Crossing the pond: The challenges of taking a SaaS business from the U.S. to EU.
Over the last 12 months, I spoke to numerous commercial leaders in the Software as a Service (SaaS) space who have launched a U.S. operation in Europe. The reoccurring theme I discovered is that taking a successful start-up in the U.S., and directly replicating the go-tomarket strategy in Europe, seems to universally fail.
This encouraged me to dig deeper.
Clearly, many software start-ups have seen considerable commercial success after crossing the Atlantic. The prospect of doubling your revenue is also magnetically attractive. Yet, the number of failed expansions also clearly shows how risky it is.
As a result, I wanted to share some learnings from experienced leaders who have both succeeded and failed in this specific journey. Here are four key takeaways:
1. Hire your Regional VP well.
It might sound obvious, but so many Founders attempt to expand internationally on the cheap and neglect the need for regional expertise.
Setting up legal entities, hiring new staff and building a team in a new market is a daunting task for any Founder or CEO. But doing that without a strong VP in the market is almost impossible.
From what I’ve learned, this regional VP needs to come with an outstanding commercial track record from your market niche and, even more importantly, needs to have experience in scaling a business in Europe without the groundwork in place. Your best bet is a leader from a direct competitor who understands your software product immediately and has the contact base to facilitate quick wins.
2. Give your VP these three basic.
Assuming you have hired well, there are three things you need to offer your VP: time, trust and investment.
Setting realistic time expectations from the outset is vital. If you are a U.S. scale-up expanding to Europe, be honest with yourself: the person you’ve hired (if done well) will know far more than you on what a good go-to-market plan looks like, as well as which key performance indicators are achievable in Europe. I always encourage this to become part of the hiring process in the latter stages, making sure there is alignment for both sides.
With the above in place, you now have a reasonable understanding of what the first few years should look like and, as a result, you will have built a strong foundation of trust with the incoming VP. But with all expansion plans, changes are inevitable and to navigate this you must give your VP freedom to adjust the strategy where needed — this is often where things can derail after 12 months.
Lastly, you need investment. To build a good commercial engine requires good people, and to get good people, you need a cash commitment to the region. Make sure this is also discussed in your final stage conversations with the candidate, to ensure they understand what they will be working with to make the business a success.
3. Segment your market — divide and conquer.
Whilst in the U.S. the method of approach for SaaS largely remains consistent, irrespective of state or region, the European growth story is never as simple.
From the commercial leaders I have spoken to, this is often the cause of fractions between the two entities and can often lead to the failure of European expansion. In EMEA, taking a countryby- country approach seems to be the most popular go-to-market strategy, although breaking it down to industry categorisations also seems to be a workable solution. Either way, this takes time, and you should not expect revenues to soar overnight or match the growth trajectory of the U.S. expansion.
4. Spend time with your VP.
It can be a lonely role as a European VP of a U.S. operation: long hours and a small team, yet with big targets. In addition, there is frequently a West Coast leadership team, which poses the challenge of time difference. In my experience, regular calls at 10pm — whilst trying to manage family life — creates the biggest reasons for top candidates leaving their roles. I think this speaks volumes.
As the CEO or Founder of a U.S. operation, make sure to visit the VP regularly and work with them through the challenges they face on the ground. Encourage greater work-life balance by accounting for the European team on key meetings where possible.
Lastly, bring the VP out to the U.S. HQ regularly. My belief is replicating culture across regions is almost impossible and trying to force it will not help, but some alignment is vital to make a cohesive operation.