For SaaS companies based in Europe, selling into the US represents a significant milestone. The US represents the biggest market for SaaS applications and early entry is advisable (not least to prevent domestic US competitors from gaining a foothold). Many SaaS markets have “winner takes all” characteristics so ensuring you are targeting the US early needs to be a key consideration.
Once your SaaS business has been running a while and has been indexed by Google the data in Google Analytics will often signify that US traffic represents the source of much of your growth even before you actively target the US via paid search.
Whether this traffic translates to sales will depend on a lot of things, not least where your proposition sits on a pricing spectrum from self-serve ‘buy now’ to an enterprise sales which entails face to face meetings to close. Once you start closing some US customers though it is definitely time to be considering your market entry options. As an aside, from an investment perspective, being able to close international sales remotely is extremely attractive as:
(a) it signals that the market can be served without the need for ‘boots on the ground’
(b) it indicates that the cost of acquisition (CAC) does not need to ramp up significantly
(c) it validates your ability to scale beyond your domestic market.
So what are some of the steps you should be taking as you look to increase lead velocity from the US?
1. Set Some Milestones
Try and establish whether these US customers are outliers or whether they are evidence of significant untapped demand. Once your number of acquired customers hits a certain number (be that 10, 20 or 100 — depending on monthly revenue) arrange a meeting of key stakeholders to discuss requirements and milestones for market entry. Once you have sufficient evidence to act it needs to become a key strategic priority and planned accordingly.
2. Consider the Capital Investment Required
Depending on your cash position, it is time to undertake some initial calculations as to the investment required across a range of scenarios from ‘continue to serve remotely’ to ‘establish a US entity and office’.
If VC backed it may be that a US expansion is part of a Series B raise in which case additional market research will be required to validate the size of the prize. At this stage it is also worth engaging with US VC’s — securing a US investor will offer many benefits (over and above the raise) including leveraging their networks (and knowledge) to help you overcome some of the significant hurdles that exist when entering a new market.
As a rule of thumb, Adam Marcus, of Open View feels that circa $2M ARR is a good inflexion point to make the move as below the $1M ARR mark cultures and values are not yet ingrained and employee numbers may not be sufficient to ensure a successful entry.
3. Undertake Some Competitive Research
Look to understand the landscape from a competition standpoint (including an analysis of close substitutes). Pay close attention to the language they use on their sites to describe their offerings ensuring you are aligning with the category description being used. A simple analysis of their blogs and social media accounts will help you understand their marketing strategy e.g. which events they exhibit at, what marketing collateral they are promoting etc These data points can help ensure you can evaluate where best to focus some of your initial marketing dollars. Use tools like SEM Rush to assess what keywords they are spending money on, which keywords are bringing traffic, and which high domain authority sites they are gaining links from so you can focus on gaining similar links.
4. Test Some Paid Activity to Validate Demand
It is worth creating some bespoke landing pages and targeting some of the high volume keywords (ideally those with commercial intent) that you’ve identified from your preliminary research. These landing pages will ideally include some US validation in the guise of social proof e.g. testimonials from recognized US brands, as well as some logos from US clients.
If your research supports your assumptions that the US market opportunity is large and you are setting clear milestones to enter the market it is time to think about subtle tweaks incl US accents on animations through to US phone numbers on the contact page.
5. Ensure Hosting Infrastructure is Updated
If the evidence supports the notion that the US is a key market it is important to run Pingdom Tests where the location is set to the US. Speed remains a key criterion for site performance (ranging from Google organic positions through to customer behavior) so add capacity if need be. It is surprising how many EU startups fail to run speed checks in overseas markets like the US. Depending on your current hosting arrangements the site speeds can be materially worse off 5000 miles away — thankfully it is usually an easy fix once you are aware of it.
6. Review Pricing and Factor in The Effects of FX Movements
US companies are going to want to see $ pricing on a pricing page so you may need to look into IP detect software that enables you to serve slightly different content to US IP originated traffic (or you can simply offer a toggle for $/£/€).
Of course, pricing in $ introduces currency risk so again this needs to be evaluated in the context of currency fluctuations. Do you anchor in US $? What pricing tiers to domestic US competitors will similar value propositions price at?
What are the implications of having a primarily UK or EU cost base versus growing US income? These are some of the issues to be considered and will require some input from external advisors. You need to be careful here so as to avoid exchange rates divergence which will result in support complaints along the lines of:
“How come US companies pay less than UK ones?”
7. Expand Customer Support Coverage for US Time Zones
Assuming some initial US sales it is important to ensure first-class support from the off. Ideally, some of these early adopters can be encouraged to become reference customers and it is important to ensure they are onboarded successfully and have access to support in real-time where possible. It is likely to mean that you need to extend your hours of coverage in the UK (to cover some US hours) or to source a US based support person in advance of a more strategic move. As chat bots increasingly grow in importance the ability to offer real time access to support will become critical.
8. Decide the Location for First Boots on the Ground
When thinking about where you should base your first office there are a number of considerations. The east coast is appealing due to a number of factors:
More cross-over with UK and EU times due to time zones
Shorter flight times
More affordable than the West Coast
However, there are significant merits to the West Coast also:
More established Tech and SaaS ecosystem (although some of our friends in Boston may differ).
Ability to cover all US time zones from a support perspective.
The choice can also be influenced by everything from where your customers are located (there may be a concentration on one coast), through to where your investors are through to the amount of capital you have raised.
9. Take Your Time With The First Hire
The first hire is often viewed as being the most important one. However, this hire is fraught with difficulty. For a start, it is often a sales lead and hiring a senior sales person in the US is notoriously difficult. At the recent Point Nine Capital event at SaaStock (2018), Best Practices Internationalizing a SaaS Startup, panelists described the following as some of the challenges:
“Salespeople are very good at selling themselves — all prospective hires seemed great. However, it is a very costly mistake to get wrong”.
“The lack of a relationship with teams back in Europe (product and marketing) can create significant challenges”.
Some of the recommendations included:
1/ Having one of the co-founders or one of the senior leadership team establish the US office.
2/ Bring one of your key sales people to the US with you initially.
3/ Leverage your existing network (ideally US VC’s) to help cut through the noise.
4/ Ensure strong connections exist between the two offices to avoid two different cultures emerging and to ensure that in-person relationships are established and developed.
Leading US VC David Skok of Matrix Partners also cautioned against entering the US before product market fit had been established and to decide between hiring someone who will follow a playbook versus a pathfinder/ trailblazer sales hire.
10/ Don’t Neglect the Culture
Once you have a secondary office established it is important to dial up communication and travel between both offices. Where budget permits, adding a HR lead in the US office can be an important step in ensuring that separate cultures are not created. Initially the first US hires are often sales and support roles, and it is vital they build strong working relationships with marketing and engineering teams.
For most SaaS businesses in Europe, the US represents the biggest market opportunity and putting a market entry plan in place as soon as you have sufficient evidence of US demand is crucial. The above steps represent some of the considerations you need to make before taking the plunge.
Alan Gleeson is a B2B Marketing Consultant based in London with a passion for helping SaaS businesses to grow.
Notion Capital (a UK-based B2B SaaS VC firm have produced an excellent book/ PDF called Crossing the Atlantic.
2. Stripe Atlas offers a US market entry toolkit which is worth reviewing.
Found this of interest? Why not read one of my other recent posts:
Thanks to Alan Holland and Connor Keppel .