Slide evento "Internazionalizzazione delle startup italiane" - Italia Startup. Slide di Avv. Valentina Casella - Studio Casella e Associati Solicitor.

1. Valentina Casella
INTERNATIONALIZATION OF ITALIAN
START-UPS
The United States

2. 1
Internationalization: Born Global
• The Concept Yesterday (McKinsey & Co. and others in the 90’s)
– Sales focus: “Management that views the world as marketplace
from the outset” (Knight and Cavusgil, 1996)
– Domestic market perceived too small for profitability
– Specialized, high technology products for competitive advantage
• And Today (start-up ecosystem)
– Broader focus: fund raising, R&D, human capital, sales
– Clearly define from the start the activities to do locally and those
to start abroad
– If you believe in Unicorns: need a market of at least 100 million
people to scale your company up to 1 billion capitalization

3. 2
Why The United States?
• The American Dream Factor
• Investment Opportunities
• Large and Profitable Market for Products
• Efficient Market and Regulations
• Strong Startup Culture and Ecosystem
– Sophisticated incubators, investors and
professionals

4. 3
What Formula for Italian Start-ups
• There is no right answer
• The “Multinazionale Tascabile”
– Italian headquarters
– world leadership in market niche with high value added
• The Dual Model (Funambol, Decysion, Gild and others)
– Italy: R&D, human capital
– United States: headquarters, fund raising, sales
– Generally: US holding, with Italian subsidiary

5. 4
How to Attract US Investments
• There is no Right Answer
• Still, three words of advice: You Need Traction
• What is traction? “Quantitative evidence of
market demand” (Naval Ravikant, AngelList
CEO)
• How to get traction?
– Test your product and market in your home country
– Get a seed round at home

6. 5
How to Attract US Investments: What Else?
• Be ready to move to the US
• Find the best “bridge” to move over, don’t do it
in a vacuum
• Build a strong local network
• Be ready to form a US Company
• Work with local professionals from the outset

7. 6
Moving to the United States: the Legal Side
• Immigration
– Identify the best visa option
• Corporate Law and Corporate Governance
– How to best structure your business
– Instruments to raise capital
• Intellectual Property
– Paramount to protect your IP and trade secrets
• Tax
– Be prepared to navigate both Federal and State tax intricacies

8. 7
Corporate Law and Corporate Governance
• Corporate law is state based
– Decide in what jurisdiction to form your company
• What corporate form for your legal entity?
– C-Corporation
– S-Corporation
– LLC

9. 8
Jurisdiction: Why Delaware?
• Preferred by Angel Investors and VCs, top choice for IPOs
• Most sophisticate and flexible body of corporate law
• Director and business friendly
• Predictable and reliable: Court of Chancery case law
• Fast and efficient
• No corporate tax if company does not do business in
Delaware
• Privacy Protection

10. 9
Jurisdiction: Why Not Delaware?
• Other sophisticated jurisdictions exist
• Extra filing fees in the state in which the
company conducts business
• Annual costs for registered agent for the service
of process
• Annual franchise tax for the right to incorporate
in Delaware
• Annual reporting obligations

11. 10
Corporate Form: Which One to Choose
• The LLC
– “Flow through” for tax purposes
– More flexible, less formalities, but higher risk of “veil
piercing”
– As a foreign investor, risk of paying taxes in the US
– VCs strongly prefer c-corporations: both for tax reasons
and for predictability

12. 11
Corporate Form: Which One to Choose (Cont’d)
• The S-Corporation (IRS election)
– “Flow through” for tax purposes
– Similar formalities as C-Corporations
– Limitations on ownership (max 100 shareholders, not
for non resident aliens)
– VCs strongly prefer c-corporations: both for tax reasons
and for predictability

13. 12
Corporate Form: Which One to Choose (Cont’d)
• The C-Corporation
– Not a “flow through” entity tax wise: shareholder face
double taxation on dividends
– More formalities to comply with
– Perceived as more solid by investors
– VCs strongly prefer c-corporations: both for tax reasons
and for predictability
– Only viable vehicle for IPOs

14. 13
Raising Capital: Before the VCs
• Convertible Notes
– Convertible debt instrument, with maturity (circa 18 mo.)
– Interest rate (around 5%)
– Converts to (preferred) stock upon “Qualified Financing”
(around $1million or more)
– Conversion price determined through lower of cap and/or
discount (usually 20%)
– If the company is sold: conversion or premium on investment
(around 2x)
– Pros: company valuation not needed at the outset, relatively fast
and cheap process

15. 14
Raising Capital: More Flexible Instruments
• SAFE (Simple Agreement for Future Equity)
– Y Combinator, 2013
– Not a debt instrument: no maturity, no interest
– Cap and/or discount
– Promise to receive (preferred) equity in the event of a future equity
financing (typically not qualified)
• KISS (Keep It Simple Security)
– 500 Startups, 2014
– Two instruments: Convertible Debt (a standardized convertible note)
and Convertible Equity (similar, with no interest rate)

16. 15
To Wrap it All Up
• Get the activities world map right
• Get traction
• Get on the move
• Get the right advisors
• Get the money
• Get the market
• Good Luck!