Nine confessions from European CEOs who launched in the US
Launching and scaling a business is hard, but expanding into the US is even harder. We spoke to over 50 European chief executive officers (CEOs) and founders who have undertaken this journey, some with incredible success. But our conversations revealed that even the most successful had to face unexpected challenges. We hope their confessions will help you think through various risks and plan your own expansion plans appropriately.
"On reflection, the decision to enter into the US felt irrationally inevitable”
In their eagerness to seize the US market opportunity, many did not stop to ask whether expanding overseas was in their company’s best interests. For most, there was no limitation on the growth in their home market. The option for continued rapid growth was there to be taken, with no risk of the company reaching a saturation point in their home market in the near future.
“We may have chosen to expand internationally for the wrong reasons”
Worse, some decided to expand internationally to compensate for a lack of growth in their home market, even if their market share remained very small. This suggests that the company had yet to find product-market fit or a repeatable, scalable, measurable sales process in their home market.
“Wow, this feels like therapy”
Yes, some of the people we spoke to found it helpful to open up about their experiences. And the conversations we had underlined how so many founders felt isolated when making the bridge to the US. The decision to expand the business internationally was often made quickly by the Board and then left to the CEO to execute, sometimes with limited further guidance or support.
“The US market is massive, but we underestimated or were unaware of our competitors”
While this observation is made time and again, most companies underestimate the breadth and depth of the US market, its regional differences, and the fullness of the competitive landscape. The fear of missing out is often anchored to a headline market sizing, without an appreciation for the number, diversity and accessibility (or not) of markets that make up the total number.
“Setting up in the US was incredibly expensive”
All the CEOs we spoke to underestimated the cost of entering the US market. As well as all the basic costs of setting up in the US, CEOs told us about a number of hidden costs, including:
- The extent and degree the senior management team focused on US market entry;
- The time and cost of hiring (and then firing and starting again) and;
- The time and cost of pursuing the wrong strategy, and not acting swiftly enough to correct course.
“I was not sure when to move to the US, or whether to move at all”
If a business is not yet successful and sufficiently resilient in its home market, then expansion adds strain to an already vulnerable position. We found a consensus that CEO and/or founder DNA is a necessary (though not sufficient) condition to effective US entry, and splitting attention between the two continents can diminish the probability of high success in both markets.
“We made the wrong first hire and this cost us 12 months”
Hiring strong local talent can be a challenge, as there is intense competition from American companies. The job market is very liquid, driving up prices and lowering retention. Meanwhile, customers expect a local presence and local services. Strong local partners — experts, service providers, strategic partners — are impactful for success.
“We could have done so much more before we hired people here”
The variety of activities that a European business can do before entering the US to de-risk the market entry is often overlooked. However, extensive pre-marketing, market assessment and network building are almost always overlooked. Distinguishing between being operational in the US and having people on the ground there full time is critical.
“We struggled to maintain our culture across the two offices”
Every CEO we interviewed spoke of the difficulties of maintaining culture across continents, of underestimating the impact of miscommunication and of the toll of constant travel on focus and energy.
Thanks to all the CEOs we interviewed — you know who you are — for your frankness and openness. For more information on how we work with CEOs and founders looking to scale explosively, visit Octopus Ventures.