Going American has a price, and it is not equity

Last September, in The Great Transatlantic Divergence, we gave UK founders with global ambition an uncomfortable piece of advice: stop waiting for Europe to fix itself - and think American from day one. Incorporate in Delaware, hire US executives, raise from investors that can actually fund your growth. For most frontier founders, that still holds.

But there is a category where it comes with a complication we did not spell out then. If you build in dual-use technology, in AI, quantum, space, or advanced semiconductors, and you decide to expand into the United States, you are not making one decision. You are making three at once, and only one of them feels like a business choice. The other two are governed by the national-security machinery of two separate governments, pulling in opposite directions.

The founders who get hurt are not the ones who say no to America. They are the ones who say yes without noticing how many doors that single yes opens, and how few of them open back the other way.

This is the first of a two-part series. This week, the trap: the three regimes that close around a single decision. Next week, the smart structure: how to build so that selling to both governments, and raising the capital to do it, does not quietly foreclose your options.

The first thing to understand: the US market is not closed, it is gated

It is tempting to assume a British company simply cannot sell to the Pentagon. Not so. A foreign-owned company can hold US defence contracts. What foreign ownership triggers is not a bar but a regime: Foreign Ownership, Control or Influence mitigation, administered by the US Defense Counterintelligence and Security Agency.

Historically, FOCI applied only to classified work, a small club that knew the rules. That is changing. A US Defense Department proposed rule of May 2026 (not yet in force) would extend FOCI disclosure and mitigation to unclassified contracts above $5m, with foreign ownership over 5% as the disclosure trigger, and the Department has signalled it intends to reach even commercial off-the-shelf purchases where it sees a national-security risk.

This is the part dual-use founders might miss. You may not think of yourself as a defence company. The US procurement system increasingly will. And once you are in scope, mitigation is not a form. It is a set of governance structures that scale with sensitivity, from agreements that simply wall off classified information, up to the deep end, where for the most sensitive work a US-controlled board of cleared US nationals, on which the UK parent may not sit, governs that part of the business. The foreign owner keeps the economics and gives up operational control of the sensitive activity. The market is open. The price of entry is paid in governance.

The second thing: US capital is the instrument that fits the gate

Here the capital and the market stop being separate questions. American investors, especially at late stage, often expect a US topco before they will write the cheque - what founders call the Delaware Flip. It is worth being precise about what this is and is not. The flip is convention and investor preference, not a legal requirement. You can raise US money without it. But it is the path of least resistance and it happens to be the same structure that eases the FOCI problem above.

That convergence is the heart of the matter. The act that satisfies your investor and the act that unlocks your customer turn out to be the same act, and it relocates the centre of corporate gravity to the United States. The founder experiences a financing event. Structurally, it is the first turn of a ratchet, and the ratchet does not run backwards. Each subsequent round, each US-resident hire into the cleared layer, each board seat that follows the money, turns it again.

None of which means you should reject this path. It means you should see the flip for what it is: not a tax wrapper, but the mechanism by which your company begins, deliberately or not, to become American.

The third thing: your own government is watching the same move, from behind

Now the pincer. While Washington draws you in, the UK regime tightens on the same transaction from the other side. Under the National Security and Investment Act, the British government can issue a call-in, a formal power to review a deal on national-security grounds and then clear it, attach conditions, block it, or unwind it after the fact.

From 2026 this covers 19 sensitive sectors, with semiconductors carved out as a standalone category and quantum, AI, satellite and space, advanced robotics and dual-use all expressly in scope. Crucially, the Act reaches outward: its guidance confirms it can apply to the transfer of IP or assets to a non-UK entity where the activity connects to the UK. In plain terms, the same flip that pleases your US investor can trip a British review, because you are moving sensitive technology out of UK control.

But it is worth keeping this in proportion. Of 1,143 notifications in the year to March 2025, only 17 were blocked or remedied. Call-in is real, not routine. But the government has used look-back powers to unwind deals involving UK-developed chip technology, and for a founder mid-raise the risk is not just a block. It is delay, conditions, and a US investor discovering your British technology comes with a British veto they had not priced.

The trap inside the trap: selling back to your own side

Suppose you navigate all that, flip, take the money, win the US customer. There is a quieter cost that surfaces later. As your engineering absorbs US-origin technology, your freedom to sell the result back to the UK narrows.

This runs through US export control, and the trigger is content, not domicile. Once your product contains technology controlled under the US munitions rules (where any US content can be enough) or US-origin dual-use technology above a de-minimis threshold (in many cases 25%), re-exporting it, including to the UK Ministry of Defence, can require US authorisation.

Manufacturing location is a separate question again: US government sales carry their own domestic-sourcing rules that turn on where a thing is made and sourced, not only on whose technology sits inside it. A reciprocal ITAR exemption for the UK, finalised in December 2025 under the AUKUS defence-trade arrangements, eases some of this for vetted members of an approved community, but does not remove it. The further into the American stack you go, the more your ability to supply your own government routes through Washington's licence desk.

Why this is suddenly not theoretical

If all of that feels abstract, consider what happened this month. The US ordered Anthropic to cut off access to its most advanced models, Fable 5 and Mythos 5, for every foreign national, allies included, citing national security. Britain's trusted-ally status counted for nothing.

The lesson is not about one model. It is that allied access is conditional, and the condition can change on a political timescale, overnight, by order, with no appeal. A UK founder who has built their company's future on the assumption that the American door stays open has taken a position on US domestic politics, whether they meant to or not.

The choice, made consciously or by default

None of this is an argument against American capital or the American market. For a capital-hungry DeepTech company, US money is often the only money that scales, and the US customer is often the one worth having. The September advice was not wrong. It was incomplete.

The point is narrower and harder. Expanding into the US national-security market is not a single commercial decision. It is three: a US ownership-mitigation question, a UK call-in question, and an export-control question that shapes who you can sell to afterwards. Treat them as one and they get made for you, by default, one reasonable round at a time. Treat them as three and you can sequence them, structure for them, and keep open the doors that matter most to you.

That is the work. Most founders will not do it in advance. They will take the round because the round is real and in front of them, and the regulatory questions are abstract and over the horizon. But at a later round they will meet all three regimes at once, when the company has already become something they did not quite choose. The capital was real. The customer was real. What went unpriced was everything bundled in between: the governance handed across, the technology that now answers to two governments, the British exit quietly foreclosed.

So, before the handshake, one question is worth sitting with. When this is done, and the company has become what US capital and the US customer require it to become, will it still be the company you set out to build? You may decide it will, or that the trade is worth making. That is a legitimate choice, and an honourable one. It is only the wrong one when somebody else makes it for you.

Next week, in part two: the smart structure. If you want to sell to both the UK and US governments, and raise late-stage US capital to do it, how do you build so that no single decision quietly forecloses the others?

 
Let's talk.