At TechSparks 2021, Capbase’s Greg Miaskiewicz offers an operational framework for taking startups global
For companies exploring to forge new territories as a key opportunity for growth, Greg Miaskiewicz, Co-founder and CEO of Capbase, helps startups and scaleups set the foundation to jumpstart their expansion journey.
When a startup is successful at home, the next logical step is to look beyond its local shores and devise strategies that can cater to wider markets. , , , , to name a few, are some of the startups that have successfully expanded their operational base.
Silicon Valley and the other tech hubs have largely developed due to IPOs, where each IPO leads to the creation of almost 50-100 angel investors or potential founders.
At a fireside chat on ‘How can Indian startups go from local to global’ at YourStory's TechSparks 2021, Greg Miaskiewicz, Co-founder and CEO of , discussed the entire phenomenon of how Indian startups can go from local to global.
Tapping into global markets
Often, many Indian startups wish to make it big in the US despite capturing a large clientele base. Here, Greg stressed on certain factors behind the shift from local to global. Reports reveal that the English-speaking market along with India comprises around one-third of the world’s total population.
“However, whenever an Indian startup is trying to capture the market in a foreign country, the creation of a sales hub is essential to get accustomed with the preferences of the local customers, while figuring out the means of effective marketing for that specific market,” he said.
Changes in strategies and localisation are essential while marketing products for the non-English speaking regions.
Talking about the specific model for Indian startups to form a base in the US, Greg traced back to the classic model of NRIs moving overseas with their engineering hub in India, and a global customer base. However, the recent past has witnessed a change in this model with Indian companies spilling products and reaching out to the US markets or in the West, in addition to forming products for the Indian market. “That is the transition from the historical pattern that we have witnessed,” confirmed Greg.
“For India to make it big in the global tech scene, Indian software companies with global customers and aspirations should have their entire team in India, developing marketing and sales strategies for global customers,” he added. Greg is hopeful about this transition happening soon where Indian companies are equal players for both the global and local markets, building certified global products.
How to set up a company in the US
The only challenge in getting an Indian company registered in the US, Greg shared, could be while getting the employee tax identification number, which becomes a pre-requisite in getting a bank account. To ramp up the process, one of the directors needs to have either the social security number or the International Tax IT number (ITIM).
Besides, there is no need to have a physical address in the US for registering a startup. “Getting access to the US VC hubs is the biggest advantage in getting the startup registered in the US,” said Greg.
It becomes easy for startup owners to get a US Visa if they have accumulated substantial funds. The E1 and E2 Visas are commonly used for entrepreneurs/startup founders immigrating to the US for two-five years. The L1 Multinational transfer VISA is for the ones working in the Indian entities of US-affiliated corporations. If they have been working for a year in India, they can be transferred back to the US by this L1 Visa.
Here, Greg touched down upon another important factor of converting an Indian startup entity into a US one. Is it worth the time, cost, and effort? Greg’s positive affirmation sealed the deal here with the process named Delaware flip.
“A new Delaware company is created with the same directors as the Indian company. The shareholders and investors in the Indian entity give up their shares in exchange for those in the US corporation, and the intellectual property is transferred from the Indian to the US company, and going forward the investors would invest in this Delaware company,” he explained.
In the process, the Indian company becomes an owned subsidiary of the Delaware company, but can continue to employ Indian workers working directly on their payroll, benefits, etc.
Registering in the US domain
As Indian startup owners might get bewildered by the process of registrations in the US, Greg simplified the process in easier terminologies. “First is to file the articles in the corporation, set up the board, bylaws, and do the founder’s equities,” he added.
Having done that, the founders need to acquire the employer ID number, the employee stock option plan to grab equities, and then finally build the products for customers to get money or investors.
This also leads to the question of international compliance and global hiring for startups. Once the startup gets registered as a Delaware corporation, it would have to meet compliance requirements in the US. Now, hiring an Indian employee in a Delaware corporation effectively produces a host of choices.
“That employee can be hired as an independent contractor, and most importantly, registering a sub-entity or franchise in each jurisdiction from where you would be employing people,” clarified Greg.
Now, depending entirely on the local employment and tax laws of that particular jurisdiction, it might be cheaper or expensive to use a partner-employee organisation. “For Capbase, most of our employees abroad prefer to be classified as independent contractors as they need to pay less tax,” he added.
So, don’t be afraid to go global as a startup even when you’re small. Just make sure you do a little bit of upfront planning to account for the extra overhead that comes with travel, coordination across time zones, and dealing with multiple government agencies.
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