The Internationalization of B2B Software Startups

A Look at Publicly Listed Cloud Companies’ International Efforts

A few years ago, I joined the board of a software company that had only a few months prior launched their first international office. It became apparent very quickly that the company was under-prepared for the launch, which led to cash being invested in the international efforts in advance of the company being ready for such a major undertaking. The end result was that precious resources were invested without yielding the commensurate return. The experience was not a happy one as you can imagine and in some respects was a “bet the company” endeavour but which we were all able to recover, getting the company back on track and thriving again.

I pushed the team and Board to conduct a retrospective review to learn from our mistakes and ensure success the next time round.

What I learned shocked me. There had been no planning process. No owner of the project. No tests run. No goals set. The company had not even experimented with selling to US customers from Europe before diving headlong into opening an office and staffing it with expensive sales professionals.

I then set out to research what I thought were simple questions:

  1. Who leads and participates in the creation of the internationalization plan?
  2. Where do companies go first and how do they decide?
  3. When do you go?

We quickly found that there was almost no research on the subject and very little anecdotal evidence in the public domain other than the odd blog post (which were typically written by consumer companies). But I did happen to meet Andy Leaver, who in Crane’s opinion, is the Godfather of internationalizing software businesses.

For the last two decades, Andy has been turbo-charging US SaaS companies like SuccessFactors, BazaarVoice, Workday and HortonWorks from domestically focused startups into global companies. He was the person who would launch their first international market (typically into the UK) and subsequently scaled the businesses into numerous new countries across Europe and Asia.

“Localisation is a journey — launch when it is just good enough. Many large SaaS companies launched in EMEA with no data centre and no local language. Make early customers design partners and let them help you in the journey.” — Andy Leaver

Armed with several key lessons from Andy’s career, we started to amass a dataset of key metrics from 69 cloud-based companies that have gone public over the last 20+ years. In our quest to answer our key questions and gather insights and learnings from those who successfully executed their internationalization strategy, we combed through every S-1 or equivalent and spoke with numerous founders and executives from the companies below as well as some of the next generation of companies that will likely go public in the near future.

The 69 Suspects

Here are some of the findings from our analysis that we found most interesting:

  1. One in three companies had less than $10m in revenues when they opened their first international office
  2. Companies are accelerating the pace of going international — the latest cohort of cloud companies (those founded between 2006–2011) launched their first international office around the middle of their third year of operations
  3. Companies founded outside of the US internationalize faster — typically in year two
  4. More than 80% of US HQ’d cloud-companies choose London as their first launch city. The second most popular city is Dublin
  5. Non-US founded companies had a slight preference for the East Coast of the US before moving to San Francisco where they ultimately set-up their US HQ
  6. 19 companies surpassed $50m in total international revenue in less than 10 years
  7. The average time for international revenues to constitute ≥10% of total revenues is year six

For founders: we hope you will use this report to better plan your launch into your first new country. We love speaking with folks about to embark on their first international launch or those already knee-deep. So please reach out if you would like to share your experiences or learn more.

The Report:

The die-hard’s who made it to our event, hosted with Salesforce Ventures despite the tube strike and torrential rain! From left: Scott Sage (Crane), Eamon Jubbawy (Onfido), Andy Leaver (Sailthru) and Alex Kayyal (Salesforce Ventures).

Krishna Visvanathan and I would like to give a special thanks to Salesforce Ventures who hosted us at Salesforce Tower in London for the launch of the report. Most of all, we would like to thank the dozens of founders and senior executives that we spoke with over the last few years in compiling this report, Ting Le Deng for his support in accessing pieces of the research and Micha Katz for his feedback on the analysis. Finally, a huge thank you to Andy Leaver and George Coelho for reviewing numerous versions of the report and for sharing countless war stories with us. We look forward to continuing to share our insights on internationalizing enterprise startups.