As your startup grows and your product and business model matures, one question becomes seemingly unavoidable: when are you going international? It’s a logical question because ultimately the global market for your product is almost always larger than your home market, usually by many times. And for a significant number of companies, the international market of choice is Europe. Europe is as highly developed as the U.S., with a larger combined GDP of $ 22 trillion, a larger potential customer base of over 500 million people and excellent public infrastructure, among many other advantages.
The opportunity of growth and expansion can, however, be easily missed. The way you evaluate the markets you’re looking to expand to and the method by which you build your go-to-market plan are both critically important steps. The most common mistake we’ve seen over the years is that too often, companies’ expansion strategy skips over the most rudimentary of questions in favor of secondary details. Worries such as “In which city should my headquarters be?” or “where and who do I hire as a General Manager for Europe?” all too often come first when they should be much further down your list.
When companies expand, many times it’s because they see an opportunity and they’ve developed an expertise that they’re great at, but that expertise still needs to be tailored for a specific audience. You can be a Michelin level chef, but if you make steak for a vegetarian crowd none of that expertise matters. Your customers are what makes your startup successful and they must always come first no matter what.
1 – The first and most crucial question is: Does your business model work in Europe?
If the answer is no, it’s very simple: you shouldn’t expand. A prominent example of a company that opted out of going to Europe for exactly this reason is the US health care company Oscar. Despite their status as the leading health insurance provider in the U.S., their business model simply doesn’t work in Europe because they’re built for an entirely private system, whereas the European market is far more influenced by existing universal healthcare models. Another surprising example is Uber. Despite having nearly unlimited funds and a wildly successful track record, European regulations hampered the service. Uber had to change its approach, and work closely with public transport companies and public authorities in order to make it work.Most business models, however, will work in Europe and in that case, you should continue the evaluation process.
2 – Product: How much will your core product have to change to work internationally?
The emphasis here is on ‘how much’ and not ‘if at all’. Most likely, your product will have to change. If you’d like to be successful in France for example, your website or app should be in (perfect) French at a bare minimum.
Behemoths such as Amazon and Netflix are showing to what extent adapting products and services is the road to success. Netflix localized their shows, produced different trailers and launched selectively across 5-6 markets before developing a roadmap and launching in 90 countries at the same time. Similarly, while Amazon has an identical interface for each country, the products highlighted on the site with the types of products offered differ. Amazon.de might have the same branding as Amazon.fr, but local product options, selection listings, and other features are all customized for the tastes and sourcing available for the particular market.
And perhaps most importantly, they’re able to provide a best in class experience that differentiates them by adding that extra bit of localization to an already fantastic platform.
The process begins with laying out a product internationalization roadmap detailing the changes that must be made to the product in each specific market. In the case of European markets there is plenty of diversity, so don’t expect a one size fits all approach for the entire continent. Instead, try to focus on clusters of similar markets that provide the most upside with the least amount of necessary production adaptation.
One more piece of advice: Don’t follow conventional rules blindly. Apply common sense and listen to your instincts. You’ve been successful in the US for good reasons, don’t lose confidence in your decision making ability.
3 – Marketing/Sales: Which marketing channel will work internationally? What tactics do you need to apply?
Cultural differences, technological advancements, and changes in user-behavior all kick in when it comes to marketing. While Tesla sending a car into space was considered a genius PR move stateside and was linked to increasing sales, in Europe it was met with a collective shrug. Europeans and especially Germans have an auto culture that’s based on precise technical features and that’s what speaks to them. Americans on the other hand, though many no doubt pay attention to the technical side, have a deep-rooted cultural appreciation for space since John F. Kennedy’s declaration that he would put a man on the moon and are more receptive to those types of stunts when it comes to sparking interest.
Though it may seem like a minor detail, even the issue of landscapes matter. An Airbnb commercial for the German market that could have shown any location in the world was filmed in Hamburg. Why? Because Airbnb wants to create a sense of home and community and for Germans, seeing something familiar even when they think of staying in a faraway locale conjures exactly that feeling.
Always keep this in mind: What works for you to achieve scale in the US today won’t work to get your first consumers in Europe. At the same time, your early adopter playbook from back in the day may well be outdated and ineffective in this rapidly changing world.
(Note: We will cover more of this in our next post!)
4 – Operations: What type of talent do you need to be successful? And how do you make your internal communication Europe ready?
Part and parcel of how to adapt is the hiring of local talent and an organization to ensure accountability and optimization of talents once new staff is hired. Many startups expanding to Europe hire the right people but aren’t effective because of a remote management team, or they breed confusion by not having a proper structure in place for those rapidly onboarded employees.
The local team should have the autonomy and capability to manage the European business with well established access to US stakeholders for key decisions, questions and feedback. Make sure to not limit conversations to just the local GM but encourage teams to communicate well across the organization. This not only increases time zone surface area but also creates a stronger culture.
Consider also that both the US and European organizations will grow so make sure to continuously scale internal communications over time.
Tools such as Slack, email and shared files are essential to manage your global organizations but nothing beats face to face meetings to build a connection, put in place organizational values and a common understanding. Make sure that people travel frequently in both directions to meet.
Many great leaders and employees in local teams will not be English native speakers and have diverse cultural backgrounds (that’s why you hired them!). It’s clear that this will lead to occasional misunderstandings and friction and that’s ok – because if you have strong internal communications in place, you will solve the misunderstandings and frictions in no time.
Netflix for instance has tackled a lot of problems by building mixed talent offices all over the world instead of strictly dividing functions (i.e. R&D in location A, and comms in location B). The result is better internal communications, a much smoother operation and opportunities for career progression in local offices.
Most important next step: Build a plan
After gaining a cursory understanding of the size and scope of an expansion opportunity, the next step is creating a more in-depth go-to-market strategy. And it’s not just a question of organization, or choosing a market, building a plan must also involve bringing the right people together. It means finding the relevant internal stakeholders and making sure that any plan includes strategy alignment across departments. Finally, get buy-in from your management team and board and determine with them, where international expansion sits in your goals.
Jumping into new markets is the very best opportunity for a high-growth company to go from local market success story to global phenomenon. In the case of a U.S.- based company moving to Europe, an expansion could more than double TAM and if done well, result in significant growth. Planning is no guarantee of success, but considering the points above make taking a startup across borders and into hypergrowth far more likely.
We’re here to support you – If you are ready to take the next step in planning and executing your European expansion, get in touch!