A while back, I met a really interesting fintech startup. Revenue was growing like crazy, 30% MoM. So why did I pass?
Because I stick with what I know. The company was in Nigeria, and the market is just too unfamiliar.
Like a lot of US investors, I only invest in a handful of countries: the US, Canada, the UK, Ireland, Australia and New Zealand. Out of 31 investments, only two are abroad, in London and Toronto.
But why not just seize the best opportunities wherever they are? Let me explain…
Languages I Can Speak
I need to see a product in action before I invest. And it needs to be in a language I speak.
You could have the best product ever. But if it’s in Hindi, I can’t understand what’s going on.
This is why I stick to products that are in English. Investing is hard enough without a language barrier.
Boots on the Ground
I know people in NYC and SF. Good deals come to me early.
The same isn’t true in Germany, Brazil or Kenya.
The best companies in those countries will be picked off by investors who live there. I’ll get the scraps.
Predictable Legal Environment
Countries where I invest have a similar, common law framework. All are pretty friendly to startups, especially the US.
Contrast that with Germany. Over there, it can take months and tens of thousands of euros just to get incorporated.
That puts a German startup at a huge disadvantage.
And if you think the German environment is unfamiliar, try India, China or the Ivory Coast.
Political and Economic Stability
The countries where I invest are all politically and economically stable. Unfortunately, much of the world isn’t.
Let’s use Ethiopia as an example. I’m sure there are some incredible Ethiopian entrepreneurs. But good luck investing there.
If we invest in Ethiopia and our customers are there, they’re paying us in the Ethiopian currency, the birr. The birr’s value has dropped by half in just the last month.
Even if we make a fortune in birr, it won’t add up to much in dollars. Throw in the risk of war with Somalia, and the country is not investable.
Tiptoeing Onto the Continent
I’m wary of investing outside the markets I know best. But I’m also doing something a lot of American investors are doing right now: carefully tiptoeing onto the continent.
Two of the most exciting startups I’ve seen this year were in the Netherlands and France.
These countries have incredible AI talent. The products are in English and the customers are mostly in America anyhow.
Best of all, the valuations are a lot more reasonable than in the US.
I haven’t made any investments on the continent yet. But later this year, I probably will.
Even then, they’ll need to incorporate as a Delaware C Corp. Predictability matters.
Wrap-Up
Making money investing in startups is really hard. Even if we stick to our own backyard, the odds suck.
Add in unfamiliar markets, unstable currencies or shaky governments, and the difficult becomes nearly impossible.
So I’m sticking to what I know: a handful of developed, Western markets. There’s more than enough here to keep me busy.
Where do you invest?
More on tech:
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