This post is by Irina Dzhambazova from Openview Labs
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The question whether to scale to the U.S. or not is among the toughest ones for SaaS founders. As many SaaS founders would acknowledge, the added value is limitless. The U.S. is the largest single market for purchasing software. You can also find numerous financing opportunities, as well as acquisition possibilities once you’ve solidified your business. Even if you decide that expanding your SaaS business overseas is the right step, there are still a ton of things to settle. When and where to start? How to avoid the biggest traps when managing your overseas operations? These are all questions that founders with global ambitions ponder on constantly. Throughout all the SaaStock events we have run, we have sought to give stage time to founders to share their learnings and find correlation patterns. We will do so, once more when SaaStock itself crosses the Atlantic for the very first
with SaaStock on Tour New York on June 20th. One of the key sessions on the day will be on fostering a New York City State of mind with Alexis Lê-Quôc, Tomer Tagrin and Ben Hindman. They will be joined by 25 other superstar speakers, speaking in front of a crowd of 400 SaaS kindred souls, figuring out together the biggest of SaaS questions and challenges. Join us. Meanwhile, we’ve gathered the wisdom of a number of experienced SaaS founders, advisors, and investors who have all graced the SaaStock stage before on how to scale your business to the exciting market across the Atlantic.
1. Find the right product-market fit across the oceanBefore getting into the questions when and where to grow your business in the vast territories of the U.S., you should prepare for the new market you’d be entering. As Roel de Hoop, General Partner at Prime Ventures, notes, you cannot simply go overseas and expect to sell the same way you did at home. Instead, you should work on identifying a product-market fit for the new market you’re about to enter. Settling this from the start is important, so you can avoid a ton of disappointments and difficulties later on.
2. The right time is an individual decisionScaling to the U.S. takes a lot of energy and is a long-haul game. The timing has to make sense for you. Here a few options:
When you want to be a global company from day oneSome companies like Dataiku decide to internationalize early on. Florian Douetteau packed his bags for America quite fast. He managed to hire a small team there, but it was difficult for Dataiku to acknowledge and adapt to the salary differences between France and the U.S. Eventually, he raised Series A funding from American investors. This was crucial for the proper functioning of Dataiku’s overseas office, as it allowed the company to make better hiring decisions and offer adequate remuneration in the U.S. Having the backing of US investors also gave Dataiku a priceless stamp of approval when it came to large clients like National Public Radio. However, Florian and Dataiku, are more the outlier case, rather than the norm.
When the critical mass of customers demands itFor Rachel Delacour, founder of BIME and now VP at Zendesk, scaling overseas came as a natural and much needed step. BIME is a business intelligence tool that was created in Montpellier, France, far away from the tech noise in California, before getting acquired by Zendesk. When Rachel and her co-founder (and husband) Nicolas Raspal got a critical mass of traction in the U.S., they had to grasp the opportunity. After raising $3M Series E funding to go to the U.S., they decided to base a local go-to-market sales team in Kansas City, Missouri. inSided similarly made the move across the Atlantic only after raising funding for that specific purpose. Otherwise it may have been too financially strenuous for the business to take the leap. Its CEO Robin van Lieshout shares that the financing came only after having the strong wish to venture into the new market. How is such a wish justified, however? It has to come from a clear customer interest. For Adrien Menard, CEO of Botify, it was an overnight trip to Seattle to meet a potential client, which he barely made flying in from Paris. Making a successful sale, he had his validation that Botify could be sold in the US. Even amidst the stress of that, he wouldn’t have moved to the US prior to that validation.
3. Even without a US office, hire a US sales repOne of the most important hiring questions that any business moving to the U.S. has to face is whether to hire local talent overseas, or move a part of the existing team to the new location. An even more crucial question is whether to create a local go-to-market sales team. The founder of the Israeli log analytics company Logz.io Tomer Levy kept his team based in Tel Aviv for as long as he could hire enough people there. But eventually, since half of the market that Logz.io could reach was in the U.S., Tomer saw that having only Israel-based sales people was not working anymore. When the company had more than 100 customers and enough traction, he decided to get an overseas sales representative.
4. Have clear milestones before you moveAccording to research of 69 high growth companies conducted by Scott Sage and Andy Leaver from London-based Crane Venture Partners, the time period that high-growth tech companies need before they start internationalizing is rapidly shrinking. Previously, it was in the range of 10 years, while now it’s accelerating to less than four years. Scott and Andy found out that businesses that were most successful in internationalizing had hit four milestones before making the step. These companies had:
- Set repeatable sales execution in their main HQ
- Found early international customers
- Already sold to early adopters
- Gained an understanding of the local culture they were moving to
5. Go to the East CoastAnother major question that inevitably pops up for SaaS companies looking to expand to the U.S. is whether to choose the tech hubs on the far West Coast, or opt for the more accessible East Coast. For most European SaaS companies, the East Coast seems to be the place. Moving to cities like Boston and New York is cheaper than the well-known tech mecca on the West Coast. The East Coast time zone is usually more convenient for companies from the Old Continent and Israel, such as Axonista, Falcon.io, and Logz.io. The smaller time difference allows teams on both sides of the Atlantic to have a maximum amount of daylight time together. All these practicalities in mind, if the East Coast is not the right fit, move. It’s what happened to Showpad after they established an office in New York. It took co-CEOs Pieterjan Bouten and Louis Jonckheere a few months to realize that New York was not the place for them and despite the fact that the West Coast was more expensive, it’s where their potential for growth laid.
6. First hire a local expert whom you know wellFor BIME, the logical way to approach the hiring conundrum was to seek a local expert in their new location in the U.S. This had to be a person who could take over organizing and managing the new location — and the new team. Rachel Delacour opted for a U.S. sales team that was well-versed in the specificities of their local environment. The MD she chose had been a close confidant of BIME, one of many relationships, she had carefully nurtured. Logz.io hired a VP from Silicon Valley who eventually built up their Boston sales team. To Tomer Levy, it had been crucial to find a person who understands the cultural differences between the core team and the new American one, and to blend the best from both worlds skillfully. They approached building out the Customer Success team in a similar fashion.
7. Hire an internal recruiterHiring in the U.S. can be tough. For Nicolas Dessaigne, Co-founder & CEO at Algolia, the best strategy had been to hire an internal recruiter. Before that, the management team would travel often to make contacts and find hires. Once they found a recruiter, this person was placed in charge of gathering a solid overseas team. Algolia also uses external recruiters when building their U.S. team.
“One mistake that I made is that we did not hire a local U.S. recruiter early enough.” – Florian Douetteau, CEO of Dataiku
8. Always work on your network in the USDimitris Glezos, CEO of Transifex, also underlines the importance of an internal recruiter, together with building a solid network in the U.S. prior to moving there. When you have the right contacts overseas, they can be the best source of quality team members. Networking is absolutely priceless according to Rachel Delacour. A solid basis of contacts helps you validate your product, find employees, scale your overseas office, and get through the hard times.
9. Keep product and engineering teams homeLogz.io kept their engineering and product teams in Tel Aviv. Their logic is that customer-facing positions such as customer success, support, and marketing should be closer to the U.S. market, while product-related teams can stay in the home office. The same functional split applied for Transifex. Ulrik Bo Larsen made a similar split with Falcon.io, keeping product and engineering in the main office in Copenhagen and basing most salespeople overseas.
10. Always have ambassadors between the two officesTomer Levy and his co-founder relocated a couple of people from Logz.io’s Tel Aviv office to Boston — and vice versa. They see these team members as ambassadors who can help blend both teams even better. Robin van Lieshout from inSided also underlines the importance of having senior people from the initial team who know the DNA of your company join the new team. Their presence can be priceless, as they can spark a vibe similar to the one in the office they come from, precisely why inSided relocated an important salesperson early on to help the growth of the new HQ.
11. Eventually one founder should relocateIn some cases, if one of the founders moves to the U.S., it may also speed up the scaling process. Many companies say it’s worth considering moving a senior management person from the home office to the overseas one. Tomer Levy from Logz.io and his co-founder often spend time between the two offices in Israel and in the U.S. A number of founders point out as a rule of thumb that they usually have one co-founder in each office at all times.
12. Spend a lot of time on company cultureManaging cultural differences can be tough, says Rachel Delacour. Even if your new team is the same age as your current one, you have to understand the nuances in how people function across the globe. For Rachel, it’s imperative to avoid misinterpretation by over-communicating. It may be exhausting, but is crucial. According to her, it’s always better to give more information rather than leave people to wonder what you mean. It’s also important to find the right software and buy proper audio visual technology for team conferences that will help you nurture closeness across the ocean. As for financial communication, it’s best to clarify topics about salary differences between the U.S. and European offices as early as possible, so that you kill a potential problem from the start.
13. Respect time zonesIn terms of communication, you should respect timezones and avoid triggering meetings that would be out of hours for any of the teams. An example of what may happen is offered by Transifex. The company is split between a Greek main office and a West Coast office, which have a 10-hour time difference. When the Greek engineering and product teams are ready to go home, their West Coast colleagues are just starting the workday. This is not always conducive to productive talks. CEO Dimitris Glezos has had challenges smoothing out the communication, which he finally managed by having the Head of Engineering fly often between the two offices. What’s more, CEOs should be the ones ready to get up early and stay up late in order to keep the communication flow. If you want to run an international business across time zones, that’s simply a part of the deal.
14. Make new people a part of the big story of your companyRachel Delacour shares that it’s key to include new people in the overall picture of your company from day one by engaging them in various activities that you already have. In this way, you ensure continuity of the culture between your offices. You should also not miss out on personal celebrations. It can be tiring but creating this social glue between your people is key to the overall success of your business. All new employees of Logz.io come to the main Tel Aviv office of Logz.io for two weeks to meet their colleagues and to get a first-hand taste of the company culture. That helps them feel a part of the big team, which in turn makes it easier for them to communicate over distance afterwards. Robin van Lieshout and Roel de Hoop also underline the importance of initial get-togethers in the home office.
“Have at least one kickoff meeting together, even if it means flying 100 people from the U.S. It is an expensive exercise, but it’s worth every penny.” – Roel de Hoop
15. Visit oftenOne of the major mistakes to be avoided, according to Rachel Delacour, is not visiting your U.S. team often enough. If you fail to see them personally on a regular basis, you may create a feeling that you prefer the “original team.” That’s why when scaling, you should prepare to travel as much as you can to meet and connect with the new team. Tomer Levy from Logz.io shares similar insights in terms of building overseas teams’ culture. He says that he spends much more time with the U.S. team one-on-one, as he feels he needs to bridge the gap. The two founders regularly spend time in both offices.
16. Allow people to suggest changesRobin van Lieshout from inSided shares an important way to improve the communication flow between offices. An employee from the U.S. office would spend three weeks in the main HQ, and then go back for a week in the satellite office. The person would usually notice so many differences in the functioning, that they would want to address them immediately. They would come back to the main HQ for another week to solve the issues. By following a similar pattern for some time, the person would help bring more uniformity between the way the two offices operate.
17. Adapt to mistakesEven with a thousand tips, the process of scaling to the U.S. is not easy, so you should proceed with caution. But most of all, you should be ready to accept that you will make mistakes, and continue even beyond them.
“The reality is, and I’d say most companies would admit that, they do f**k up, everyone f**ks up. And the question is really around whether you can adapt to that.” – Ray Smith, CEO & Co-Founder of DatahugMake sure you don’t miss our SaaS on Tour New York edition taking place on June 20th for an even more detailed outlook on the US SaaS landscape, as well as hands-on tips on how to make the move over the ocean. The post 17 Priceless Lessons Learned from Scaling to the US appeared first on OpenView Labs.