Most Israeli startups target the U.S. as their primary market. As an Israeli entrepreneur, your customers, partners, potential acquirers, future investors, and most importantly, your competitors – are mainly based in the United States. Almost by definition Israeli startups start with an inherent disadvantage when trying to win the U.S. market.
At some point, Israeli entrepreneurs always contemplate whether they should move to the U.S. and if yes, then what is the right time to make this move? For many startup CEOs relocating to the U.S. is a big personal sacrifice. Israelis tend to be close to their families which makes the move more difficult. Also, very often a relocation means that their partner will need to quit his or her job and sacrifice their career. Another big factor against moving to the U.S is the large distance and difference in time zone between the U.S. and Israel. This makes it harder for the CEO to keep managing the Israeli team, get involved in product and R&D decisions, and sustain the company culture they have created. Finally, other large markets such as Europe and Asia are easier to target from Israel.
From what I have seen I truly believe that while all the factors above are important, the benefits of the CEO moving to the United States almost always outweigh the downsides.
First, it is easier to build a strong sales and marketing organization when you are in the U.S. than trying to do this remotely. You will have more time to evaluate candidates, more time to train them, and most importantly you will be able to ensure the vision and culture of the U.S. office stays true to your principles. This is something that is almost impossible to do when you come in and out from Israel.
Secondly, you will be physically located close to the ecosystem you should be part of. For all its hype, Israel is still a small and isolated island far away from the real market. There is a huge advantage in being able to casually meet potential partners, to hear rumors and gossip of what is happening in your industry, to build personal relationships with potential advisors and contributors, to get to know the tech media, and to stay close to future investor. Michael Eisenberg, a partner at Israeli-based Aleph Ventures, summed this well saying “when you are in the Valley, good things just happen”.
Thirdly, being close to your customers is important for your company. Yes, you can frequently fly from Israel to meet customers, but this can’t be compared to being close to them. Being in the same time zone enables you to easily ‘jump by’ which makes all the difference in the world. Once you relocate to the U.S. you will likely notice that your customers also become more communicative with you. Regardless of all the great communication technology available these days, people still have a psychological barrier when they need to make a random call or even a video conference with someone who is in a different continent.
Finally, there is another important benefit that isn’t talked about much. Most Israeli CEOs have a technical background and their comfort zone lies in products and R&D. Therefore, during the early days of the company, they are heavily involved in technical decisions. As the company matures, it is healthy to have the CEO let go of these daily decisions and concentrate mainly on customers, partners, and investors. Once you move to the U.S. you will naturally be less involved in daily R&D decisions and you will spend most of your time building the company’s sales and marketing muscle. Many Israeli CEOs find this thought disturbing, but they always agree in retrospect that this was the right move for the company.
A CEOs relocation to the U.S. takes a toll on the company and therefore is better done when the company is ready for this phase. In the early stages of the startup, it is almost always better to have the entire team in the same physical location while building the core team and capabilities. Only once the startup matures and the focus moves from building a product to building a sales and marketing machine, it is the right time to consider moving to the U.S. This typically happens after the series A or B funding round. It always helps if one of the other co-founders who stays in Israel can manage the local office as co-founders serve as the best bridge between the two distant offices.
The next question that is raised once you decide to relocate is whether it should be to the East Coast (typically NY) or the West Coast (typically the Valley or San Francisco). This is a crucial decision which I’ll try to address in the next post.