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International Investment in Austin

foriegn-investment-300x257Last month, a panel moderated by Isaac Barchas–ATI’s director– met at City Hall to discuss strategies startups could use to attract funding from international investors.  The four panelists were Angelos Angelou, founder of Angelou Economics; Jagath Narayan, founder of Ordoro (ATI graduate); Pascal Nicolas, founder of SalesVu (ATI portfolio company); and Rogelio de los Santos, managing director of Alta Ventures.

Austin has already seen the impact foreign investment can bring to its economy.  Angelou estimates that investment from large multinationals like Samsung–who has already invested over $10 billion into Austin–have created over 25,000 jobs.

But it’s not just foreign companies looking for a foothold in Austin that are making investments.  Advances in social technology are beginning to open new pathways to funding for local startups.  Platforms like AngelList allow companies to efficiently market themselves to a large number of geographically dispersed investors, who in turn can utilize the platform to pursue deals beyond their proximity.

It’s exactly what happened for Narayan and his software company, Ordoro.

One day, in between pitches to local investors, Narayan received an email from  a VC firm based in Brussels that had come across Ordoro’s profile page on AngelList.  They had never invested in a U.S. company before, but wanted to visit Austin and learn more about Ordoro.  Long story short, they visited Austin for three days and became the lead investor for Ordoro’s seed round.

“Most people say your VC needs to be in town for you to work with them,” explained Narayan.  “But we send them a report once a month and converse regularly over Skype.  Now they’ve invested in three other startups from the U.S. and geography has not been a constraint at all.”

Rogelio de los Santos, who directs a private equity firm in Mexico, explained how regulation reform abroad is also contributing to the sudden spike in foreign investment.

“In Mexico, pension funds just started investing into private equity in 2009, which is something that happened in the U.S. back in 1978,” said de los Santos.  “This has opened up a tremendous amount of capital and institutional investors are looking for opportunities across the globe, but particularly in entrepreneurial cities like Austin.”

However, it’s important for startups working with foreign investors who might have different expectations and processes than their American counterparts.  Pascal Nicolas spent several months and thousands of dollars trying to work out a deal with investors from the United Arab Emirates that ultimately went nowhere.

“If I had to give advice to someone seeking investment from another country it would be to have several preliminary talks with them via Skype or GoToMeeting.  You have to determine how well your goals and expectations align with potential investors before you make any substantial investment in time or money; two assets startups can’t afford to waste.”