10 Commandments for Launching Internationally
One of the hardest things to plan and execute is successfully launching a startup into a foreign country. This is especially true if it was founded outside of the US and you are B2B focused.
As an investor into European software companies that are predominately B2B/enterprise focused, we are not looking for local market winners (ie a French payroll provider or a Nordic focused site optimisation tool that has little chance or motivation to scale outside of their home country). We look for companies that after reaching a local maximum in their initial country are ready to take those learnings to the US — which is still the largest market for enterprise software in the world.
The US is the most natural place for UK based companies to launch first and I posit that it is the first or second most common geo for Continental European startups to launch (many come to London first to get ‘anglicised’).
My partner Krishna and I have supported over 15 startups historically in launching into the US and have learned a lot. The following are the key lessons that we wish we would have known years ago:
(1) Make sure product market fit has been achieved in your new market before opening an office
So you’re saying there is such a thing as product-country-fit? Yes. This means you need to lay the groundwork before just opening up an office and hiring sales people. Product-country-fit is actually easier to reach that product-market-fit as you will already have a product being used in your home market that hopefully is starting to grab the attention of developers, end users or customers in other markets. This is more the case for application companies selling annual saas licenses for sub $25k, but you can also test demand for much larger and complicated products before committing to a market.
(2) Develop your products so they can be localised more easily
This sounds obvious, but many companies don’t think about the need to localise the product over and over for new markets and their subtle nuances. This falls more under the umbrella of ‘internationalising’ than ‘international expansion’. Make sure that your early product marketing also speaks to your customers in either a local language or in a neutral global language. It’s surprising when US startups launch in the UK (typically one of their first international markets) and the product comes across as incredibly American. Be global.
(3) See where the market pulls you, don’t force yourself into a new market
I meet so many founders that feel the need to launch internationally even before being able to successfully forecast their bookings for the next two quarters in their home market. If your sales execution isn’t well understood yet, then it is definitely too early to consider serving customers in a new location.
If you are a majority inbound business, really pay attention to where your customers are coming from. I remember a software company I was involved with many years ago that was getting the 2nd most number of queries from Brazilian customers and yet <1% of ARR was from Brazilian companies.
On the other hand, you may think you need to launch in SF or NYC, two of the biggest tech hubs in the US. But again, another company I was involved with was getting the majority of their interest from Boston based customers. Ultimately it is looking like they will land in Boston from Europe because of this pull (as well as the majority of the companies in their ecosystem happen to be in Boston — so more talent and more partnership opportunities).
(4) Consider a range of go-to-market strategies before committing to one
This is why it is important to have nailed your sales execution model as it will help you form your go-to-market strategy. In almost every company I’ve been involved with launching into the US, they used the same sales model but with very fine tweaks.
Going organically into a new market isn’t your only alternative. There are creative ways to acquire smaller teams or even partner with other companies or form a JV. These can get complicated and for a small fast growing company, be a much larger distraction than going at it alone, but these are options that I have seen work in the past.
(5) Test selling to a new market from your HQ before sending your first employee over permanently
This generally starts at the point where (a) you are getting enough organic inbound from a particular market that you can close over the phone with one dedicated rep or team or (b) you have found a successful outbound strategy that enables you to convert leads/opps into closed new business.
One example I like to site is actually a US private saas co that is on $10m of ARR and who generates more than 20% of their revenue from outside of the US. They decided to set-up a new sales team at their HQ focusing exclusively on Europe. They work odd hours and have started coordinating with marketing for more targeted campaigns in the new market. The goal is to have enough reference-able customers and to have learned enough insights from selling into the new market that by the time they are ready to put people on the ground, they’re not wasting time learning how the sales process differs or grabbing their first logo’s.
(6) Price according to your local market, not your home market
A very successful company I worked with couldn’t believe how quickly they were closing deals when they launched in the US. Then they realised they were underpricing their product by at least 20%! They increased the pricing and still couldn’t sell it fast enough (typically two phone interactions with a customer). They raised pricing again and found price parity. So test the market for pricing after you close your first customers to see where it levels off. But remember, you may have to give away discounts to your first few customers in order to grab your first logos.
(7) Send a founder or early senior executive to scout and sell
In almost every successful international launch, this was one of the very first steps taken. Send the person who can tell the best story about your company/product. Someone who loves meeting new people and will take any meeting. Someone who thrives meeting 30 companies in 3 days in 6 cities (there’s a notorious story about girl who did this at an American company). And they need to meet everybody in that local ecosystem to map it out — predominately potential customers but also channel partners, investors, and public sector enablers/connectors.
(8) Focus on culture
Integrate your new local hires into the company by training them in your co’s HQ. This way they can meet all of their team members, go through on-boarding, and see first hand what the culture of your organisation actually is.
I also believe it is important to allow each office to build their own culture while retaining the core pillars of the company’s culture. Often times, sending a young employee that espouses your core culture and who is a good ambassador is good to send to the new office for a year.
(9) Set organizational goals for the international business
This one has crept up on me as a board member. I’ve been a member of a team that didn’t set goals for the founders who were launching into the US. It was a disaster.
You are launching your business internationally because you are satisfying a demand that nobody else can. Hopefully this means you are first to market. So what are your 1 month, 3 month and annual goals in terms of leads, new business, upsells, case studies, speaking slots at conferences, partnerships etc? How do these metrics enable you to reach a bigger company goal? For example, we want 10% of our new business to come from the US next year. Well work backwards to see if that is a reasonable goal.
(10) Focus on one market at a time
Its hard enough scaling a company in your home market, so don’t launch in multiple markets at the same time as there are so many unknown unkowns.
In summary, launching a startup into a new country takes months of preparation and careful execution before actually ‘formalising’ it and putting people on the ground. In a later post, I’ll write about when and how companies typically launch into the US.