How to do business in California

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How to do business in California

Exuberant, maverick and curious (in both senses), California is the antithesis of Trump’s insular vision for the US. And, as we hear from British expats who have flourished in the world’s largest subnational economy, it has much to offer foreign entrepreneurs

Talented young developers in Silicon Valley are using a new yardstick to help them determine which hi-tech start-up to work for.

Forget six-figure starting salaries and handsome stock options in a firm with decacorn potential – it’s all about unlimited vegan tacos and cappuccinos made with grass-fed butter now.

According to Tim Crouch, the Department for International Trade’s regional director for the western and central US, they are increasingly rating potential employers by “how well stocked their snack cupboards are. It’s a visual statement of a company’s generosity and how much it will care about you,” he explains.

Some might see this as the latest case of Bay Area barminess, following hard on the heels of in-house philosophers and extreme “biohacking” regimes (Twitter CEO Jack Dorsey recently tweeted about going on a 22-hour fast). Yet savvy leaders here see workplace culture as the key to nurturing the type of creativity that’s consistently helped California to come up with world-changing innovations – from denim jeans to smartphones.

While they often seem wacky at first sight, such practices tend to enter the mainstream quickly. For instance, the “walking meetings” pioneered by Steve Jobs at Apple were widely dismissed as eccentric affectations until relatively recently. Public Health England now recommends their use to reduce stress and back pain among employees.

“California has an attitude that makes it OK to think off the wall. There’s no such thing as a bad idea here,” says Simon Elliot, an IoD fellow who decamped from the UK to the San Francisco Bay Area 10 years ago to start a software consultancy.

“Added to the education system and all the venture capital money here, this has created the perfect ecosystem for people to invent, create and thrive.”

The state’s flourishing tech, entertainment and agricultural sectors boosted its GDP to £2.1 trillion last year, meaning that California (population: 40 million) has overtaken the UK (population: 67 million) to become the world’s fifth-largest economy.

Doing business in California

Much of Facebook’s office complex at Menlo Park in Silicon Valley was designed by renowned architect Frank Gehry

Golden opportunities

Given that California is the driving force behind tech such as autonomous vehicles and AI, as well as home to Elon Musk’s Hyperloop high-speed train project and Nasa’s Jet Propulsion Laboratory, it’s no wonder that Crouch believes the “innovation coming out of here will define the next half-century of the world”.

Elliot, who is now vice-president of strategic partnerships at Fortune 500 firm Aramark, notes that this factor has attracted “some extremely bright people from all over the globe” to California.

Notable recent arrivals from the UK include Moonfruit founder Wendy Tan White, hired by Google’s parent, Alphabet, to become VP of its X “moonshot” division; former deputy prime minister Nick Clegg, who is now Facebook’s head of global affairs; and David Cameron’s former adviser, Steve Hilton, who has co-created political fundraising start-up Crowdpac.

British tech expertise is also behind two of the biggest products currently striking a chord with health-conscious Californians: mindfulness apps Headspace and Calm. The latter, offering adult bedtime stories narrated by Stephen Fry, is the brainchild of Michael Acton Smith, creator of the phenomenally popular online game Moshi Monsters. In February the seven-year-old business became the world’s first mental health venture to be valued at $1 billion (£770 million).

British creativity – as personified by Slack co-founder Cal Henderson and Apple design chief Sir Jony Ive – often provides the practical, profitable yin to California’s fantastical yang, according to Crouch.

“The UK and America might have a shared culture, but there is a difference in perspective,” he observes. “In some ways British innovators are scrappier – we are able to do more with less. That’s different from the Californian ‘anything is possible’ ethos. If you can combine the two approaches, you’ll get more innovation because of the diversity of thought.”

In terms of emerging sectors of opportunity, biological engineers from the UK are particularly in demand in California right now, while tech experts who helped to make London 2012 a success could become highly sought-after in Los Angeles in the coming few years, as the city gears up to host the Summer Olympic Games for the third time in 2028.

The movie industry has been a mainstay of the Californian economy for the past century, of course, but the advent of streaming has meant that “nobody talks about Hollywood any more, because the studio system is in major crisis”. So says Charlotte Bavasso, co-founder of Nexus Studios, a London-based production company that set up in LA 18 months ago.

This disruption has created opportunities for smaller players such as Nexus, whose animated short This Way Up secured an Oscar nomination in 2009.

“It’s an exciting time – almost like the beginning of a creative independent scene,” she says. “This has been a wonderful thing for companies like ours. People are taking more risks because they’re not trying to appeal to all of the [demographic] quadrants that the big studios aim for.”

Talent is not the only British export that’s in demand in California. Last year the total value of goods and services it imported from the UK was £4.1 billion, with transport equipment accounting for much of that figure. In particular, Californians have a penchant for British luxury marques such as Jaguar Land Rover, Aston Martin and McLaren.

Doing business in California – Elon Musk

Elon Musk is turning seemingly outlandish ideas into groundbreaking business ventures

Talent on tap

Many of California’s standout achievements stem from the R&D work of its world-class universities. Most notably, Berkeley and Stanford (whose alumni include Google founders Sergey Brin and Larry Page) pump out a stream of ready-made tech entrepreneurs, thanks to the commercial slant of their courses and their incubator programmes.

“Universities here produce high-quality graduates and are linked to industry very explicitly,” Crouch says. (Apple has even been known to headhunt undergraduates from Stanford.) It should therefore come as no surprise to any UK firm considering a move to California that wage expectations here are high.

The average starting salary for a software engineer at Fitbit in San Francisco, for instance, is $101,600 (£77,900). But he disagrees with the idea of keeping employment costs down by bringing British staff stateside. “One of the key reasons for being here is to tap into the talent pool – you’re buying a premium product. If that cost is too high, California is probably not the place for you,” Crouch says.

IoD Yorkshire member Richard Doyle, an investor in LA-based software firm Numecent, argues that   the most brilliant graduates are unlikely to be attracted to new or lesser-known ventures. “We’ve found recruiting expensive and difficult here,” he reports. “Why would they join a small start-up when Google is offering massive packages? They almost need to have a connection to be attracted to your firm.”

Indeed, the titans of Silicon Valley are such a strong magnet for talent that the All-Party Parliamentary Group on Artificial Intelligence warned last October that an AI brain drain of UK tech graduates to California was making life hard even for British developers.

But some observers of Californian workplace culture believe it’s possible that innovative perks might just prove more attractive than big financial rewards. As Crouch says: “There’ll be an expectation from anyone you hire here that what you offer as an employer is not measured in terms of salary alone.”

Which brings us back to the aforementioned vegan tacos. Elliot argues that such benefits are often less benevolent than they seem at first sight. “These firms might promote everything being free, but offering your staff supper at 6pm encourages them to stay longer in the office. And those free Wi-Fi-enabled buses whisking people to work are actually boosting their productivity too.”

But the standard Silicon Valley method of attracting talent is to offer equity and/or share options. This contrasts with the British approach, because, as Elliot notes: “UK companies are reluctant to look at stock because they see it as their crown jewels.”

In March, Lyft became one of the first tech unicorns to go public, floating on Nasdaq. With Airbnb, Pinterest and Uber expected to follow suit, Elliot expects that there will soon be “quite a lot of instant millionaires” in San Francisco.

That money will come in useful, as the cost of living in this once-bohemian city is already soaring. A lack of affordable real estate has led many tech firms to decamp 400-plus miles down the Pacific Coast Highway to form the so-called Silicon Beach cluster in LA. Google, Snap and YouTube have joined a wide range of start-ups working alongside the hippies and weightlifters around the edgy enclave of Venice.

“Ten years ago, if a British company had an office in the US, it would be in New York, but Los Angeles is undergoing a revolution,” Bavasso says. “It’s right at that cross-section of brands, technology and entertainment.”

Doing business in California

Ride-sharing app Lyft floated on Nasdaq in March, raising expectations that other Silicon Valley unicorns will follow suit

Just say ‘yes’

Californian workplaces are highly progressive, especially compared with the rest of the US. The state has taken the legislative lead on issues such as employment rights, LGBT+ equality, renewable energy (10 per cent of cars sold in California are electric), online privacy and even cannabis consumption. All companies with HQs in the state are required to have at least one female board member, for instance.

Such liberal policies contrast starkly with those of the national government. Donald Trump has made no secret of his disdain for California, describing the streets of San Francisco as “disgusting” and threatening to withdraw federal funding.

Ever since he entered the White House in 2016, there has been a notable “Calexit” campaign in favour of the state’s secession from the US. Indeed, in its own way California has already acted like a sovereign nation.

For instance, in 2017 its then governor, Jerry Brown, bypassed Trump – an avowed climate-change denier – when he signed a deal with China’s president, Xi Jinping, to expand trade between California and China, with an emphasis on green technologies that could help to cut both parties’ carbon emissions.

Many British entrepreneurs arriving in California find that its biggest charm – and business benefit – is its irrepressible “can-do attitude”, according to Bavasso. “This energy is something we experience daily here,” she says. “It isn’t replicated anywhere else in the world.”

Doyle observes that a dose of good old- fashioned British realism serves as a useful counterpoint to Californians’ relentlessly peppy approach. “Their mindset is: ‘I have this new product and it’ll be massive within 30 seconds.’ We Brits are a lot more pragmatic – we want to understand how and why things are going happen,” he says.

Such sunny optimism could also be responsible for Silicon Valley’s “fail fast, fail often” mantra. Entrepreneurs here accept failure as a rite of passage. That can come as a shock to British expats, says Elliot, but he adds that “embracing this culture is important if you want to be successful here”.

For entrepreneurs with a visionary idea, there’s surely no better place to be. If dreams can come true anywhere, it’s in California. When Musk talks about colonising Mars, for example, he’s being deadly serious.

If you want to thrive in California, it would seem obligatory to buy into its “culture of saying ‘yes’. People here look out for opportunities to do so,” Crouch observes. “When you add that approach to California’s outstanding universities, the huge amounts of venture capital and the quality of life here, it’s amazing what you can achieve.”

Getting there

United Airlines flies daily nonstop to Los Angeles and twice daily to San Francisco from London Heathrow. From Glasgow, Edinburgh and Manchester you can also connect to California via New York/Newark. The airline also offers bespoke starter packages to help your business get established in the US. For more information, contact Deirdre.Moloney@united.com.

Click here for insights on setting up in California from Charlotte Bavasso, co-founder of Nexus Studios

Cover feature on sustainabilityFor our guide to the legal considerations for setting up in the US, pick up the latest edition of Director, the magazine for IoD members, which is out from 23 May.

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About author

Christian Koch

Christian Koch

Alongside his work for Director, Christian has written features for the Evening Standard, The Guardian, Sunday Times Style, The Independent, Q, Cosmopolitan, Stylist, ShortList and Glamour in an eclectic career which has seen him interview everybody from Mariah Carey to Michael Douglas through to Richard Branson with newspaper assignments including reporting on the Japanese tsunami and living with an Italian cult.

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