Hello, everyone. A sign in India was admonishing people how to take care of their used cigarettes. Both in Hindi and then in English underneath instead of using the word cigarette, it said, “Please do not drop your butt into the toilet bowl.” Slight misuse of words and exactly why you need professional language agencies to make sure that your meaning is conveyed correctly. 

So, with that, today’s guest is Karina Sotnik. Karina Sotnik is CEO of WorldUpstart, a Philadelphia-based firm that empowers overseas tech companies, especially in the Biosciences and Medtech, to enter the US by optimizing strategies and connecting prospects with players, partners, and investors. 

WorldUpstart also works with universities and government agencies internationally to build commercialization programs to foster the creation of innovative, viable, and scalable startup companies, based on academic discovery and research.

Karina is a serial entrepreneur, mentor, and advisor with over a decade of experience creating entrepreneurial ecosystems through innovation programs with significant economic impact. She has extensive experience in academic innovation, incubation, acceleration, and global soft-landing programs for startups, universities, and international organizations.

Welcome Karina. Delighted that you are with us today.

Thank you so much Philip for inviting me. I really appreciate it.

So as your WorldUpstart website says, entering the US market can be overwhelming, and entering the US market for an American company also can be overwhelming. But let’s start with some of the major issues of bringing overseas companies, particularly in Biosciences, to the USA. What would you suggest?

We work with bioscientists and Med-tech. So, I just want to broaden our umbrella a little bit and that includes digital health companies. There are many challenges, right? So, I can just run through some of them, which would obviously be the regulatory FDA approval and how to understand the pathway to the FDA, and the cost associated with that competition. We see a lot of foreign companies coming from smaller markets really underestimate how much competition they will face here in the US because the US has very robust bioscience and Med-tech industries and the US continues to innovate. So, companies really need to be aware of their local competition here and we will touch on competition a little bit later, I’m sure. 

Understanding what problem they will be solving in the US. U.S. healthcare is so vastly different from the rest of the world that you know if they solve a surgeon’s problem somewhere in Norway, it wouldn’t necessarily translate here if they are dealing with insurance companies. So, understanding whose problem you will be solving and who your customer is in the US is a really big key issue that companies need to understand. 

Then, of course, reimbursement. Right again, our U.S. healthcare is very different from one payer systems elsewhere. And so, understanding how that works, how to work with insurance companies, and how to be paid for your product becomes key. 

And finally, all of this that I just mentioned, plus I didn’t even mention employment because employment law in the United States is really different from anywhere else, right? So, understanding all of these key components becomes crucial when companies come here to fundraise. Because to convince investors to invest in you, you really need to understand all of those aspects that I’ve mentioned. So, there are plenty of challenges, but I have to say the U.S. market is very big and very desirable and companies absolutely need to look at the U.S. as their next obvious step for expansion.

You know it’s very true, and I guess if you’re talking about the reverse, taking U.S. companies abroad, it’s the same kinds of issues, just different for their own systems.

Right. Plus, I would say we will probably talk about misconceptions later, but you know the US is very diverse and so are other logical next steps for U.S. companies to expand, usually to Germany and which is the gateway to the EU. Germany is one of the largest in the European Union. And then some companies look at Japan to enter the Asian market. In Germany you also have different states. Different states have their own incentives. So not looking at the country as a country, but actually looking at the regions and understanding which region is better for you becomes a really important key consideration.

Yes, very interesting. 

One of the most fascinating issues that I find is that foreigners gain information about the US based on American movies and television shows, and even if they make multiple trips here, they’re still very surprised, shall we say if not shocked… when they move here and confront the reality of living in the United States and having to deal with American businesses on a daily basis, and of course when they invest there are other issues as well.

What do you think most inbound foreign executives forget about – or simply not know – when they enter the U.S. market?

So, we talked a little bit about this. I think a lot of people underestimate just how diverse and vast the United States is, and I always tell companies you will be dealing with 51 countries when coming to the US, 50 states plus federal.

Maybe 52 including DC.

Exactly. But when we’re talking about, you know, employment laws and regulatory rights, each state has its own differentiators. But culturally, it’s even, I think, more important to understand that doing business in Louisiana might be vastly different from doing business in New York or California. Understanding those differences, understanding the priorities where you want to go first as your first entry into the U.S. and then expanding within the U.S. becomes really critical because you know there are a lot of cultural differences, obviously between other countries and the U.S. but there are also plenty of cultural differences within the U.S. if you look at different regions, the Midwest versus the coastal cities. 

So, I would say that is important. And it also obviously affects your customer’s behaviors, right? So how you’re going to market your product into different parts of the US, the messaging that you’re going to use, it all becomes really important and It’s important for a consumer product, but it’s also important for the enterprise because you know, people operate in their cultural realm.

Another one of the biggest misconceptions at such a red flag for me is they always underestimate the U.S. competition, you know, even if the product is completely novel. The way things are done today, the way the problem that you’re solving is solved here today is your competition and you have to address it. People do not change their behaviors easily, right? And so, understanding how you’re going to get your customer to change and adapt your product becomes key. And cultural consideration plays a huge role there. So, I would say these two are probably the biggest.

Can you give some specific examples of perhaps how a product might be marketed differently, say in Minnesota versus Louisiana or Georgia? Everyone’s talking about northern versus southern.

Well, I mean obvious and maybe the hottest and the most controversial is reproductive rights and a product for reproductive rights. So, things of that nature. It’s really important to understand not just the laws, but also culturally how it’s going to be introduced to the market. So that’s the obvious example.

Right. I thought perhaps it would involve something like a medical product as opposed to a cultural issue. But yes, you’re right.

Well, the medical products for those issues, right, exactly.

What about Med tech and biotech companies? What kind of issues do they face that perhaps manufacturing companies would not face coming into the U.S.?

Well, the most obvious is regulatory, right? So, bioscience and Med Tech are very regulated and so understanding the path to regulatory approval is really important, although I have to caution: Companies sometimes think that this is like the final milestone and once they get FDA approval, they’re golden. They’re not, the road is bumpy after that as well. 

So, regulations are one of the biggest issues. Another one is IP, right? Low tech might not be crucially relying on intellectual property, but Biosciences and Med-tech, you bet that intellectual property is crucial to their well-being and survival in the United States.

So, understanding how you can expand on it, how you can keep competition at bay with it, and how you cannot infringe on other rights: All of that becomes very, very important and we see a lot of companies not succeeding because of IP issues. 

Then also obviously distribution channels and understanding how to work with partners like hospitals or insurance companies, and clinics are hugely important for success or pharma for success in the United States. Low-tech companies might not face that, but they face their own challenges like logistics and supply chains. 

So, and lastly, I would say the biggest difference I think also is in talent acquisition: Where do you find people that are trained and skillful in supporting and continuing to build your product and that’s where also understanding the differences in a location within the United States becomes critical. 

So, collecting all the data, understanding where the tech talent is, where people may have a lot of universities they go to. Also, staying in those places as opposed to graduating and leaving all of that becomes really important, so collecting a lot of data for companies coming here is crucial.

And are those some of the services that your company offers?

So, we touch on every point that I mentioned from legal to operational to fundraising to healthcare reimbursement, regulatory. And I am not a specialist in all of it, but through years of vetting, I partnered with the best experts in each field. So, we bring in experts to work with companies who can really get them to the road map where they understand first of all the checklist of everything that they need to know. I always joke that sometimes companies don’t know what they don’t know, right? 

So, understanding and shining a light on what they really need to know, coming here, and then introducing them to people that can give very practical, very targeted advice as opposed to self-promote and give infomercials which some other programs do. I think that will be really helpful.

Which states or which U.S. cities seem to be the most welcoming to Med tech or biotech /biosciences firms?

So, I’m not going to elevate some cities and trash others. But I will say as I mentioned before that companies really need to collect the right data to make that decision. What is the biggest and the fastest access to your customers? Where are your customers so companies go to where the customer’s partners and investors are? 

So, evaluating regions and cities on that becomes important. And then if you look at three or four cities, let’s say you decide on your European company and it makes sense for you to be on the East Coast because of the closest connection to Europe that makes logical sense. Then you need to look at the cities on the East Coast and figure out the cost-of-living, cost of real estate, and the cost of talent. 

So, compare that data. Some of the cities, and again I’m not promoting, but some of the cities like Philadelphia might come up very favorably compared to oversaturated and really expensive Boston or New York, right? 

So do that comparison, however. If your clinical trials are in Boston, if your investor is in Boston, it makes sense for you to be in Boston, right? 

So, we prepare companies for the U.S. market as a whole. We do love Philadelphia and Pennsylvania and a lot of companies that graduate from us end up here because they already have an ecosystem. They already have potential clients. They already have potential partners and that plays a huge role. And because the East Coast is so well connected, it’s easy to be in Philly and go for investors in New York, for example, or Boston, right? So, but I always say look for where international airports and ports are, you know it’s important for your logistics, right trains not a lot of companies know how easy it is to get by train from Philly to New York or Washington for regulation. So, all of those considerations become really important. 

And then you also need to look at what different states give you as incentives because every state wants to attract business to them. And so, we teach companies in the example of Pennsylvania, how to look at those in incentives, and then they can extrapolate it to other states when they’re looking for the best site selection. Yeah, because here in Pennsylvania, for example, we have something called Keystone Innovation zones and Keystone Opportunity zones where they give you tax abatement. They give you R&D credits, there’s a lot of real goodwill associated with that. And so, I always advise companies to look for that.

And I’m sure each state has its own incentives.

Of course they do. Yes, but you need to look at incentives. In sort of in connection with everything else, right? So, you might have the best tax incentives, but if you cannot find talent, people trained in your field… let’s say selling gene therapy, you can go to Texas for state incentives, but if you cannot find the cell in gene therapy talent, you will not succeed there. I’m not trashing Texas. I’m sure they have plenty of that talent, but.

That makes a lot of sense. And conversely, when US tech companies or biotech companies go abroad, are there any countries or cities that seem to be most welcoming or that offer special incentives?

Well again, a lot of countries are trying to lure business, especially the U.S. business.

So, there are a lot of incentives that companies might not realize. But talking to economic development agencies is really beneficial. They can give you a lot of data, and they can make connections for you. You know you should not do it alone. There is a lot of help and a lot of help that is free of charge. That you can take advantage of so Italy has its own incentives. Germany has its own incentives. As I said, each region has its own incentives. 

But I think for U.S. companies, it truly makes sense to figure out where the largest market opportunity is. Again, I love the whole of Europe. But it might make less sense to go to a country like Croatia versus Germany as the first entry with a couple of exceptions. 

Some of the countries in Europe might be much cheaper for clinical trials and for regulations. And in that case, it does make sense to go to lower-cost countries. So, there’s a lot of data that companies need to evaluate to make those decisions.

Yes, very true. Startups have very different challenges than established firms do when going abroad or coming here. What kinds of issues do they face? In essence, what do startups face that established companies don’t face?

And I can actually reverse it too, because sometimes startups do have sort of an advantage too, I would say. Startups are always strapped for cash, right? So, expanding to other markets is expensive. There’s no way around it, and even if you have already gained traction in your own country and you think you might naturally expand to other markets, it will require additional capital. So, understanding that and prioritizing fundraising then becomes really important, right? 

Also, we talked about how Bioscience and Med Tech are capital intensive, so you need to figure out where that capital is going to come from. Startups do not have established brands, so versus established companies and that’s a disadvantage, although sometimes it’s an advantage because startups could be really destructive in a stagnant industry, right? They can come in and shine a light on the problems that bigger companies have overlooked because of the ways that business has been done for many, many years. 

So that’s the biggest advantage –  that they stay fast, nimble, and agile, right? But they do require support. They do not have a lot of resources like established companies might have, and so it’s gymnastics with how to execute it well and become successful here. But it’s equally challenging for established companies. There are plenty of examples of well-established companies’ legacy. The company is coming from the European market to the US and not succeeding with all the capital that they have and that mostly lies in understanding the cultural differences.

Can you give us an example?

Yeah, I can give an example. There’s a great book that just came out by a professor from Colombia, called  How to make it in America. And the author gives an excellent example of a German company, a well-established German company that makes windows. They corner the European market. They make phenomenal windows. They decided to come to the U.S., and they failed. And they failed in the U.S. because in Europe, as many of us who go to Europe often have windows open vertically, you know, it opens this way in America. We open it this way. 

And so, they did not take into account how we are used to opening the windows here in the United States? Right. It’s simple, but it’s illustrative of how every marketing decision needs to make sense.

So, opening vertically versus horizontally.

Exactly. Yeah, yeah. There are a lot of great examples in that book, but yeah, I mean, I’ll give you another example of cultural differences that companies need to understand. They really need to understand how business is done in the United States. How does the customer behave here?

There was a French company that used to sell products to surgeons. And in France, they would cold call surgeons and cold email and that was how they were doing business development. Well, you and I both know you cannot cold call any head of surgery or surgeons in the United States because you will get nowhere with that. Just understanding how business practices work here with your customer segment is critical.

And knowing those kinds of failures, I think, is very illustrative for anyone going abroad because while obviously the industry simply transfers, one has to understand the business practices, the sales practices, financing, funding, and how it all works and to see whether your assumptions work in this country or in any country.

Yeah, even simple things like understanding the visa. Right? So OK, your company is well established, let’s say in Norway and you start sending your salespeople or your technical people to do demos in the United States. 

Well, do they have the right to work in the United States? What kind of visas are they going to have? What kind of contract do you have here in the United States that might affect their visa status? So all of this, that’s what we’re teaching. We’re teaching all of the things that you might not even think through what they need to understand.

Is there anything else you’d like to add before we close?

So, I just want to maybe say a few words about our program. So, our program is a six-week online accelerator, which means that companies do not have to come here physically to get that knowledge and to work with experts to really create their own road map for U.S. expansion. And then we invite them to the U.S. to come here and meet with partners and investors. And right now, we’re partnering with the great Science and Technology Park in Philadelphia. 

So, they also can have a space here, so that works really great. I just want to tell you that our next program starts in September and the applications are open right now. And the due date is April 15th, but there are many, many programs …

This is 2023 by the way. 

In 2023, yes.

There are many soft lending programs in the United States and so understanding which program is right for you, becomes critical because some cost a lot of money, some take equity, some are free. But as we know here in the United States, there is no such thing as free. Right? So please always look at how the program is structured. And what it gives you to get sponsorship from big firms, accounting firms, and law firms.

And so that’s fine and that’s great. But what do you get out of it? You get an infomercial essentially, so you really need to evaluate programs like this on their impact. We’re very proud of ourselves. In fact, if I could just say a few words, we’ve graduated 54 companies so far and 22 are now in the United States, with seven being FDA approved. So statistically only one in five companies succeeds in the United States, which will literally double the odds of companies being successful in the United States. 

And so, I’m very proud of our statistics, but there are plenty of other programs and so I encourage companies to go and evaluate all of them. And again, look for how is the program structured? Who is paying for it? What kind of impact does it deliver?

That’s fascinating. Thank you. And I should add for the benefit of all of our listeners and viewers that on our website under auerbach-intl.com/podcasts/ or under the media section of our website, which is where podcasts are in each podcast, you will see a listing of other products or services under the guest’s bio and information. And WorldUpstart is listed there as one of the many services that we offer for all of our listeners and viewers and subscribers around the world.

Thank you, Philip.

Thank you, Karina. This has been a wonderful, very educational, enlightening session with Karina Sotnik. I hope you will all join us next week for another edition of Global Gurus and their stories of international business.