Going to America — US expansion tips for European tech founders

Last month, we hosted a Thanksgiving breakfast with the Silicon Valley-headquartered law firm Wilson Sonsini Goodrich & Rosati (WSGR) for European scale-up founders looking to expand their operations to the US.

The idea was to combine practical advice from Daniel Glazer (WSGR London Office Managing Partner), and our Venture Partner Kevin Kimber (EMEA founder of ServiceNow), with lessons learnt from our US sister fund F-Prime and portfolio companies which have expanded to the US e.g. (AppsFlyer, Good Data, Red Points, and Neo4j). Here is summary:

When should I consider establishing US operations?

For most, the best time to launch in the US is when their company has achieved commercial traction and built a solid US sales pipeline. If you have done that, how early you go will depend on the strategic important of the US market to your business. The more important the US is — the sooner you will need to move there and the more likely it is that one of your founders will need to based there.

Where is the best place to set up in the US?

The US is not homogeneous and if you want to set up an office you need to think very carefully about the best place to go. Here are some questions to consider — remember it doesn’t always need to be San Francisco!

  • Is there a place in the US where my company has a concentration of customers?
  • How are you planning to manage the US business? If the culture of your US business is going in one direction and the culture of the rest of the business is going in another you will run into problems. If you are not going to send founders or senior people from your European headquarters you are going to need the local hiring team as close to HQ as possible
  • Is there a particular talent profile you’re looking for? Is it concentrated in a particular location?
  • What is the cost of doing business in this location e.g. the relative cost of setting up in New York vs. Texas
  • What state and local incentives are there for you to set up your business? Remember that all the top US cities are competing to attract the best tech companies….
  • Is your exit likely to come from a select group of acquirers? Should you consider setting up near them?
  • Where is your next VC investment going to be from? If you want your next round to include a US investor, this is going to be important. And it’s not automatically Silicon Valley, for example, there are several sector specialist VCs in New York, Boston, Seattle, Los Angeles and elsewhere

If these questions don’t lead you anywhere specific, keep in mind that being near a travel hub can save you and your team a lot of time — e.g. basing operations near Chicago O’Hare Airport allows you to be pretty much anywhere in the US within 3 hours

How to sell/ pitch in the US as a non-US company?

There is a significant difference selling in the US compared to in Europe and these pointers will increase your likelihood of success:

  • Change your tone of voice and spelling in your external communications and marketing materials to American English
  • Drive US web traffic to a US focused site so US customers are served only relevant US content and case studies
  • Create a registered virtual office in the US with US phone lines (if you don’t yet have an office)
  • Highlight existing US customer relationships clearly in your materials — the more recognisable the brands of these customers the better. If you don’t have US customers yet, leverage European customers with an established US presence e.g. Ikea, H&M
  • Hire American salespeople to pick up US sales leads: “Americans like buying from Americans
  • Do the hard sell and be outwardly confident — American audiences will expect it
  • Still consider using senior team members from HQ to close a big sale, sometimes it pays off to get on a plane and have a meeting in person — seniority and an in-depth knowledge of the business still count for something!
  • Make your sales process in the US as frictionless as possible, especially when dealing with procurement or administration teams that are not internationally minded

What to consider when hiring a team in the US?

Hiring is the single biggest problem that European companies have moving into the US, some ideas on how to overcome the challenges:

  • Competition is strong and salaries are much higher than in Europe. Think carefully about the best way to reward talent and bear in mind that there are different expectations
  • Consider setting up different option plans for US and European employees; options and investing have different meanings depending on geography (although US-style option plans are becoming more commonplace)
  • Make holiday a part of your culture by enforcing it (through pay), this is unusual and can be attractive for US employees
  • Provide plenty of opportunities for US employees for travel to Europe
  • Ask for personal recommendations from contacts and look to hire sales people from companies where you respect their sales process because both good sales people and bad sales people in the US do one thing really well — sell themselves
  • Be prepared to spend time courting the right employees, it may end up saving time and money in the long run: “We talked to one of our (now) star sales hires for a year before we hired them from one of our competitors”
  • Remember if you use consultants, and they become defacto employees, they do not have to have employment contracts to be deemed to be employees in the US and there are various obligations that come with that. Use consultants in a transitional way and be careful about when you make them full time employees to avoid unexpected claims or liabilities down the line
  • If senior members of your team are not sitting in the US, make sure US new joiners still have frequent, face to face interaction

We hope this provides you with a good starting point for your thoughts on US expansion. We’ll be hosting more events and workshops on key scale-up issues and themes in the coming months, please email events@eightroads.com if you’d be interested in attending.