws, learn to do accounting, legal issues, etc.”
“If you’re from abroad, then go to a local accelerator or spend on advisors and consultants in order that you will start your business with the least number of mistakes,” said Ivan Terekhin, CEO of BINO, a fully-automated mystery shopping platform. “My advice is to go to your potential American customers and talk to them. You need to understand them or you will lose. Test all possible channels and ideas on how to attract customers and find your own formula.”
Another serious obstacle is that many local investors are reluctant to invest in start-ups in which there is not one American founder. “They believe that a foreigner simply cannot take into account all the nuances associated with the local mentality. So, we have to look for investors who are, themselves, foreigners,’’ said Lobachev.
Lobachev advises being aware of differences in regulations, as well as local social taboos. Race and sexual identity are huge issues in America today, and East Europeans might not fully realize how sensitive these ‘hot potatoes’ can be to many Americans. “In Russia, I am used to one law, here it is necessary to adapt to completely different ones — for example, we can be unfairly accused of racism if one of our users will be refused for even a practical reason.”
Of course, America is a big country, and it’s important to be ready to confront and deal with regional differences in culture and mentality. What works on the East Coast, might not work on the West Coast, or in Texas or Florida.
“We had difficulties with the New York City business climate,” said Anton Gerasimenko, the other co-founder at Anryze.
“I used to live in San Francisco but New York City mentality differs a lot. Also, the whole business ecosystem is different — they’re building startups in SF, but in NY we’re building businesses.”
Seeking business model convergence
Indeed, business models and structure also diverge. Quite often in the U.S., a company revolves around a founder’s idea, who then contracts out to tech skilled experts to build their solution or platform. The average American founder has an idea, but not yet a working product. The East European startups at Starta are real techies who have already built their solution or platform, and they often have traction in their homelands.
“Our startups are stronger from the technology perspective and more mature in terms of the whole startup process itself, and so they get more traction because they have a working product,’’ said Ms. Dorozhkina, but adding that the East Europeans, in general, tend not to be business and sales people.
“So our goal is to help East Europeans with a strong tech background to combine their excellent technological know-how with American entrepreneurial skills. This is the formula that creates successful companies,” she concludes.
