Wondering when to take your business to the US? Go Early, or Go Late
Starting and scaling a business is one of the hardest things out there. Taking your business into a new international market is another step up in terms of challenge. Assuming the rationale for international expansion is sound, the next question for an entrepreneur to consider is when to launch in a new market.
In speaking with over 50 founders who have recently been on this journey, we’ve seen a clear pattern of success and risk mitigation emerge:
Often European entrepreneurs start building their startup in their home territory and then recognise that the market opportunity there pales into insignificance compared to the market opportunity for the same problem in the US. The founder then elects to sacrifice (or at the very least substantially reduce activity) in the home market and commit to the new market completely, often moving team and raising money in this new geography. The benefit of this approach is that the team will build only one product or service and it will be entirely focused on the consumer in the new market (whether that be an actual consumer or business). The startup’s stage, funding raised and customer traction then aligns with a young company in the new market, in this case the US.
Other entrepreneurs who have successfully entered new markets like the US have chosen to do this much later in their company’s evolution, often post Series C and when the core business is cash-flow break even. The benefit of this approach is that the CEO is not “betting the house” on the new market and can afford to be measured and somewhat clinical, testing, iterating and only recruiting behind success. By having a stable core business, the pressure on the founder to make the new market work is greatly reduced.
Beware the in between:
Those founders who launched an international market before reaching scale in their home territory found both markets hard to deliver. The home territory was required to continue to be the engine of growth for the business, but now focus and resources were strained, dealing with double the level of complexity without operational scale — and in many cases those founders had to make the painful decision to retrench one to two years later. The knock on effects of this can also be very painful: a business that is subscale in its home market and unproven internationally, may struggle to raise additional fundraising and be forced to seek several rounds of potentially dilutive internal funding.
So unless you are willing to go very early, consider concentrating on your home market until your business has reached a certain scale.
The US in particular has been the graveyard for too many great European tech businesses. Many have failed as they have made the international leap at strategically the most inopportune time. They have lacked the benefits of a fresh beginning in a new market or the stability of having scale and credibility from a successful domestic market.
Bear in mind that if you can reach and sustain 100% year-on-year growth in your own market, you’ll be in the small minority of VC-backed companies. Now that’s something to rally behind.