Winning in America – a primer for European startups

Despite all the difficulties that the American economy is facing, the United States remains the most important market for many technology companies.  Not only is it the biggest but, more importantly for many young businesses, it is also the one in which new technologies are usually pioneered.  For example, Software as a Service is being adopted worldwide but according to Gartner almost two thirds of all SaaS spending this year was in the US.  In many, perhaps most, technology markets, the US is where the battle for global leadership is fought, yet too many young European technology companies lose, or worse, don’t even compete there.   So, how can they do better?

1.      

The Israeli model

Historically, many Israeli technology companies would move the entire management team, except the VP Engineering, to the US as soon as they built up some initial momentum.  Development would stay in Israel and the founders would spend a lot of time on airplanes, but the company would look and feel like an American one right from the start.  The founders would get stuck into the American network and build relationships with early adopter customers and partners from their new US base.

Many successful European companies have adopted a version of this approach, which is particularly applicable when integration into an existing ecosystem is crucial to success.  Companies like Zendesk, MySQL and our portfolio company GoodData have taken this path to success and have been able to get the best of both worlds with world class, and stable, European developers connected intimately to aggressive and fast moving business teams in Silicon Valley.  In the 1990s, Business Objects, a French startup, got into trouble and it was only when the founder and CEO moved to the US that the company found the right path to what ended up being a great success.

2.      

The US Sales and Marketing office

This is a riskier approach but can be the right one for companies for which the US is an important market but where the business needs to have a global perspective.  In this model, the European company builds a substantial US office, mainly focused on sales, marketing and, if relevant, professional services run by a general manager.  This is the flip side of the normal US company practice of hiring a European team under a VP EMEA.  Sometimes the global head of sales doubles as the head of the US business and the company runs a distributed management team.  The key to success in this model is make sure that the top management is genuinely world class and can fit into an international business and that requires the founders and leaders of the business to spend a great deal of time and effort on recruiting the absolute best managers in the US and then integrating them into the company.   Notoriously, European companies tend to struggle on this and hire glib but less than stellar US managers.  Even SAP had to go through three management teams in the US before settling down with one that worked.

3.      

The founder transplant

Probably the riskiest of them all, this is the approach that can sound appealing, particularly if one of the founders likes the idea of living in the Californian sun.  Moving one of the founders to the US and trying to build a business on that basis is really hard.  The founder who moves needs to be able to be effective in the American market.  That means that he or she needs to have an existing network there, to understand the US way of working and to be able to attract the right talent to the team.  All the logistics can be horrible as well, from getting a Green Card to managing the move itself.  Then the founders left in Europe need to keep communicating to the one who has moved to the US and continue building the business together.  It can work, but it’s not for the fainthearted and is one of the commonest reasons I see for founding teams to split apart.  On the other hand, for companies that need to build tightly integrated global team, for example when they need to roll out local services in different cities, this can keep the culture unified over long distances.

So, here are three well tried paths, each with their advantages and risks.  The starting point, as so often, is to understand what the business needs and to talk to other European entrepreneurs who have tried this before to learn what really works.