When does it make sense to raise money in Silicon Valley?

Mitch Kitamura / October, 2018

Description

Mitch Kitamura launched JAIC’s US investment arm in 2000, and brings a comprehensive background in business expansion between Asia and the US, having invested across 30 startups. At Draper Nexus, he specializes in Consumer/ Enterprise Internet Services and Mobile in US and Japan.

Watch this video with Mitch Kitamura as he explains when it makes sense for an early stage startup to raise money in Silicon Valley, and if it’s necessary to be incorporated in the US to do so.

Video Transcript:

When does it make sense to raise money in Silicon Valley?

I think there are two answers to that. One is right at the beginning.

When you start from scratch building the company and you know there is a market all over the world and you want to try to challenge that. That is the right time. I see a lot of people coming over here to start a company already from the beginning in Silicon Valley.

The second option is that they build a company in Japan or in their local country. They build the momentum of the business and after that, they expand it to be a global business.

It is really either at the beginning or it is at a time when the company is growing and going into the next stage development. The two options depend on the situation of the company and also what kind of product the company is building.

Angel investors, Global investors, and Corporate Venture Capitalists care less about incorporation in the US because they understand global tax issues.

The US venture capitalists like to invest in US corporations because that’s their mandate from their Limited Partners (LPs). But also, because they understand the tax laws. If they invest in Japan where they don’t know the tax law, they are going to hesitate to invest. I would recommend incorporating in the US first so that at least lower the bar and from there you can start talking to the people.

The typical venture capitalist especially in the early stage, they invest in the team and the people. When we invest in people, if we know the people it’s fine, but if we don’t know the people we want to make sure the background of the person, the reference check and what kind of things he or she has done before.

It is important to have somebody locally who we can trust and can give a good recommendation of the person. Like he/she has been working with this company for long and have been successfully doing business, so I think this person will be a good entrepreneur when he/she starts a company. Having a recommendation by some of the famous people or the locally well-regarded people is very important.

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