US Market Entry Checklist for foreign startups
I spoke at an angel investor conference in Ireland last week organized by HBAN, the umbrella group that organizes angel networks in Ireland. I was there to talk about Irish-American affinity investing and about how I helped co-found the Digital Irish Angels group alongside David Beatty and Shane Naughton. This group now invests in Irish founded startups alongside Irish VCs. More details on that group below.
At the conference, I also gave a few pointers to Irish angel investors on how to spot whether an Irish firm was ready to expand to the US. My Dave Letterman Top-Ten-style list was slightly tongue in cheek, but it resonated with the audience so I wanted to share some of those points in longer form. In reality, those points are fairly universal beyond Irish firms – especially to other firms based in Europe.
So, what are the red flags that show that a firm isn’t quite ready to start their US growth efforts or perhaps, more positively, what do you have to do to set up yourself for success when looking to break in the US? I see 3 main areas:
- Basic Preparedness
As the Scouts like to say “Always be prepared.” This applies to a few areas when it comes to US expansion.
a. Market Research
Research your business BEFORE you get here. America is an expensive place to figure out your business model. A few scouting trips and conversations with people in your space will help you avoid costly pivots. The example I gave in Ireland was that I have seen a lot of Sports-related startups with ambitions to sell their software to US Sports leagues and teams. I have seen startups spend 6 months to a year figuring out that those targets are often tricky to negotiate commercially viable deals with (as they often think their brand name association means that you should feel privileged to work with them for below market value). When they pivot to ad-backed models, they spend another 6 months figuring out they don’t have the scale to get Madison Avenue’s attention. Smart scouting missions can avoid that – talk to sellers for competitors’ products and test your solutions with US buyers before you commit to a US presence.
b. Lay the basic foundation
Before you move over and start interviewing, set up a US entity and an EIN (your tax ID number) using a local lawyer (Digital Irish’s sponsor @ White & Williams is a good place to start- talk to Nicole Sullivan over there). Then talk to various PEOs like Trinet (Kieran McGovern a good contact there) or Namely to make sure that you are ready to hire with a clear understanding of what health and other benefits you are going to provide and so you are ready to go with a payroll service (PEOs do all this in one). Then start interviewing. It is ok to fly in and out to interview but remember that Americans move fast – when they are looking, they are typically looking to start anywhere from now to 6 weeks from now. you need to be ready. In order to be a credible future employer, you need to plan to be on the ground every 2 weeks while interviewing – a week on for in-person interviews, week off for video interviews until you make that hire.
Don’t go into the US underfunded. America is an expensive place to do business. The US high growth startup approach is to raise funding, then spend it fast knowing full well that it is going to run out, but aim to get so much momentum in the interim that raising the next round is easy. With some European startups, they raise the bare minimum and build out to their presence to the lowest common denominator. They do things on the cheap – they hire the person with the least experience they can get away with, sometimes avoiding local recruiters (who can provide way better peer to peer vetting of fellow natives) and come away with limited success. Yes, they may not burn out as often or as quick as US startups but they often don’t get the momentum they need to really achieve that US hockey stick of growth.
To give you an idea of how expensive America can be, if you hire a VP of Sales managing four Enterprise sellers say with quotas of $1.2m each, where everyone is fully ramped and hitting those quotas, that will cost you upwards of $1.3m per year! But that expense can be worth it if you get the momentum. And that, my friends, is the American way!
d. Case studies.
Make sure you have local US-based case studies or at least case studies with companies with US name recognition. Yes, there is a chicken-and-egg scenario here but do everything you can to get a local case study in the specific industries that you are focused on. Give away the business to get the case study if you need to. It will be worth it. At the angel event, I said that giving Dublin County Council and Irish Rail as client examples for an Irish startup, say in a Goldman Sachs product pitch, is next to useless! They will want you to give other Major US-based Investment banks as references. Figure out whatever you need to do to get one of those as reference clients.
Being prepared applies to your support structure also. if you don’t have a 24 x 7 global NOC and even if you do, you will need support resources on the ground in the US to give enterprise customers the peace of mind that you are committed to the success of their implementation of your offering. There is cold comfort in parachuting support resources in from afar or for pre-sales meetings.
2. Going Native
I think it is crucial for foreign startups to go native fast. Establish a presence here with real people (parachuting people in every few months doesn’t make you remotely credible), then hire locally, embed your startup in local work environments and adapt your offerings for the local market.
For people, it is always ok to bring one or two initial employees over to set up an office but, beyond that, I think it is crucial to hire locals from that point on. Expats go down well in cosmopolitan places like NY and San Francisco but the further afield you go, the more important it is to have local roots. You will also save yourself a LOT of visa hassles given some of the more restrictive issues at play under the new administration.
Some countries offer incubation or workspace for their startups in key US cities. This may help save money for the first few months while you find your feet, but I believe it is crucial to get immersed in native work environments where you can benefit from the network effect of other teams around you. Generic co-working spaces like WeWork are great but sometimes even better for useful connections are industry-specific ones like Workbench in NYC (Enterprise Tech) or Tech Talent labs (recruiting startups).
Don’t also discount going native to the language. American English is different. You need to adapt your website and collateral to match the nuances of the language. You will use lots more Z’s in the localiZation (ahem! not localiSation) and make sure you don’t use European specific terms like “Bespoke” or “ICT”. Oh, and hiring locals will also help you get up to speed on the myriad of sports-related terms that appear regularly in business meetings. More on that here so you don’t get a curveball thrown at you.
You will also need native case studies as highlighted above.
3. Business environment nuances
The US business culture is different. I have direct experience of this having worked at BT for 5 years and witnessing the difference between the US and London offices. Here are a few things to be aware of in the US:
The US has a more litigious and more Politically Correct work environment. There are loads of questions you cannot ask in interviews – such as “are you married?”, “what age are you?” and, now in NYC, “what is your current salary?” Be careful so as not to draw lawsuits onto you and your firm. Do not be a walking legal minefield.
Americans are supremely confident in how they present themselves. Europeans tend to be more sheepish, self-deprecating and undersell their achievements. You need to prepare for this in interviewing and evaluating American candidates and in thinking about your approach versus competitors in both VC pitches and customer pitches. Be a great storyteller. Shrinking violets are less likely to succeed in the US.
c. Sales centricity.
In the US, don’t be sheepish about the close. Don’t be embarrassed about asking for the business and don’t be afraid to sell value and potentially charge more in the US for providing it. It is a sales-centric work environment and, when the timing is right for them, US clients will expect you to try and close them. Furthermore, culturally, it is ok for successful US salespeople to make a lot of money. Get comfortable with that or you may lose them to competing interests.
If you are interested in reading up more on work-culture differences across different countries, I would suggest reading Erin Meyer’s book, The Culture Map.
That isn’t quite a punchy top 10 list like the original presentation but those 3 areas are what I would focus on if I were working for a foreign startup looking to expand in the US. At Glenborn, we do a lot of work with such startups on sales hiring. If we can be of assistance to you on that front, please get in touch.
More details on Digital Irish Angels
At Digital Irish Angels, we believe there is an untapped opportunity to engage more Irish Americans that are accredited investors in investing in earlier stage Irish startups. Money is one benefit to the startups, but even more important is the access to a senior network with connections on the ground for these startups that will help them accelerate their US growth faster than they can be going in cold. You can find out more about the group at www.Digitalirishangels.com. Please note it is for accredited investors only. sec Digital Irish Angels is a sister group of Digital.irish that promotes Irish startups in the US through monthly networking events and past pitch events in NYC.