Take flight: looking for capital? Consider looking abroad. International investors can provide funding—and much more

Entrepreneur, July, 2005 by David Worrell

Have Money, Will Travel

You don't need an office in Budapest to attract European investors, says attorney Heather M. Stone, partner and head of the fund formation practice group at Edwards & Angell in Boston. Stone has worked on both sides of the table, helping U.S. entrepreneurs negotiate terms with foreign investors and vice versa.

"Many foreign [investment] firms focus less on geographic criteria than on what their fund is going to invest in," says Stone. Many Canadian, European and Israeli funds, in particular, plan on making some or most of their investments in the U.S. "Based on the technology they are interested in, that's just where those companies are," she says. "They sort of back into it."

That should be welcome news for entrepreneurs in cities that lack a strong VC presence. U.S. venture firms tend to be concentrated in the largest cities like San Francisco and New York City, leaving many second-tier cities hungry for capital. Looking overseas may be the right move for entrepreneurs in those cities, especially entrepreneurs with products or technologies that can make the leap to foreign markets.

Many foreign funds don't even have an office in the U.S., says Stone. "They just get on a plane," she says. "Most deals are done on e-mail now anyway, so there's some initial travel, but it's not a huge time commitment."

Whether you're looking for foreign markets and partnerships or just a new pool of investors, don't limit your search to the usual suspects in the U.S. If you expand your search internationally, you may find that international investors are looking for you, too.

For a list of the top U.S. VCs for entrepreneurs, turn to "New Growth" on page 68.

DAVID WORRELL is author of the e-book Finding Funding Contact him at david@dworrell.com.