Going abroad can kill you

Paulo Rosado
Jul 13, 2009 · 2 min read

We all know that Europe is not one country. Therefore we should all know that Europe is not one market territory. But as technology leaders, selling to the enterprise, we sometimes forget this fact. We look at Europe with its unified currency and outwards seemingly cultural habits and we tend to believe that selling in Europe is different than selling in multiple unrelated countries. That Europe is like the United States. That Europe is one market.

The fundamental premise of successful market expansion is reference selling. You sell because an existing customer has acted as a reference and can vouch for you. The more customers you have the easier it is to sell. Mainstream customers only buy if you can show evidence that the product works and is providing major benefits and therefore you need those first early adopter sales.

When you jump to a new market you have to start the reference building process from scratch. You have to go again through that most painful process of selling to the first customer and then the next three, and then the next seven.

This is what happens when you decide to expand from Holland to England or from Portugal to Spain. You have to restart all over again. Customers in Holland do not have a trust network in England they can independently validate your claims. They are unfamiliar with the companies that are your early adopters. They don’t even speak the same native language.

I believe this is one of the fundamental reasons that we don’t see very large tech companies outside large local markets. Those early days when you grow fast without having to restart your sales for a new territory save you a lot of time and money. The cost of acquiring those early adopters in a new market is so high that most of the times either the company bankrupts or is forced to withdraw. So US, UK, German startups have a substantial competitive advantage in not having to go abroad too soon while they are low on cash and global awareness.

The exception is Israel. A small local market with very large tech companies. How do they do it? Simple. They overlook the local market and invest their sales in a large market like the US from day one.

So the advice is simple. If you need to go abroad, pick one large market and stick with it. Don’t disperse geographically just for the benefit of collecting flags in your web site.

paulorosado

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