Tag Archives: Europe

The Top 5 Mistakes European Startups Make in US Expansion

This is a cross-post to Kellblog of the first post in a six-part series that I wrote for Balderton Capital as part of my work there.  The first two posts are already up on Balderton’s Build website, while the remaining four will be rolling out at the rate of about once/week over the next four weeks.

This series was both a lot of work and a lot of fun.  I was able to leverage many of my Balderton colleages (e.g., Bernard, Suranga, Alice, Rob) as well as my other European startup colleagues (e.g., Chris, Eric, James, Fred, Andrew) while drawing on my nine years at Business Objects, five years on the board of Nuxeo, and two years on the board of Scoro, as well as many advisory gigs both within the Balderton portfolio and outside.  Thanks to everyone who helped me as I worked on this series.

Here’s the lead post.  (I am only putting the lead post on Kellblog, and leaving the rest to Balderton.)

International expansion is hard. Expanding internationally means managing differences not only in language and time zone – but in culture, business norms, law, taxation, labor, employment, compensation, and competition. It’s no small undertaking and it’s not for the faint of heart.

But it is nevertheless, absolutely essential. To create a worldwide leader you must, almost definitionally, execute a successful US expansion as part of the process. The US has a massive total available market (TAM), which accounts for between 40% and 50% of worldwide technology spending.

US thought leaders — including industry analyst powerhouses such as Gartner, Forrester, and IDC — define not only the yardstick for evaluating vendors in existing categories, but also new product categories, the trends driving their creation, the hype cycle of technologies behind that, and the “companies to watch” as categories emerge. US customers are demanding, operate at the forefront of many categories, and push their suppliers in a virtuous cycle to advance the cutting edge of functionality, performance, and useability.

Much as Paris is a bellwether for the future of fashion, the US market is a bellwether for technology. And every week is fashion week. To adapt the ancient proverb, it is no longer that, “all roads lead to Rome,” but, when it comes to building a worldwide technology leader, “all roads lead through the US.”

What’s troubling is that if international expansion is hard, US expansion is harder. The US poses numerous, often unique, challenges for a European technology startup.

The market is vast

The US market is vast both in terms of TAM and geography. Segmentation strategies are critical. So is developing a geographic strategy. I often quip that if Geoffrey Moore were English, he might not have needed to Cross the Chasm by intersecting vertical beachheads with geographic industry clusters.

The market is highly competitive

The US market is highly competitive, a statement that is often misunderstood to be about the temperament of US salespeople (who, by the way, generally are), when it’s really just a fact about the number of competitors. Startups typically face more competitors in the US because you have both “the usual suspects” in your home market plus the frequently US-based, next-generation disruptors who have yet to expand to your home country in Europe.

Different buying criteria

US customers tend to buy less on perceived product superiority and on a mix of product and vendor attributes. Ultimately, for most US customers, picking the “best” product isn’t about selecting the product with the best technology, but about picking a vendor who they perceive as safe and who holistically offers the best solution to their problem. That’s easy to say, it’s much harder to internalize.

Industry analysts matter more

While European buyers seem somewhat more independent in their decision-making, US buyers – particularly Fortune 1000 IT departments – routinely rely on advice from an ecosystem of thought leaders and influencers, ranging from major industry analyst firms (e.g., Gartner, Forrester, IDC) to boutique analyst groups specialized by technology or industry (e.g., Dresner Advisory, Outsell) to independent consultants promoting books and methodologies (e.g., Bob Seiner and Non-Invasive Data Governance). Knowing how to work with them can become critical.

Lack of home field advantage

Just as sports teams have an advantage when competing in their home stadium, European startups often have a (sometimes unacknowledged) home country advantage when competing in their home market. Expanding to the US isn’t just Manchester United playing in Stamford Bridge. It’s worse. It’s playing in a stadium on another planet before an audience exclusively composed of opposing fans who neither have heard of your team nor have the ability to locate your home country on a world map.

Unusable customer references

Relevant customer references are a key part of any technology buying process. So you may think you’re in great shape when you arrive in the US with a fantastic set of hard-won enterprise references like Carrefour, Enel, La Poste, RioTinto, StatOil, Tesco, or Total. You quickly learn that those references get you more blank stares than nods. Think: “so who that I might have heard of is using your software?”

Labor market misunderstandings

You will likely face a bidirectional set of misunderstandings with the American labor market. You probably won’t understand the labor market – for example, when it comes to cash compensation, equity expectations, or the interpretation of American resumes. And the labor market probably won’t understand you – for example, when it comes to the basic concept of working at foreign subsidiary of a technology company. I’ve seen US marketing heads incorrectly think they were responsible for global product launches and I’ve seen European technology startups offer US sales candidates options on 10 shares at €2,950 each. Both situations end badly.

Unforced errors

Sometimes, the challenges combine to provoke unforced errors, ultimately, I believe, because of intimidation. The idea of US expansion can be so daunting that sometimes founders conclude basically illogical things like, “we can’t possibly do [something that works for us in Europe] because it’s the US and [manufactured reasons] apply.” So rather than putting their best foot forward in their US market expansion, they launch into one of the toughest markets in the world on their back foot.

A six-post series

This is the first in a six-post series that discusses what I see as the top five mistakes European startups make in approaching USA expansion. While I will write in the first person to reflect that the content is ultimately my opinion, those opinions have been informed not only by my own experience working with and at European startups for the past 25 years, but also by the collective experience of the Balderton team, who have worked with scores of European startups on US expansion.

This work builds upon the ideas of Rob Moffat in his Internationalization Playbook which focuses on when, where, and how to do so, along with a case study and comparison data. Rob also discusses when things go awry, going into depth on some frequently-encountered problems, so in some ways you can consider this series a more recent take on that topic, and one done from the point of view of a different author.

As we discuss the top five mistakes, I hope to not only describe the mistakes and explain why I believe they happen, but also outline the steps you can take, as a European technology startup founder or executive, to avoid them.


With that introduction, I believe the top five mistakes European technology startups make in US expansion are:

1. Delaying US expansion

Expanding to the USA is scary, so you delay it and delay it again. You establish artificial thresholds and re-establish them – “we need to be $5M in ARR,” followed by, “no, we need to be $10M,” followed by, “no, we need to be $20M.” Instead of embracing US expansion early, you delay in the name of critical mass or incremental cost. No matter the logic, threadbare or not, the result is the same. The company starts too late, potentially lets US competitors or copycats get established, and now faces an even more difficult expansion in the US.

2. Failing to adapt structure and process as you expand into the US

This might sound esoteric, but it’s not. Many European startups try to add the US as “just another country” without making changes to their core structure or processes. While there are several different models for building a global technology leader with a strong US presence, virtually none of them treat the US as just another country. The mistake is thinking that expanding into the USA will not change you – e.g., how you do things, how you are structured. It will. To be successful, it has to. The question needs to be, “how do we want to change?” and not, “do we need to?”

3. Hiring the wrong people

As alluded earlier, hiring is a veritable minefield and the list of possible mistakes is long. To offer a few popular examples: hiring weak people because you get confused by embellished US resumes, hiring on-the-cheap and building a team of minor-league (i.e., division II) players, or hiring big roles (e.g., general manager) prematurely and filling them with junior people. Overall, these mistakes fall into several broad buckets that we will identify and help you avoid.

4. Underestimating the importance of sales and marketing (S&M)

It’s one thing to say, “the best product doesn’t always win.” It’s another thing to internalize it. It’s yet another to take some perverse pride in it, as many Americans do. Many European founders – often despite saying the right things – fail to both understand and believe in the importance of S&M and still, buried beneath a layer of platitudes they repeat as dogma, believe that they will win the market because they have the best product. Deprogramming is difficult and too often accomplished only by losing in the market. The less painful approach is to focus on two questions that can serve as a North star to keep you on the right path: (i) who gets to define “best” and (ii) how do they define it?

5. Looking and sounding too European

Unless you’re selling cars, wines, or fashion, most Americans will not hear the word “European” as a positive addition to your company’s list of self-describing adjectives. US buyers tend to hear “risky” when you say “European” in the context of technology. While you might think saying “French” is an implicit boast about your company’s amazing engineers, the American buyer will wonder about technical support hours, language fluency of support staff, and the availability of resources in the local ecosystem. Showing up on a sales call with four employees all named Jean-something, having the lead presenter speak with a thick French accent, and showing product screens where bits of French appear in the UI and demo data, will only exacerbate their fears. While successful companies do not necessarily conceal their European origins, nor do they needlessly highlight them.

In the rest of this series, we will cover one mistake per post, diving into more detail on the nature of each mistake and the steps that you can take to avoid making it.  Thank you for reading this introduction and welcome to the series.

You can continue reading the series with the second post, here.

SaaStr Europa Slides: The Top 5 Mistakes in Scale-Up

Just a quick post to publish the slides from the talk I gave today at SaaStr Europa in Barcelona on the top 5 mistakes in scale-up.  Thanks so much to everyone who attended, stuck around for the AMA session afterwards, and gave me feedback or asked me questions at the conference.

If you have trouble accessing these, please let me know and I can try to switch file sharing platforms.  I like Slideshare for the embed capability, but I’m told they now paywall off my stuff and I haven’t fully researched how and if I can fix that.  Leave a comment if you have troubles so I’ll know to go look.

Here are the slides:

France without Johnny?

On the plane to France last summer, I channel-surfed into a hilarious movie, entitled Jean-Philippe. In the film, Fabrice Luchini portrays Johnny Hallyday’s biggest fan who, after receiving a knockout blow in a drunken fight, awakes to find himself in an alternate universe where Johnny Hallyday was never discovered, and ergo never became the cult, rock star legend that he is today.

Johnny Who, you might ask? Johnny Hallyday, the aging French rock star treated with idolic reverence throughout the country; the French Elvis who lived. What’s so hilarious about the film, in fact, is its uniquely French premise; the incomprehensibilty and injustice of a world without Johnny.

How does all this relate to my blog?

Well, ironically, the French government is doing its best to create this nightmare France without Johnny. As The Economist reports in this story (subscription required), Johnny recently stirred up controversy by becoming the latest in a long line of tax refugees who have fled France (in his case, moving to Switzerland) to escape its onerous wealth tax.

Since this concept is foreign to most Americans, I’ll say it again — “wealth tax” — i.e., a tax on net worth. France charges a tax of between 0.5% and 1.8% of net worth above about $1M. So if you’re a captain of industry or a rock star worth $50M, in addition to your regular income taxes you will have to pay a tax of about $1M (~2%) every year, all for the privilege of living in France more than 182 days per year.

Peter Mayle even wrote a novel, Anything Considered, about a magnate who hires the main character to “be him” outside of France so he will generate documentation (e.g., parking tickets) “proving” he was not residing in France and thus avoiding the wealth tax.

So how does this relate to the business of technology? Simple. The wealth tax is one key reason that Silicon Valley will never reproduce itself in France. Great companies like Dassault Systemes and Business Objects are spawning on pavement because a key element of the Silicon Valley model is talent recycling.

As mentioned in this post, in Silicon Valley, when people experience great success, they either do it again (a la Steve Jobs), “retire” to sit on boards, or best of all, become venture capitalists, eat at Bucks, and sit on boards. In all three cases they are recycling their talent back into the system by helping young companies leverage their knowledge and expertise.

The wealth tax destroys this because, when faced with a tax on net worth, most high net worth individuals simply leave the country. Ergo, there is no talent recycling, and no self-reinforcing system.

Whether it’s France without Johnny or France without its most successful entrepreneurs, it’s the same driving issue: the wealth tax. Until the government fixes it, the French will have trouble with technology entrepreneurship because its most successful entreprenuers won’t live there anymore. They’ll be neighbors with Johnny in Switzerland.

Quaero: Chirac’s Waterloo

Here’s a colorful story I stumbled into on Diplomatic Traffic bashing France’s Jacques Chirac for the failure of Quaero, which I’ve written about previously and characterized as the Airbus of Search.

Germany’s recent bail-out from the Quaero project, detailed in an excellent IHT article here, appears to have been driven by a basic disagreement about design goals. From the IHT:

“But according to one French participant, organizers disagreed over the fundamental design of Quaero, with French participants favoring a sophisticated search engine that could sift audio, video and other multimedia data, while German participants favored a next- generation text-based search engine.”

Again from the IHT:

“‘When you look at the offerings of search engines out there on the market already, one has to question the wisdom of spending a lot of money to construct yet another search machine and try to compete with Google,’ said Ulrich Trabert, a software analyst in Frankfurt at Bankhaus Metzler, a private bank.”


Pandia has excellent coverage of the story, here, discussing Europe’s own Fast Search & Transfer. From Pandia:

It should also be noted that there is no need for a European inferiority complex in the search engine arena. Norwegian Fast Search Transfer actually did develop a search engine delivering search results of a quality close or equal to Google’s called AlltheWeb. Unfortunately Fast found it hard to make AlltheWeb commercially successful and sold AlltheWeb to Yahoo!

Fast is now working on their own European-supported project, called Pharos (Platform for Search of Audiovisual Resources Across Online Spaces) focused on next-generation audiovisual search.

But the real fun relates to the story I first cited on the Diplomatic Traffic, which begins with:

“At the Musée National in Versailles something odd reportedly occurred in a chamber holding the fading tableau of Napoleon Bonaparte at the Battle of Austerlitz. On a recent nighttime visit there by President Chirac, to find inspiration, he exclaimed that he heard sobbing and the repeated snarling of ‘The search wars have only just begun! Learn from my blunders!'”

Check out the story itself for more fun.