Jeff (Startup Whisperer)

For founders based outside the United States, deciding whether to raise capital from American venture capitalists before or after entering the US market is a pivotal and also a costly strategic decision. The optimal approach depends on your industry, market readiness, and operational objectives. Drawing on recent data that we analysed, here’s a comprehensive look at the factors that should guide your choice.

Key Data on Overseas Startups Raising in the US

A study of 153 overseas startups that raised capital in the US reveals several notable trends. On average, these companies secure their first US investment 4.3 years after founding. Nearly 45% obtain US funding within two to five years, while only about 13% do so in their first year. Interestingly, startups founded after 2015 reach US investors more quickly, with those established in 2020 averaging just 1.6 years to their first US investment (due to 2021 bull run).

Patterns: US Hiring vs. Fundraising

The sequence of US hiring and fundraising varies by industry and can influence the scale of capital raised. About 30% of companies hire US employees before securing US funding, a pattern most common in healthcare, biotech, and payments sectors, typically resulting in lower initial capital raised. Roughly 35% raise US funding before making local hires, a trend prevalent in fintech, software, and IT, and these companies tend to secure larger funding rounds. A smaller group, around 14%, hires and raises in the same year, while a niche 3% raise US capital without hiring locally, often in remote-first or specialized sectors. The data suggests that startups raising before hiring in the US are more likely to secure larger investment rounds.

Industry and Geography: What Shapes the Sequence

Industry and geographic origin play a significant role in shaping US entry strategies. Life sciences and regulated sectors, such as healthcare and biotech, often prioritize hiring US talent before fundraising. This approach is driven by the need for local expertise, regulatory navigation, and credibility with investors and customers. In contrast, digital and software startups-especially in fintech and enterprise IT-frequently raise US capital first, leveraging product traction and global relevance to attract investors before building a local team. Startups from Southeast Asia and Australasia are more likely to establish a US presence before fundraising, signaling commitment and reducing perceived execution risk for American investors.

Strategic Implications for Founders

Fundraising Before US Expansion

This approach is best suited for SaaS, fintech, and enterprise software platforms with strong product-market fit and global appeal. Securing US funding before establishing local operations preserves capital for growth, demonstrates capital efficiency, and allows startups to test US market demand before making significant investments. Typically, these companies secure US investment and then set up US operations within two to three years.

Hiring Before Fundraising

For regulated or capital-intensive sectors like healthcare, biotech, or financial services, hiring US talent or leadership before fundraising is often essential. Building a local team enhances credibility, accelerates regulatory approvals, and signals long-term commitment to the market. The typical path involves recruiting key US personnel, setting up local operations, and then approaching US investors.

Simultaneous Approach

Some startups, particularly those with ample resources or operating in highly competitive sectors, pursue parallel strategies-raising funds and hiring in the US simultaneously. While this maximizes speed and market learning, it requires greater capital and operational bandwidth.

Best Practices for US Market Entry

Successful US market entry requires more than just capital or a local presence. Deep market research is essential; founders should avoid assuming that US buyers behave like those in their home markets and must localize their value proposition accordingly. Strategic partnerships with established US players can accelerate credibility and market access, sometimes reducing the need for immediate local hires. Phased rollouts-starting in select regions-allow startups to test and adapt before scaling nationally. For regulated industries, early legal and compliance planning is crucial to avoid costly delays. While many US investors still prefer local teams, especially at early stages, there is a growing acceptance of remote-first models and global teams.

Practical Guidance by Sector

For enterprise software and fintech startups, focus on demonstrating product traction and global relevance. It is often possible to raise from US investors before hiring locally, but you should have a clear plan for US expansion. In healthcare and biotech, prioritize hiring or partnering in the US before fundraising, as local presence is often a prerequisite for regulatory and investor confidence. Regardless of your sector, align your US hiring and fundraising strategies with your operational capacity and market readiness. Investors seek both commitment and capital efficiency.

“There is no universal rule, but your US hiring strategy should align with your market readiness, funding strategy, and operational capacity. Investors want to see commitment, but also capital efficiency and product clarity.”

Bottom Line

There is no one-size-fits-all answer to whether overseas startups should raise capital before or after entering the US market. The optimal sequence depends on your industry, business model, and market strategy. For most SaaS and digital startups, raising capital before building a US team is often preferable-but this usually requires exceptional traction that signals the potential for a 20x or greater return. In regulated or high-touch sectors, establishing a US presence first is crucial to unlocking investor interest and market access. Many successful startups blend both approaches, adapting as they learn from the market and investor feedback. Ultimately, careful planning, deep market understanding, and a tailored strategy are essential for a successful US entry and fundraising journey.

As a Singapore-based VC, I've witnessed how innovation ecosystems evolve naturally when properly supported. Singapore initially emphasised deep tech but allowed market forces to shape developments organically.

Critiques of New Zealand's funding imbalance misses a crucial point: successful startups need significant market power quickly, regardless of their technological depth. Creating numerous small non-deep tech ventures won't deliver the economic impact New Zealand seeks. You need to continue to focus on both.

Three focused recommendations:

1. Establish a national coordination body with a hands-on advisory panel of experienced entrepreneurs and investors who can directly mentor founders to scale globally. This addresses both fragmentation and practical scaling challenges.

2. Develop diverse funding mechanisms prioritizing ventures with global potential rather than simply increasing startup quantities. Government initiatives on grants, fund of funds support should continue with momentum but understand the signs of change and adapt to it.

3. Implement more talent development/retention programs, one example to take note of is Singapore's NUS Overseas College, which immerses students in innovation hubs like Silicon Valley, creating globally-minded entrepreneurs with valuable networks. Net new migration into New Zealand needs to be positive over time, but this is likely to be the toughest challenge yet.

New Zealand should focus more on building globally competitive companies with proper ecosystem support. I know you can do it. You know you can do it. Whāia te iti kahurangi - pursue that which is precious.