This article first appeared in UKTN.
Building a big, enduring and global business will inevitably lead to a market launch in the US at some point in a startup’s journey from Seed to scale.
The size, opportunity, and speed of the US market is an attractive pull for anyone with ambition, but it’s important to get it right. Winning the US market requires more than just a brilliant product or service and there is no ‘one size fits all’ strategy.
We have seen companies succeed and fail by being too fast or too slow, the first or the last, big or small. In order to have the best chance of success, business owners eyeing the American market should consider the importance of timing, preparation and weight on the ground.
Timing is everything
European businesses interested in expanding to the US may be wise to take a step back and make sure they aren’t risking their business with poor planning. Entering the US market at the wrong time can put your core business under extreme stress.
We have witnessed some companies enter the American market as soon as they have initial traction in their home market. Without repeatability and scale in their native territory, moving across the Atlantic can increase their vulnerability, as their resources risk being spread too thinly. This confidence too early in a business’s development can not only scupper the US plans, but damage the local market, wasting investment and precious time.
Be prepared before you go
Being as prepared as possible before you go may sound obvious, but it’s not until you consider the finer points that you realise just how prepared you need to be. Our data has shown that US citizens are proud to “buy American” and that even brands that may be established in the UK shouldn’t expect to find recognition across the pond.
Many underestimate how crowded the market is. For instance, in 2016, per capita advertising spending across the pond was over 60% higher than that in the UK.
Founders, therefore, need to complete extensive pre-market research to identify their competitors, consider the strength of their unique selling proposition and build a robust local network before they commit to moving.
Money matters, especially when it comes to your employees. Many companies overlook the increased spend they will need for their employees’ payroll, owing to market, cultural and socio-political differences. For example, salaries can cost double what they cost in Europe for the same skillset because their job market is more fluid and job retention is low. Additionally, healthcare may be taken for granted in the UK for instance, while as an employer in the US, healthcare benefits at work ranks as one as one of the most important considerations individuals make when accepting job offers.
Regulation is another potential sticking point. If your business operates in a regulated market, you’ll more than likely need a number of different licenses. An important thing to remember is that regulation varies on a state-by-state basis – what covers you in one city might not be valid in another. This is where a local counsel can be crucial.
Pack your bags
We found that the presence of founder DNA on the ground is a necessary condition for success in the US. Remote communication will always be a challenge and frequent flying will be a drain on leaders. Demonstrate your commitment to staff and customers by setting up a permanent base in the US and think about how you’ll stay present in the UK – whether this is through setting up a trusted team to handle things or using technology to keep in touch.
Ensure your company culture is true to itself, by being present enough of the time to keep an eye on how it’s going. Your company culture is more likely to remain compatible across offices if senior management leads in this new setting.
You won’t know as much about the market as an American expert. Market success can be increased with a US advisory board with the market experience to fill in knowledge gaps and provide strategic advice. This could save you money and time.
Land of the Free
The US presents a huge opportunity, but making it will demand all of your tenacity, focus and hustle. Poorly considered expansions rarely yield success. Remember, if the risk is too high, slow down and focus at home.
But if you think it’s the right time, the US market holds great promise for scale. While there are no silver bullets, with the right advice and plenty of preparation, you can ensure you’re in the strongest position possible before you head west.
For journalists in their professional capacity only. (Personal opinions may change and should not be seen as advice or a recommendation.) We do not offer investment or tax advice. Issued by Octopus Investments. Octopus Ventures is part of Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London, EC1N 2HT. Registered in England and Wales No. 03942880. Issued: October 2017.