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On May 2 there will be this event in Milan: http://link.baia-network.org/events/baia-panel-dual-companies

 

The topic is hot. Does it make sense to create a dual company in the US and  Italy? Assigning the IP to the US company does help in finding VC money? What are the costs involved?

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Matteo,

Creating a dual company, i.e. a business framework in which independent companies operating under the laws of different countries (in this case Italy and the U.S.) agree to cooperate for the sake of the larger enterprise, has distinct benefits and drawbacks, but overall, I would say that the benefits win in the long run.  As much as people don't want to speak about it, it is absolutely true that U.S. companies hesitate to engage in business with a foreign company, largely because of our own parochialism.  The U.S. has been so accustomed to having the world coming to its door with their representatives speaking fluent English and willing to do things the American way that the shift in the tide of global business has forced a certain degree of discomfort on the that same business community.  In the midst of experiencing that discomfort, certain inner unexplored prejudices and reservations about other countries eventually ooze to the surface.

One of those reservations has to do with the legal system of a foreign country and the willingness to give a U.S. litigant a fair hearing on foreign soil when disputes arise.  As with most things found in the news, the most sensational things are what make it across the ocean and end up on the evening news in the U.S.  When examples of local justice in another country appear to be out of step with the norm in one's own, it can amplify the fear of doing business and deter profitable commerce from even starting.  So, overcoming the objection to the jurisdiction of a foreign legal system needs to be addressed if discussions are ever to move beyond the exploratory stage.  For this reason alone, dual companies would seem to have an advantage. 

It is equally true, however, that dual companies also have to erect dual back office operations in accounting, legal, and executive roles at the highest levels.  That, of course, increases overall costs, and while those costs may not be insuperable obstacles for an established company with lots of revenue and a broad customer base, it is a formidable obstacle to a start-up company whose cash is limited and whose list of key players and trusted inner circle members is small and generally not mobile. 

Breaking through this wall of trust and finances, when dealt with in customary ways can be close to impossible.  By customary ways, I mean looking for an angel investor whose risk profile matches the risk characteristics of the business venture or finding a U.S. company that will agree to distribute one's own product at a comfortably profitable price.  These approaches to solving the problem assume that money fixes everything, but it does not.  What does solve problems is trust.  Trust is hard to achieve in the absence of continuing exposure to the people whose trust one is trying to win, and when one heaps on the additional barriers of distance and language, it becomes even harder.  To look for a "trick" or a tactic instead of a realistically workable strategy for business development is a big mistake.

What I suggest is to address the issue of trust head on and to find effective ways to build that trust using other disciplines and third parties whose own interests could be fulfilled by engaging them in the overall solution.  For instance, in every country in the world there are higher education institutions that operate for the most part in much the same way.  They provide education in the abstract with little connection to the real world of creating jobs, holding jobs, and competing successfully and ethically for a piece of the world's wealth.  The typical language department at a university can teach a student to parse a sentence, to conjugate verbs, and even to help them speak the language passably, but when one looks at language department enrollments in the United States, what he sees is declining numbers in all directions.  The reasons may be numerous but they all fall into the same general area which is the lack of a clear connection to the student's ability to earn a living upon completion of his education, which in turn would allow him to repay his education loans.  Instead, students look for courses in business, computer technology, and anything else that he believes will give him a marketable skill upon graduation. 

What if a language department could be enlisted to provide business leaders in the local economy specialized language training for business in another country and to provide as part of its curriculum a trip overseas to that same country during which the executive students would meet with their executive counterparts in an environment focused on finding ways to do business with each other.  The willingness of the executives to participate in such a program would provide the necessary filter that would exclude those not desirous of actually doing business, and it would predispose participants to stay focused on the benefits of international trade.

Note that such an approach would not necessarily provide instruction with regard to venture capital or other typical concerns (although it could).  Instead it focuses on shared experiences and the implied trust that such carries.  Crossing the trust hurdle is the fastest way to getting down to doing business that I know.

In this case, the unusual involvement of a university’s language department could be the catalyst that yields a deal, but it could be something else that most would normally dismiss as not being relevant to the problem.  The phrase “out-of-the-box” thinking is repeated so often that most regard it as hackneyed, but it is what is required.  Small dynamic businesses need to think inventively to overcome their shortage of capital en route to making successful deals with foreign companies. Building trust and overcoming suspicion and fear needs to be at the top of one’s list and not just an afterthought.

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