Opinion: All startups should think in dollars—not their local currency

Photo credit: Burst

Alexander is a TIA Star Contributor and publishes exclusive, high-value content that serves the Asian tech community. Read more from TIA Star Contributors here.

I’ve made a lot of fundraising models for people all over the world. So unsurprisingly, I get people from Europe saying, “The model is in dollars. How do I make it all euro?”

That’s not a dumb question at all. But honestly, using euro or even ringgit for financial models doesn’t make sense (generally). I’m going to tell you why.

No one likes math

No one really enjoys math. It involves thinking, and thinking is always bad.

So, what do you think will happen when a Malaysian founder attempts to offer a potential head of marketing a RM30,000 salary? She’s going to say, “What’s that funny money mean in something I understand?” (I lived in Kuala Lumpur, so that’s why I’m picking on ringgit 😉).

You need to convert that into an international currency. If it’s dollar, pound, or euro, then it’s just a +/- 20 percent that everyone can figure it out without checking foreign exchange rates.

In principle, do you agree that at least for less common currencies/countries, it would make sense to talk in terms of big currencies? If you do, then wouldn’t it be logical for everyone to just pick one?

Everyone understands dollars

In my view, the US dollar is still the language of investment:

• Innovation comes out of America.
• Seventy percent of all exits are still in the Bay Area alone.
• All the big VCs are situated there and invest in US dollar funds.
• Seventy-five percent of the SaaS market is in the US.
• Everyone wants to expand to the US at some point.
• Most of the companies that the media write about are still in the US.

There really needs to be a currency everyone thinks in. Pounds? Eh, OK. Euro? Sure, it’s a solid choice. Swiss Franc? We just use that to correlate gold prices. Bitcoin cash? Lol.

To me, it’s really between euro and dollar. But when you go to Africa, Latin America, etc., street vendors are taking dollars, not euros.

Investors think in terms of dollars

When I talk to VC friends casually, I can’t think of a time someone said they invested in euros. It’s all “X just did a US$42 million raise.” Sure, when the UK funds do seed stage, they talk in pounds. But once you start doing series B, that’s going to start shifting to dollars, as foreign investors will be involved.

When investors talk about their fund size, most do so in dollars, especially since all the big tech blogs report in that currency.

You need a currency to operate with if you expand internationally

Your competition is probably American

Everyone wants to raise in America, eventually

Exceptions

Closing on financial models