Foundamental | Global Growth Gains ⎟ Why Building For The US From Outside Creates Value

Global Growth Gains ⎟ Why Building For The US From Outside Creates Value

November 15, 2024

Discover how founders outside the US can leverage cost advantages to build successful US-focused businesses in construction tech, with insights on talent, valuation, and market entry strategies

Patric Hellermann

Shub Bhattacharya

Global Growth Gains ⎟ Why Building For The US From Outside Creates Value

This Week On Practical Nerds - tl;dr

The US market is uniquely accessible to foreign companies due to cultural influence and dollar dominance

Cost advantages can be 3-4x when building from markets like Europe or India

Outcome-focused business models are particularly well-suited for cross-border expansion

Field software and enterprise solutions require deeper local presence

Recent valuation convergence makes building outside the US increasingly attractive

Global talent pools have evolved to match US quality in many sectors

The closer you are to an outcome or to a globally unified customer, like in CAD or planning and design, the better for you.

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The US market is uniquely accessible to foreign companies due to cultural influence and dollar dominance

We're living in a world where the United States has spent the last 80 years exporting two primary things: culture and dollars. This has created a unique dynamic where the US market is surprisingly accessible to foreign companies. Unlike other major markets such as Germany, India, or Japan - which require deep local understanding and presence - the US has developed a system of high absorption through osmosis.

This accessibility stems from widespread familiarity with American business culture, practices, and market dynamics. Most entrepreneurs worldwide have grown up consuming American media, understanding American business practices, and speaking English. While local nuances and state-specific requirements still matter, the baseline understanding of how things work in the US is significantly higher than for any other market.

This cultural export has created a foundation where founders from outside the US can enter the market with a reasonable understanding of customer expectations, business practices, and market dynamics. It's not perfect empathy, but it's far beyond what you'd need to enter any other major market globally.

Cost advantages can be 3-4x when building from markets like Europe or India

The numbers tell a compelling story. In the US, particularly on the coasts, a million-dollar pre-seed round might get you two high-caliber hires for 12-15 months. The same amount in Europe could support three to four hires for two years. In India, you might be looking at double that capacity, both in terms of team size and runway.

This isn't just about stretching dollars - it's about fundamental cost structures. A senior hire in San Francisco might command $200,000-300,000 annually. That same budget in Bangalore could get you a team of seven to ten high-quality professionals doing similar work. This creates a massive structural advantage in terms of capital efficiency.

The cost advantage becomes particularly crucial in categories requiring extensive product development and high shipping velocity. For instance, in robotics and 3D CAD, where reaching minimum viable feature sets demands substantial development effort, the ability to maintain a larger team for the same budget can be the difference between success and failure.

Outcome-focused business models are particularly well-suited for cross-border expansion

Not all business models are created equal when it comes to cross-border expansion into the US market. Construction technology particularly rewards outcome-focused approaches. When you can deliver concrete results to construction managers, sites, and supply chain partners, the conversation becomes less about where you're based and more about what you can deliver.

This dynamic works especially well for:

Cross-border marketplaces
Robotics solutions
Outcome-as-a-service models
Software with globally unified AECS tech customers
CAD/3D software
Data infrastructure for planning and design

The key is that these models don't require extensive process changes or deep integration with local workflows. Instead, they focus on delivering measurable outcomes that speak for themselves, regardless of where the solution originates.

Field software and enterprise solutions require deeper local presence

While many business models can thrive with a light US presence, some categories demand deeper local integration. Field software for general contractors and enterprise back-office solutions face particular challenges when expanding cross-border into the US market.

These solutions often require extensive localization across multiple dimensions:

Infrastructure integration
Business process alignment
Supply chain workflows
Local terminology and units
In-person enterprise sales
Deep customer relationships

The more a solution requires intimate, in-person conversations and deep integration with local processes, the more the cost advantages of building elsewhere diminish. While it's not impossible to succeed in these categories from outside the US, the thesis needs to be different from a pure arbitrage model.

Recent valuation convergence makes building outside the US increasingly attractive

The landscape has shifted dramatically over the past decade. Ten years ago, building outside the US came with significant disadvantages - valuations were 3-4x lower, and funding access was limited. Today, that picture has changed substantially.

In Europe, early-round valuations (pre-seed, seed, Series A) are now largely on par with the US. In fact, during 2022-2023, construction tech valuations in Europe sometimes exceeded US levels. India has also seen significant valuation convergence, though still offering investors relatively fair value propositions.

This valuation convergence, combined with persistent cost advantages, creates a compelling argument for building outside the US. You can now achieve similar valuations while operating at a fraction of the cost basis. This efficiency translates directly to equity preservation and better capital utilization.

Global talent pools have evolved to match US quality in many sectors

The talent equation has also evolved significantly. In certain construction tech specialties, particularly robotics and 3D/CAD development, regions like Europe often boast superior talent pools. This creates an interesting dynamic where you can access top-tier talent at lower costs without compromising quality.

The development of strong technical ecosystems outside the US means founders can build world-class products without relocating their entire operation. Many successful companies maintain small US offices for client-facing functions while keeping their core development teams in more cost-effective locations.

This model has proven successful repeatedly, with numerous companies appearing "American" to their clients while maintaining significant operations elsewhere. The key is understanding which functions truly need to be in the US versus which can be handled remotely without impacting quality or customer satisfaction.

#construction #globalbusiness #startup #vc

Global Growth Gains ⎟ Why Building For The US From Outside Creates Value

This Week On Practical Nerds - tl;dr

🎧 Listen To This Practical Nerds Episode

The US market is uniquely accessible to foreign companies due to cultural influence and dollar dominance

Cost advantages can be 3-4x when building from markets like Europe or India

Outcome-focused business models are particularly well-suited for cross-border expansion

Field software and enterprise solutions require deeper local presence

Recent valuation convergence makes building outside the US increasingly attractive

Global talent pools have evolved to match US quality in many sectors

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