AI Gives Foreign Founders an Edge

Andreessen Horowitz (a16z), a renowned venture capital firm, has long been associated with its ‘American dynamism thesis.’ However, the firm’s focus on supporting foreign founders has gained significant attention in recent times.

According to Gabriel Vasquez, a partner at a16z, ‘44% of our investments in the Apps Fund One and Two have an international founder.’ This percentage is a testament to the firm’s commitment to backing talented entrepreneurs from diverse backgrounds.

Vasquez, along with general partner Angela Strange, is the driving force behind a16z’s Borderless Founder network. This initiative aims to support immigrant and international founders, acknowledging that great companies can emerge from anywhere in the world.

The premise of a16z’s Borderless Founder network is that foreign entrepreneurs now have an edge over their American peers, particularly in the AI-dominated cycle. ‘There is now an advantage to having one foot in your home country, and one foot in Silicon Valley,’ Strange and Vasquez wrote in a recent post.

The Shift in Buying Patterns

Historically, enterprise startups have been hesitant to engage with startups from outside the U.S. However, the past three to five years have witnessed a significant shift in buying patterns. ‘The buyers from countries outside the U.S. were not moving rapidly, and their willingness to pay was very low,’ Vasquez explained.

However, this trend has reversed, with startups now securing major clients worldwide, even in less cutting-edge markets. ‘When we started hearing from international seed-stage startups working with Fortune 500 companies, we thought this might be an exception, but it was clearly a trend,’ Vasquez said.

Examples of international AI startups signing major clients early on are now abundant. This shift can be attributed to AI, which has made legacy players realize the need to buy third-party solutions to remain competitive, even in areas where human labor is still affordable.

The Rise of International AI Startups

Europe, in particular, has seen a surge in international AI startups. ‘Software never really picked up in the region, because you were competing with cheap labor,’ Vasquez said. However, AI agents have become commonplace in customer service and more, making it easier for international startups to secure clients.

According to Vasquez, AI has been the driving force behind this shift. ‘There’s so much appetite at the enterprise level for companies all around the world to consume AI, but American startups don’t have the speed yet to go serve the entire market from day zero, so they obviously prioritize U.S. companies,’ Vasquez explained.

This leaves the door open for local founders to sell AI solutions to companies in their country, while splitting their time between home and the U.S. ‘The concept of headquarters is something that is changing a lot; it’s just more fluid,’ Vasquez said.

Talent and Access

Access to talent is a key differentiator for international founders. ‘Right now, recruiting in Silicon Valley is the hardest thing, because you’re competing with Anthropic and OpenAI that have raised billions and billions of dollars for the best talent,’ Vasquez said.

However, international founders often tap into the talent pool that exists in many places outside of the U.S. Talent clusters are also the reason why Vasquez has been spending a lot of time on a plane, often in Stockholm, in search of the next unicorn.

Some of the top AI scaleups are European academic spinouts, and VCs are going after them. ‘European talent remains one of America’s biggest startup advantages,’ Dealroom founder Yoram Wijngaarde noted.