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article imageQ&A: When should international startups break into the US? Special

By Tim Sandle     Oct 6, 2019 in Business
Cracking the U.S. market is a goal for many international startups — but opening a U.S. office is the ‘Holy Grail’. But when is the best time to do this? And what is the optimum strategy? An expert reveals all.
Having a team on the ground in the world’s largest market is a sure way to boost credibility and solidify your reputation as a global player, which is why the prospect of entering the U.S. is so attractive to many startups.
However, it can be hard for businesses to know when it's time to make the jump. Emil Dyrvig, Managing Director of the Americas at Templafy warns that a move at the wrong time could be detrimental to the success of a business.
Digital Journal: What are the key challenges facing startups?
Emil Dyrvig: The product is ultimately the foundation for a startup’s ability to succeed. However, no matter how great your product is, your success will in the end be defined by the CTF pyramid - Culture, your ability to acquire the right Talent and lastly a laser sharp Focus on everything you do from product development to your go-to-market strategy.
If we start with the latter it is extremely difficult to hone-in and focus on the right things, especially in the earlier stages. Your product is less defined/developed, and you have not had the chance to test a lot of hypotheses in the market. It is tempting to fall in the trap of “we can serve everyone and solve all these challenges”. This leads to resources wasted and also cripples your ability to fail fast as you might be failing slowly in some areas while succeeding slowly in order. Additionally, a broader focus requires more resources if you are to do things right. It can be argued that some companies have indeed succeeded by going broad and wide from the beginning but.
When it comes to talent, it’s crucial to hire the right people at the right time. You will, at some points along your journey to a billion-dollar company, need different profiles and skillsets. Generalizing a bit, a builder and entrepreneurial profile will probably be a good fit earlier on in your journey, or when launching a completely new product. Contrary to that, the same profile might be unsuccessful in later stages where people who thrive in a more structured and less ambiguous environment are very successful. I have met extremely talented people who’ve simply got to the right company but at the wrong stage.
Defining what profiles you need today but equally important when you expect to start needing to shift your profile mix to a different one is crucial. This not only reduces the risk of hiring the wrong people but equally prevents churn from existing employees and will serve as a great boost to your company culture.
This brings me to the bottom and most important part of the CTF pyramid - culture. The cultural foundation is defined early on and research shows that it is (not surprisingly) heavily influenced by the founder(s). Making a conscious choice of what culture you would like and what values should be core focus and task early on. Important note is that when I talk about values, I am not talking about putting posters on the walls but actual everyday values you look for every employee to embrace and live by.
A culture naturally evolves as your company grows, example being the classic case of “I used to know everyone in the office now we have 10 new people starting every week”. Culture is the hardest part to get right and it is very challenging to keep and maintain – especially as your company grows. A culture naturally evolves as your company grows such as the classic “I used to know everyone in the office now we have 10 new people starting every week”.
Having the right focus and hiring the right talent definitely helps on creating a good corporate culture. However, without a great cultural foundation you won’t have the ability have either of the two other CTF factors.
DJ: Why do so many startups fail?
Dyrvig: When diving deeper and looking at why so many companies fail to make the leap to the U.S. the CTF factors play a big role. If you aren’t bringing the right culture, if you don’t have the right talent and you lack focus you are going to fail. That is however not only for the U.S. – that accounts for everywhere. Assuming the above is in place where I see majority of companies fail in their U.S. expansion is due to a premature entry and/or a lack of prioritization.
In today’s world you have a ton of opportunity to validate whether your product and go-to-market hypotheses work in the U.S. before deciding to go physically opening up an office. This is for example what we did at Templafy. We started focusing on U.S. customers remotely from our Copenhagen office first. Then we started traveling to visit some of them. After we successfully had landed a range of smaller to mid-sized deals and some large enterprise deals, we decided that the timing was right for us to open up our U.S. office. This also provided us with a foundation for, based on data, to make a larger bet on our U.S. opening, which brings me to the next point.
If you want to succeed in the U.S., you cannot do it half-hearted. You have to make a bet and be ready to invest and prioritize the move. Sending one of your employees over there and placing him/her in a shared office space with a 5-9 hours’ time difference is difficult. You are relying on one person to validate your thoughts and prove your success. It will naturally be easier if it is a person who has been at the company for a longer period of time however it is tricky.
When you have decided to prioritize the move and make your bet and set up an office with people a couple of simple, but very impactful tips, will help mitigate a potential failure:
Make sure to mix the local and “global” culture. Bring culture ambassadors from your overseas HQ and mix them with local hires. You cannot go into a new market and believe that your culture is the way to go. However not bringing any of your corporate in you risk creating a separate “separate company feeling” where collaboration between the offices will be challenging.
Get a senior leader in the company to be part of opening up the office. No matter how you look at it the persons you hire locally has no track record at your company. They might be making the right calls and recommendations however it can be very difficult for HQ management to validate whether they are right or wrong. Having a local senior “ally” will enable your company to make decisions faster but more importantly make the right decisions based on facts.
DJ: How important is it for startups to enter the U.S. market?
Dyrvig: The U.S. is the world’s largest market (for most things). At some point in time it makes sense for you to enter the market. Entering the market does not necessarily equal opening up an office.
With that said the U.S. represents a tremendous opportunity due to the homogeneity of the market. There is reason for that the majority of the most successful companies all originate from the U.S. Not having to deal with multiple languages, country borders, local laws (ignoring state differences) makes going to market easier. I would argue that going to the U.S. is very important for startups but the question rather being not if but when. A lot of VCs are looking for “the American proof” when they invest in companies. If you have proved that you can make it in the U.S., the world’s at your feet.
DJ: Do startups need a physical office in North America?
Dyrvig: No, I would not say so. A physical office does make a lot of things easier such as not having to manage time zones, better understanding of the U.S. culture and it does create a certain level of trust with your customer base knowing that you are operating out of a U.S. office.
It is important to note that North America is a broad term. Opening up a U.S. office does not equal opening up in New York, San Francisco or LA. I see a lot of companies defaulting to opening in those three cities while there are many other great alternatives such as Boulder and Austin, especially for tech startups. The cities have great living conditions, great talent pools and are cheaper than the three “usual suspects”. When opening up it is important to stop and consider what you are selling and how you are selling it. Are we selling a lower-priced product and strictly via the phone – probably better to go for a Boulder office than an expensive New York office.
DJ: How does a startup know when the time is right to make the jump?
Dyrvig: Prove that your product and model work in the U.S. With the technology and cheap air-travel today, you have plenty of opportunity to prove and fine-tune your go-to-market strategy before making the leap and opening up the office. The costs and resources spent on a failed office opening can be significantly mitigated by doing some due diligence from abroad.
This is not the same to say that you should move slow. In many industries it is about getting to somewhere fast and becoming the main player faster than the competition. It is a delicate balance but when you feel you have collected enough data to prove your hypotheses – do it!
DJ: What the consequences if this happens at the wrong time?
Dyrvig: Aside from the obvious money, resources and momentum, it’s very likely a unsuccessful move to the U.S. market will tear on the culture and the belief in the company’s ability to succeed. Employees (and investors) will tend to view it not only as a U.S. failure, but a failure of the company as a whole.
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