how to launch in the us
TRANSCRIPT
www.launchinus.com 1
Entering the US Market:Top 10 Reasons Companies Fail
The US market offers tremendous opportunities for technology companies…
… but it is a complex place to do business
© 2009-2010 Launch in US Alliance
Jos Scheffelaar, CEO
www.launchinus.com
Jos Scheffelaar
• Graduated from TU Delft, Electrical Engineering
• First job: Stationed in the US near Philadelphia for the SWIFT international banking network
• Via Brussels, Copenhagen, Tulsa (Oklahoma), Atlanta (Georgia) and Tokyo (Japan) to Boston.
• Gradually transitioned from Engineering to Business
• Since 1990 in Boston: data networking, network security, internet services, software services
• Started Launch in US Alliance at the end of 2009
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Launch in US Alliance
All the core services in one place• Market assessment
• Market strategy
• Sales & marketing
• Human resources
• Financial & tax
• Legal
• Office space
• Etc...
The Alliance assembles a team of experts meeting the evolving needs of each specific client
© 2009-2010 Launch in US Alliance
www.launchinus.com © 2009-2010 Launch in US Alliance 4
Sponsors & Partners
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Outline
• US Market – the Rewards
• US Market – the Challenges
• Roadmap for Success
• Conclusion
© 2009-2010 Launch in US Alliance
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US Market – the Rewards
• Largest single market in world (by GDP)
• Global source of business innovation
• US economy is recovering
• Success in the US market drives up company valuations
• The US is still the Land of Great Opportunity
© 2009-2010 Launch in US Alliance
United States $14,440,000 China $7,992,000 Japan $4,340,000 India $3,304,000 Germany $2,925,000 Russia $2,271,000 United Kingdom $2,236,000 France $2,133,000 California $1,846,757 Italy $1,827,000 Canada $1,303,000 Texas $1,223,511 New York $1,144,481 New England $763,683Florida $744,120Netherlands $673,500Illinois $633,697
GDP in Millions of USD (2008)
(European Union $14,940,000)
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GDP by US State
Italy
Canada
IndiaN
etherlands
Turkey
Poland
Sw
eden
Saudi
Arabia
Norway
Greece
Austria
DenmarkArgentina
Switzerland
South
Africa
Finland
Ireland
Tha
iland
Columbia
Portugal
Malaysia
CzechRepublic
Nigeria
Israel
Chile
Philippines
Pakistan
EgyptHungary
KuwaitKazakhstan
NewZealand
Vietnam
Angola
Bangladesh
Croatia
Belarus
Sudan
Syria
Sri Lanka
BulgariaLatvia
Uruguay
Guatemala
Yem
en
Estonia
Luxembourg
Lithuania
Peru
Libya
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Regional Differences
8© 2009-2010 Launch in US Alliance
Source: Boston Globe
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US Market – the Challenges
Introduction– The US market is brutally competitive– There are no special considerations for international companies– International companies must follow the rules for doing business here– International companies generally do not have professional networks
or name-recognition in the US
Biggest problem: Knowing what you do not know
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http://www.ritholtz.com/blog/2009/11/the-world-according-to-americans/
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Business Culture
• US is a multi-cultural society– used to dealing with people of different
cultural and ethnic backgrounds
• Europeans generally well received• Easy to appear to be American• Strong Buy-American bias in
certain industries (defense, local community procurements)
© 2009-2010 Launch in US Alliance
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American business etiquette
• Short-term focus: – Time is money
• Bottom-line orientation– What’s in it for the company?– How can I shine within my organization?
• Be positive and outgoing– First impressions are important
• Hard-nosed– Being assertive is expected– Negotiations can be tough, but usually fair
• Be persistent– Perseverance is required for initial appointments
12© 2009-2010 Launch in US Alliance
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US Market – 10 Challenges
Marketing IssuesPoor segmentation analysisInsufficient Marketing & Sales budgetWeak value propositionUnsophisticated pricing philosophyUsing formula that worked in Europe
Other IssuesNot outsourcingHiring the wrong talentMaking the product perfectLocation of first US officeKnow what you don’t know
© 2009-2010 Launch in US Alliance
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1. Poor Segmentation Analysis
• Because of its size, the US market has more segments in a particular industry than any single European country
• Europeans segment by culture
• Result: not knowing who your customer really is in the US and too many potential markets
• Recommendation: think about the US opportunity strategically. Need market research to define initial market segments. Refine after 3-6 months.
14© 2009-2010 Launch in US Alliance
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2. Inadequate Marketing & Sales Budget
• European companies are used to bootstrapping– If VC funded, they get money in smaller increments.
– But: You need to think BIG in the US!
• Even with proper segmentation, still very expensive to reach the right audience– PR agency, analyst relations, multiple regional trade shows,
advertising etc.
• Spend money wisely– Get insight from trusted advisors
– Create a realistic budget (it WILL shock you!)
15© 2009-2010 Launch in US Alliance
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3. Weak Value Proposition
• What is the:– Unique Selling Proposition (USP)?
– Return on Investment (RoI)?
– Cost of Ownership (CoO)?
• Case studies and White Papers are required
• Need crisp, hard-hitting articulation of Value Prop for various audiences (“Pitch”):– Based on US environment
• Competitors, pricing, desired features
– Customers, distributors, potential employees, business partners, investors
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4. Simplistic Pricing Policies
• Prices often “translated” from local currency into US$
• Understand intrinsic value and charge accordingly
• Software pricing especially complicated
• Beware of transfer pricing traps– Take into account value created in US
– Get advice from a global accounting firm BEFORE setting transfer pricing
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5. Using European Marketing Formula
• What worked in Europe will not work in the US without changes
• Target the needs of the selected market segments
• European reference customers are (almost) useless
• Re-write all sales collateral and especially the website together with American industry experts
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Using European Formula
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6. Outsourcing
• Budgets often contain full-time positions for HR, accounting, marketing, etc.
• This results in a misallocation of funds– unnecessary overhead
– compounds the underspending in Marketing & Sales
• Most functions can (and should be) outsourced
• Done right, the company will look and react like any other nimble US start-up
20© 2009-2010 Launch in US Alliance
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Sales
MarketingStrategy
OutsourcingSupport Functions
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Legal
Accounting
Web Design
ExecutiveRecruiting
IT Support
Logistics
LeadGeneration
Financial
HR
PublicRelations Market
Research
ChannelStrategy
MarketingCommunications
Pricing
© 2009-2010 Launch in US Alliance
www.launchinus.com
7. Hiring the Wrong Talent
• Once the decision is made to expand in the US, European companies often move too fast– Trade show contacts
– Referral by business partner
• Hire LOCAL sales & marketing talent– Familiar with US methodologies
• But find the right people– US sales professionals are experts at selling,
which includes selling themselves
– Search firms provide a valuable filter
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8. Making the Product Perfect
• Many European tech companies strive for perfection
• That takes time (and money)
• US companies make the product “good enough”
• Sell sooner, realize cash flow sooner
• Quality is important, but perfection is too costly
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9. Location of First Office
• Typically decided without much thought– Hometown of the wrong talent
that was hired in a hurry
– Plant of the first US customer
– California (Hollywood effect)
• Boston (New England) is tough to beat– Great talent pool, easy access to Europe, little congestion
• West Coast HQ only recommended if overwhelming industry need – 9-hour time zone difference with Central Europe
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10. Know What You Don’t Know
• Would you climb Mt. Everest without a Sherpa?
• Why try to conquer the US alone?
• Low cost and lack of red tape involved in starting a US business does not mean it is easy
• Perform an audit– create a functional map of your areas of US expertise
• Marketing, Sales, Distribution, HR, Legal, Tax, etc…
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Opening a US office
• Select US location– Maximize overlap of business
hours with headquarters– Presence of talent, target
industries– Major airport nearby
• Find office space• Establishing a US legal entity
– Incorporate, what state?– Operating Agreement
• Open a US bank account• Accounting, financial reporting,
tax
• Bringing over European staff– Potential immigration issues
• Hiring first US staff– Recruiting, employment
agreement, payroll, benefits• Conducting first business
transactions– Business agreements under US
law (pick your state)• Business insurance
– Product Liability
Many of these functions can be outsourced, at least initially
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Conclusion
• Do your homework before entering the US– Know what you don’t know
– Double sales & marketing budget % compared to your home market
• Hire US sales & marketing executives– Minimizes cultural issues
– Gives immediate access to their professional networks
• Focus on your core business– Outsource non-core functions as much as possible
© 2009-2010 Launch in US Alliance
www.launchinus.com
Observations by a European in the US
• Business Culture– Some key words: Language; decisiveness; risk taking;
awareness of legal risks; not openly sharing opinions; service-oriented; competitive; leading edge
• US professional environment stimulates entrepreneurship– Regular employment is not without risks– Low threshold for establishing a company– Many networking opportunities– Opportunities to get funding for good ideas (Angels, VCs,
Self Funding)