It is a well-known fact that sports teams benefit from a home court advantage. In fact, NBA teams consistently win about 60 percent of games that are played in their home arenas. The same phenomena is true for international startups which need to compete in the US, outside their comfort zone. This is always the case for Israeli startups that are forced to target the US given the unattractive and small local market.
[I am going to concentrate on Israeli startups for the rest of the blog, but the same holds true for any international startup.]
Why is there a home court advantage in sports? Many different factors contribute, but there are a few that have the biggest impact:
Different stadium– Although the measurement of the court is always the same, there are unique experiences in each stadium (light conditions, age of court, how hard or soft is the basketball rim). These experiences benefit the local team which is used to them. The same is true in the startup world: While the rules of the game are the same, there are small nuances that favorite the ‘local’ competitors. One example is understanding what a customer really means when they give feedback (Israeli entrepreneurs tend to think they heard “yes” when their US customer was just being polite). Another example is doing “small talk“ if you don’t watch local sports or follow local weather. These settle nuances also make it more difficult for international startups to identify and recruit top talent in the US.
Psychological impact- there is a placebo effect to home court advantage: players believe in it and therefore it becomes one. The psychological impact is also true for the international startup when the entrepreneur is away from his local support system: He leaves a lousy customer meeting and there is no one in your time zone he can talk with to help cope with the emotional pain. It’s also easier to think you failed ‘just’ because you are not local.
The travel- This one is obvious- home teams have more time to rest before games. Now think about an Israeli-based startup CEO who needs to travel for more than 20 hours to get from Tel-Aviv to the Bay area! He loses almost a day because of the time zone difference, lands tired and weary after a long non-direct flight, and now needs to be at his best in front of the customer/new recruit/analyst he is meeting. Even if the CEO decided to relocate to the US as the company matured, the R&D team, Product Management and other important parts of the team are still left in Israel. So our CEO still needs to work weird hours because of the time difference and to frequently travel back and forth between both locations. This is also a great opportunity to petition for a direct SFO-TLV flight: http://sfotlv.org/!
Referee bias– Studies have shown that referees tend to favor the home team unconsciously. Same is true when an analyst covers a space and needs to compare the local players he knows well vs. the heavy accent guys he just talked to. Now think about an M&A: Would you want to fly halfway around the world to assess an acquisition opportunity or would you rather drive a few blocks to do so? Finally, being able to generate “buzz” is more difficult when you are not local: Whatsapp has almost a Billion users all over the world and still hasn’t really caught in the US. I am also not sure Waze would have gotten the US momentum without Tim Cook going on stage to apologize for Apple Maps and encourage users to download the app.
If you are an Israeli entrepreneur, there is no need to panic yet as there are many ‘local’ advantages that will help you win. These include things like quickly testing the product on friendly local customers, recruiting a strong core team of people you know, overcoming the first phases of growth pains based solely on trust, being more scrappy and hungry, leveraging the skillset you gained in the army (either technical know-how or managing people), recruiting extremely talented developers more cheaply, thinking outside the box etc.
Recognizing you have an inherent disadvantage is critical for your success. Once you realize this you can start thinking more strategically and find the right opportunities that will help you win the away game. Good VC investors understand this too – it’s impossible to simply ‘import’ an investment thesis that works in the US back to Israel. This is why it’s important to have local presence.