Raising capital in the United States can be both a challenging and rewarding endeavor for international businesses. The U.S. offers a vast market with numerous funding opportunities, making it an attractive destination for companies hoping to expand their operations and increase visibility. However, there are significant legal, structural, and strategic considerations that foreigners must also consider when fundraising in other jurisdictions.
The U.S. market, especially in places like Silicon Valley, is prized for its access to experienced investors and advisors who specialize in scaling high-growth companies while simultaneously providing access to capital.
As a first step, International businesses hoping to expand, gain global visibility, or secure long-term institutional backing need develop an understanding of how U.S. fundraising operates. To successfully fundraise in the United States, foreign companies must understand the influential roles that their legal structure, cross-border tax exposure, market positioning, and company narrative play. All these aspects greatly influence investors and should therefore be carefully thought out.
However, it is impossible for international businesses to be successful in their U.S. capital raise without a partner that has an understanding of the cultural and social nuance of raising funds from the vast array of sources in the United States - especially when those sources are beyond venture capital or other investors that seek to take control of key areas of operations, and the company desires to find private investors first.
This guide addresses the first step, and provides a guide to the key considerations and practical steps that foreign companies must understand to effectively raise U.S. capital, from establishing an investable structure to creating a compelling narrative to successfully sealing an investment.
Foreign business owners should first consider why they want to raise capital from U.S. investors and why they are coming to the U.S. in general. Some of the most common reasons include a greater access to capital, availability of operational resources to build their company, or the hope of creating a rare "unicorn".
While access to capital has changed significantly in Asia over the past twenty years, Silicon Valley and New York have generally remained the standard destinations for investors willing to invest at higher valuations, compared to anywhere else in the world. Many foreigners come to the U.S. to access these top-tier investment opportunities. Silicon Valley’s collective knowledge of how to build a successful technology company is a valuable, high-demand resource. This area consists of numerous experts who have helped scale companies technically or operationally, providing foreigners with the opportunity to learn from them and receive their support through an investment to help build their company. Lastly, with more people buying goods and services online, there is an overall increase in international opportunities. Therefore, this is the perfect time to work with U.S. investors and entrepreneurs for international startups, as more investors are seeking returns in international technology markets.
Depending on the company's goals, there are also "club" style financings among networks of investors who are not affiliated with venture capital or professional investment entities who understand your product and may be prime candidates for seed capital or Series A financing. Access to these investors may be more elusive and dependent on more qualitative factors such as personal or professional relationships with U.S. Family Offices or high net worth individuals from across the United States that can provide financing without founders sacrificing too much control.
Non-US based businesses should consider why they want to raise capital and detail their goals and preferences. Most foreign companies typically raise capital in the U.S. through private markets first, then expand into larger institutional markets later. Public listings are also an option; however, they entail heavy reporting requirements and greater scrutiny (How). Some of the most common forms of capital include venture capital, crowdfunding, private placements, private credit, and public markets.
Venture capitalists (VCs) focus on high-growth potential startups and small businesses in exchange for an equity stake, aiming for substantial returns when the company succeeds through an IPO or acquisition. VCs also grant strategic and operational guidance to help companies expand, while typically investing in sectors such as technology, biotechnology, and life sciences. Types of investors include venture capital firms and individual investors, also known as “angel investors.” Angel investors provide capital to early-stage companies and often offer valuable mentorship and business connections in exchange for convertible debt or equity.
However, venture capital differs from traditional financing in several key ways, as it typically focuses on high-growth companies, invests capital in return for equity rather than debt, carries higher risk in exchange for the potential of higher returns, and offers investors more time to ride market ups and downs. In addition, it is important to consider that venture capitalists will demand at least a seat on the board of directors. Therefore, founders must be prepared to give up some control and ownership in exchange for funding from a VC firm. Using venture capital may be inappropriate for some companies depending on their growth stage, short term financing objectives, and overall capital needs. In other words, there are reasons to use Venture Capital, but there are also many alternatives.
Private placements refer to capital raised through a private offering to sell an interest in the company directly to a limited group of investors, rather than making the offer available to the general public. These private offerings allow investors to avoid the slow, expensive and complicated SEC registration requirements for public offerings which are usually not appropriate when a company is preparing to establish a presence in the United States. These assets are usually sold to specific and high-net-worth individuals and top financial institutions that meet the property eligibility requirements. Usually, only investors who can absorb potential losses are invited to participate. The most common types of private placement investments are preferential allotment and qualified institutional placement. Preferential allotment refers to selling stocks to investors privately, while a qualified institutional placement involves issuing securities to qualified institutional buyers. This strategy is preferred by businesses in need of capital and investors seeking flexible opportunities, as some advantages include having reduced regulatory oversight, being more cost-effective, and having customization options.
Private credit is a type of financing provided by direct lenders and private credit funds. It is typically used for cash-flow lending, asset-backed financing, and acquisition-related transactions, especially when traditional bank financing is unavailable or too restrictive. Private credit is often valued for its speed and flexibility, yet it often comes with more intensive collateral requirements and tighter terms. Thus, companies should thoroughly evaluate the implications of demanded oversight and the level of control by private credit providers to access this particular capital.
Accessing public markets involves raising capital from public shareholders through verified offerings. This route is typically pursued by larger, more well-established companies with significant scale, operating history, and strong internal controls. While public markets provide substantial access to capital and liquidity, they also entail significant ongoing obligations, including extensive financial reporting, disclosure requirements, governance standards, and ongoing regulatory compliance. Therefore, companies must attentively evaluate whether they have the operational infrastructure and preparedness to meet these perpetual public-company responsibilities.
In some cases, investors require international companies to “flip” into a U.S. company, in which the foreign entity forms a Delaware C-corporation and contributes its equity in exchange for shares of the U.S. parent company. However, with an investable U.S. entity, investing in the U.S. and globally comes with additional complexities, such as international tax reporting requirements. Thus, it is recommended to first consider the tax implications, determine which entity owns the intellectual property, and establish the structure of commercial agreements between the entities. Seeking legal advice to help with these primary considerations may be useful. If considering flipping, do it early on. By starting earlier, additional legal fees and complexities can be avoided, rather than when the company and headcount have grown (7).
Although a Delaware C corporation is often ideal for venture equity, other structures are available for different investor types, tax postures, and locations where the business operates. Sometimes, foreign companies form a U.S. subsidiary while retaining the foreign entity as the parent company. This structure is typically used when the primary operations are abroad, but U.S. customers, contracts, or investors play a central role in the company. A U.S. subsidiary is valued for its flexibility in establishing the appropriate contracting entity for customers and partners, as well as its ability to create a clear operational presence in the United States. This arrangement is usually preferred for specific debt arrangements and commercial facilities, especially where other lenders or parties prefer a U.S.-based operating entity (How).
However, it is important to realize that establishing a U.S. legal structure can trigger cross-border tax, withholding, and reporting obligations. Issues related to tax treatment, withholding requirements, and “doing business” thresholds can increase reporting burdens and reduce returns if not addressed early. Businesses should work with experienced legal and tax advisors to develop a plan to address potential withholding, satisfy requirements, and prepare for the reporting implications that often accompany cross-border structures.
To ensure business success and attract investors, the company must first determine whether its product is considered market-fit and growing in a favorable direction. Therefore, it is critical that the business directly interacts with its audience to understand their specific preferences, assuring its product conveys consumer wants and needs. If done properly, product/market fit is more likely to be achieved, resulting in a product with significant growth potential. Success comes from constant communication with customers to continuously address and improve the company’s product, and should thus be a significant focus.
Additionally, a company should clearly determine a large total addressable market (TAM). A small TAM could pose a significant obstacle to raising capital, as investors are less likely to support businesses with limited scale, especially international entities targeting U.S.-based investors. Therefore, a company should introduce itself by featuring its highest vision, either serving an entire region or focusing on proven, high-growth sectors.
The basics of developing an influential narrative come from three distinct components: the world operates in a certain way, then something happens, and the world is now forced to function in a different way. History follows this exact formula, but fundraising can, too. A company should structure its narrative and conversations with potential investors around these three elements. First, it is important to set the scene by explaining the market, where it exists, the problem, and why this issue is important. Then, it is time to feature the inflection point, such as everyone now owning a mobile phone or remote work becoming more normalized. Lastly, the company must demonstrate that its product solves the problem presented, has tangible traction, and can reshape the market. It is crucial that a company’s narrative poses itself as a story arc that people can follow and resonate with. Practicing new depictions on various people besides investors is key to finding the right portrayal. The narrative is most likely working when the audience becomes noticeably excited.
Many people assume that pre-revenue valuation is centered around results. However, many early-stage companies’ valuations are entirely made up and instead based on potential. Companies starting out should especially focus their energy and time on figuring out what their narrative is and how to pitch it, rather than worrying about determining their valuation based on revenue. A company should calculate the amount they want to raise based on the rough figure that would last them 18 to 24 months. This extended period will ensure sufficient time to accomplish the set milestones while building a margin for error. There is plenty of information available on raising money, but it is crucial that companies avoid the usual trap of believing their valuation must be tied to financial metrics. In the early states, the story and trajectory oftentimes matter more than revenue.
It is necessary for a company to spend time identifying which investors they want to pitch to and which are most likely to invest, to save both the company and investors’ time. International companies must find people who are open to investing internationally while continuously researching new prospects. Platforms such as CrunchBase and AngelList allow individuals to see where investors have specifically invested, helping companies find the specific investors they want to target.
When meeting with these investors, it is crucial that the company’s pitch include a clear, compelling introduction that explains why it is worth investing in. This is an investor’s first impression, so it should be brief, intentional, and persuasive. Instead of focusing on the details, the three core narrative arcs should be briefly covered: the problem the company is solving, its unique solution and traction, and the magnitude and significance of the presented opportunity. Ideally, this should all be said within seven to eight sentences to give investors a cohesive understanding of the business, with added pressure describing its potential to succeed before they even decide to invest.
Once an introduction has been secured, it is key that the company’s spokesperson is prepared for the meetings. Firstly, it is important to avoid assumptions about the audience. The speaker should be able to explain the business and industry in a concise, straightforward manner, treating the listeners as reasonably intelligent but without prior knowledge. Thus, the pitch should omit any industry terminology or complexity that could give investors an excuse to disengage. Clarity, along with simplicity, in describing a compelling narrative will help captivate and engage the audience, which is the overall goal. The spokesperson should also be aware of the type of investor they are meeting with. Different investors, such as angel investors and venture capitalists, often follow distinct processes that can ultimately shape timelines and expectations. An underrated value to display at these meetings is authenticity. Being honest can build a stronger connection between the company and investors. It is recommended to be honest about what is going well in the business, as well as the aspects that are more complicated, rather than making up a response. Accordingly, it is highly recommended to thoroughly understand the company's numbers and metrics to be best prepared and to display confidence in running a successful business. Lastly, it is critical that the audience understands what makes the company so noteworthy, as the speaker must find a way to intertwine the company’s unique selling point within the tailored narrative.
After establishing a strong initial conversation with the investors, who are engaged and captivated, the next step is to sustain this momentum. The spokesperson should proactively present the next steps, rather than letting discussions stall. To maintain investors’ focus and create a sense of urgency, a clear fundraising timeline must be introduced thoughtfully and credibly. For example, the company could illustrate its plan to speak with investors over a set period and its goal of closing the round soon. However, while referring to a deadline can apply pressure to investors and signal a sense of organization and seriousness, it is important to avoid imposing deadlines without leverage. Furthermore, it is important to understand how the U.S. venture ecosystem, especially in places like Silicon Valley, is built on trust. Once terms are agreed upon, even informally, it is imperative that these commitments are kept. Integrity and consistency are key values essential to the fundraising process and to building a strong, long-term reputation.
Fundraising is a valuable tool for building a business. However, this avenue shouldn’t be abused. It is advised not to raise money unless it’s essential; if the company isn’t constrained by limited resources, it should continue building and expanding on its own. Moreover, it is said that startups are essentially a pass-or-fail course, as success ultimately takes the form of an IPO, merger, or acquisition. Along the way, many companies lose sight of this goal and get distracted by fundraising, aiming for the highest valuation or the most money. While these metrics may seem important at the moment, they rarely influence the final outcome. What really matters and ought to be prioritized is building a business that can survive, scale, and reach a meaningful exit.