Crawford Beveridge, Executive Vice President, People and Places, and Chief Human Resources Officer at Sun Microsystems Inc, Chairman of Sun Microsystems Europe and a member of SEP’s board US imports

The exodus of technology companies to the US is building, with some of our best entrepreneurial companies moving across the Atlantic, and the European VC community must think about how they respond to this.

The US is indeed a hugely important market for technology companies, and it is also true that it is notoriously difficult for an overseas company to set up an effective sales channel that will enable them to tap into that market. One of the main reasons that companies are moving to the US is the belief that a physical presence is necessary to achieve this. However, many will find to their frustration that it takes far more than a local office to establish the channels they need to tap into the market.

For most young technology companies, the ideal solution is to partner with an organisation that has already established strong marketing channels. If a small company can form a partnering relationship with a company like Sun Microsystems then the vast resources of Sun’s sales channels are opened up to them.

Yet even if a company were based right next door to Sun’s HQ in Santa Clara, achieving this kind of partnering relationship without the right contacts is almost impossible. In an organisation of 40,000 people, finding the best person to talk to in the first place is hard enough. Even in my position, it can even take a week or more to find the right decision-maker in my own
organisation! An outsider would find it much more difficult, and harder still to gain that individual’s attention and interest without an endorsement from a source they trust.

Rather than focusing too much on the issue of geographical proximity, companies should perhaps concentrate more effort on finding US based non-executive directors with an industry background. Someone who works or has worked directly in your sector and has direct connections with organisations you want to get close to and a network of contacts who can help open doors.

Finding a US NXD with this kind of background may seem like a daunting task in itself, but there are many very able people who have personal or working relationships with the UK who are keen to maintain them and are receptive to opportunities that will help them to do that.

It might seem an expensive exercise to bring someone across from the US for board meetings but the value they bring to
developing relationships and channels for the business will be enormous. It will also undoubtedly cost far less than trying to set up direct channels or find channel partners without their help.

European VCs should also consider their role in this. VCs with an international outlook and good financial and industry networks can offer companies a great deal of support as they set out to make these contacts. US VCs can be strong allies in this effort and can be a good option as a syndicate partner. Although some US VCs may seem too overpowering and controlling to be brought into a syndicate without them taking over, with careful research it should be possible to find a boutique firm with similar values.

It may also be a challenge to convince a US investor to join a syndicate investing in a European company and led by a European VC, as they prefer to have their investments nearby and to have high levels of control over their management. Convincing them of the benefits may therefore take time and good working relationships will not develop overnight. But, when established, these links can only enhance the UK venture capital industry’s offering to the technology community and help them win more deals rather than lose them. It may even help halt the exodus in its tracks.