The USA Opportunity

Introduction

Sage Partners’ Gateway to the USA advisory services are designed to help growing European companies, both established and newly emerging, to scale their innovations in USA markets.

We believe it’s time to bring more young European ventures to the USA market because:

  • Innovative ideas are there in Europe.
  • Leading growth market is here in the USA; and
  • Resources and culture of success are here in the USA.

Indeed, the “business of the USA is increasingly in ventures”, as small, entrepreneurial ventures are founded and early stage growth initiatives are developed by larger companies. These businesses, very often built and launched by non-USA entrepreneurs, are scaling up to generate the majority of new USA job opportunities, income growth and wealth creation.

USA-based entrepreneurs are creating more ideas, developing them more quickly, deploying and iterating them more nimbly, raising funds to grow them more aggressively, and driving consumer and enterprise adoption in USA markets than ever before. This entrepreneurship, technology innovation and adoption will be the fundamental drivers of improved quality of life, productivity and economic strength, in the USA and worldwide.

USA innovation and technology adoption

While USA markets are the most competitive in the world, they offer highly attractive conditions for the scaling up and growth of emerging European companies. Indeed, USA innovation is at its most active level in its history. Every sector, from consumer retail to financial services to life sciences to healthcare provider to manufacturing to media and entertainment, is being restructured around digitization, the “cloud”, and data analytics.

USA opportunity attracts more ideas, more talent and more capital from around the world. Barriers to entry are low, particularly as the “entrepreneurial culture” attracts the talent needed to address emerging needs with new (dare we say “disruptive”) solutions. Deeply ingrained systems of venture organization, agile administration, digital and social marketing, virtual distribution, and crowd fund raising are developed and making it easier for European entrepreneurs to “set up shop” in the USA and to scale their ideas into the future “unicorns”.

USA Venture Capital, Access and Investment Returns

USA innovation is fueled by USA venture capital. Over 70% of global venture capital originates in the USA, while 14% originates in EU. More USA VC firms, with larger funding resources, fund more aggressively than EU firms through all, and especially later stage ventures (from seed, Series A start-ups, Series B-C-D expansion and growth)

  • 70% of global venture capital originates in the USA
  • 14% originates in EU
  • USA VC firms financed 5.4x the US$ value and 3x the number of venture deals than EU firms (2015)
  • Over 20 additional animations for each elements

Nearly 50 percent of this global VC investment originates from USA markets where Sage Partners has active venture clients and access to VC networks and funding. These include SF/Silicon Valley (25% of global VC funding) and Boston/NYC/LA (19%) (see Diagram A).

 USA VC deals tend to be in digital technologies (software, cloud internet services, etc.), biotech/life sciences, and media and entertainment. USA success rates have peaked in the last couple of years. Those who fail in a new venture very often return to the next venture smarter and ready to build up again.

USA VC deals tend to be in digital technologies (software, cloud internet services, etc.) biotech/life sciences, and media/entertainment. USA success rates have peaked in the last couple of years. Those who fail in a new venture very often return to the next venture smarter and ready to build up again.

USA strategic exits for venture-backed companies were valued at:

  • USA strategic exits for venture-back companies: $59B (2015)
  • IPOs raised $39B in initial public capital (2015)
  • EU average and strategic M&A exists achieved less than 50% the exit valuations than those in EU (2015).

USA market opportunity and business climate
Why does the USA offer European entrepreneurs and innovators an attractive place to scale up their ventures?  First, the USA opportunity is world class in terms of market demand and purchasing power; and the opportunity is backed by a highly favorable USA business and investment climate.

The USA offers global businesses the world’s largest and most attractive market across most consumer, private enterprise and public services segments.

  • USA population is 323M although growing at less than one percent per annum.
  • EU population is 508M and growing at only .25% per annum (2016).
  • Both markets are growing with major immigration coming from the Americas, the Middle East, and Asia.

Venture CapitalEconomic Freedom

USA and EU economies are nearing comparable size and purchasing power.

  • USA Gross Domestic Product is $17.4 Trillion (28% of the global economy), forecast to grow at 2.4 to 3.0 percent per annum through 2020.
  • EU GDP is $18.5 Trillion (30% of the global economy), forecast to grow at 1.8 to 2.0 percent per annum through 2020.
  • USA GDP per capita is $46,405, over 50 percent higher than EU GDP per capita of $30,240.
  • Unemployment has dropped to 4.9 percent in the US and 4.3 percent in EU.
  • US consumer demand represents over two thirds of US GDP. The current US recovery is driven by consumer confidence and demand particularly in housing, automotive and retail segments.

USA consumer markets are characterized by increasing diversity (e.g. ethnic, racial, cultural) and greater income stratification in most geographic regions. It remains possible to achieve “upward mobility” from all real income levels. The quality of US education, and the cost effectiveness of healthcare for all people, remain highly competitive in the developed world.

The favorable USA business climate is shaped by a capitalist democracy as with several EU country markets (e.g. Netherlands, UK, Germany, Nordic countries). USA is ranked among the highest in the world in terms of “economic freedom”. Economic freedom includes the opportunity to organize to do business; to trade freely overseas; to hire and terminate employees to fit business requirements; to secure venture and growth funding and optimize fiscal liquidity; to retain and protect real and intellectual property rights; and to deal in contracts without corruption or coercion (see Diagram B: Economic Freedom Heat Map).

USA government intervention in private business matters remains relatively limited.

Global trade agreements have opened both import to and export from the USA markets substantially. Progressive USA corporate taxation is both higher than many tax-optimized jurisdictions in EU, as well as lower than many others. The US dollar has remained a strong, stable and ubiquitous global currency, and is forecast to remain so through 2020.

USA political environment is considerably more stable than current presidential political “high season” reports might suggest. The USA Federal, state and local governing structure is remarkably stable. Constitutional law and jurisprudence offer a long term foundation of justice and predictability. Freedom of the press offers transparency and accountability at all levels of government and private enterprise. Government and business corruption occurs, but is most often found and remedied through political cycles and just policing and punishment. The USA business climate and political environment attracts and supports business investment in long term US market growth opportunities.

Summary

Sage Partners is ready to work with European business entrepreneurs and innovators to provide a “Gateway to the USA” and its highly attractive markets, venture capital resources, and business climate supporting innovation and growth.