It is a battle to break into any market, but for small cap tech plays the US can be particularly challenging given the dominance of the so-called FAANG stocks (Facebook, Apple, Amazon, Netflix, Google).

Two Aussie small caps that have succeeded in expanding into that market are LiveTiles (ASX:LVT), which makes AI software and has a notable partnership with Microsoft, and Tinybeans (ASX:TNY), which operates a social media platform intended for private use among family members to share their children’s growth.

Stockhead spoke to the heads of both companies to get their take on the challenges they faced in trying to conquer the US market.

 

Key differences

Tinybeans’ co-founder Eddie Geller has been in the US for nearly five years.

He said the major difference between the US and Oz was scale and competition.

“The market here is so big that you’re competing for time and attention from people,” he said.

“More people here are more inundated with requests, so many don’t get filled.

“Few take meetings from people they don’t know, so in short the competition is simply more intense. More money, more people, more ideas.”

He also noted that while Australia serves largely its own, the US system serves not only its own but “the many that come from all over the world to ‘make it here'”.

 

A tech & investor perspective

LiveTiles co-founder and CEO Karl Redenbach told Stockhead that Australia had much to learn from America on disruptive innovation.

“What sets the US apart is the depth of SaaS product and engineering expertise, their support for home grown entrepreneurship, and a bias for growth over profitability,” he said.

“US investors are typically more sophisticated in knowing that SaaS gross margins and recurring revenue models will result in profitability at scale.”

His co-founder, Peter Nguyen-Brown, admitted Australia had a growing risk tolerance and start-up ecosystem.

But he believed some things Down Under needed to change, including tax rules around employee options, consistency in R&D tax concession policies as well as investing in technology and business education.

 

Fighting for market share

One of LiveTiles’ key partners is Microsoft. There are several aspects to its partnership, but easily the most important is LiveTiles’ software being offered to Microsoft clients as part of its SharePoint “home sites”.

“Microsoft have played a significant role in our growth and will continue to play an even more important role as LiveTiles continues its trajectory into the next tier of global software vendors,” he said.

LiveTiles’ Teams solution has more than 13 million daily active users. It is the fastest growing application in Microsoft’s history.

Networking with the giants before you leave Australian shores can be important as well.

Both of LiveTiles’ founders, Redenbach and Nguyen-Brown noted that they had been working with Microsoft in Australia and the US as a services partner before LiveTiles for nearly 20 years before collaborating.

Read More:

Microsoft loves LiveTiles and shareholders do too

 

Where to set up shop

LiveTiles have multiple offices across the US, including in San Francisco. But LiveTiles’ headquarters is in New York.

Redenbach told Stockhead the ‘Big Apple’ was the city of choice because it was close to prospective enterprise and business customers.

He labelled the alternative approach as,”trying to follow the Silicon Valley crowd”.

But Redenbach advised against limiting your markets to just one city, pointing out that it was easy to get lost trying to cover every part of the country.

“Pick a home base  – city or state – and start there for talent, customers, partners, and then build out your network,” he said.

 

Going all in

Tinybean’s Geller’s final words of advice to aspiring tech founders was to “commit and be all in”.

He added that they should also leverage relationships as much as possible.

“I know its simple but it works. And never stop hustling,” Geller said.

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