Bootstrapping your European Enterprise Software Business
In my first post on globalizing your enterprise software business I discussed three of the ways of expanding into Europe – Partnership, Acquisition, or Direct Entry. Let’s assume that you have decided to enter the European market directly – just how do you go about that?
My first word of advice is to assume that you are going to be successful and invest accordingly. Merely dipping your toe in the water is unlikely to succeed. So hire the best people, start your product localisation, and be prepared for the long haul.
Every successful business needs a leader and your first decision is ‘who will lead the European operation?’ There are two main choices:
- Send an experienced executive from head office to Europe for a minimum of two years. The advantage of this approach is that the leader will know the product and will have all of the needed connections within the company
- The alternative is to hire someone local – but ensure that they have done a European startup previously. The advantage of this strategy is that the person hired will know the local culture and should have a good local network – not just for developing business, but also for all the administrative tasks that must be undertaken
My recommendation is to hire the local leader – it is much easier to learn a product and build an internal network than it is to understand a culture and build an external network. Once hired, bring them to head office and immerse them in the product and the company for at least two weeks.
Whilst the European leader should have a strong sales leadership background, you also need to hire a salesperson and a sales support engineer as soon as possible. This is where the leader’s network can start to be useful. Ideally, these two hires should have experience in the target industry. And once again, send them to boot camp at head office to learn the product and your company’s unique value proposition and sales approach. While there they will also be able to give feedback to product management on any globalization and localisation concerns.
Meanwhile, your marketing team need to have developed a plan for lead generation. It is too soon to hire a local marketing resource, although some aspects can be outsourced to a local marketing agency. Having folks in the marketing team with previous international experience is a great help as the techniques that work in the home country do not necessarily transfer to Europe. With the move to more digital marketing (further accelerated by the current pandemic), a good knowledge of European data privacy regulations (GDPR) is essential.
It is likely that if you are selling enterprise software, then there will be a significant implementation effort required and you will need to have a clear plan as to how you will deliver implementation services to your first few customers. Hiring and training a full team ahead of demand does not make sense, but neither does attempting to run the entire project remotely. I once worked for a North American vendor whose model was to base all consultants in Canada – economically this made sense as even considering travel costs, the expense to the customer was less than local European resources. But the customers were not happy – time zones and culture got in the way. And don’t forget – you will be competing for business with local suppliers offering that local presence.
The answer is a hybrid model to start with. Hire a local professional services leader with the experience to grow the team over the first few years, but who is prepared to get hands-on and, for example, project manage the first few implementations. Then hire at least one local consultant with relevant industry knowledge whose primary task for the first few months will be learning on the job from more experienced head-office staff. The latter can either be sent to Europe for short periods at a time to work on the projects, or ideally transfer at least one experienced consultant to Europe for six months. Whoever travels to Europe, be sure to brief them well on cultural and other local issues.
Support is not a priority when you first start out in Europe, but you need to begin planning. Your first few customers can probably be supported by the professional services team – you are likely to want to give them the kid-glove treatment anyway. And then, depending on where your support centre is, you may be able to extend its operational hours to include Europe. Ultimately most companies evolve to a ‘follow the sun’ support model using three or four centres around the world. Another consideration, depending on the countries and industries that you are targeting, is the languages in which you will provide support – not everyone speaks English!
Doing business in a new country inevitably involves significant administrative overhead. As soon as possible the EMEA leader, using their previous experience and contacts, should establish outsourced relationships for the financial, legal, and HR tasks that will be required. You should not attempt to do all this in-house from head office as you will surely miss some of the nuances of local rules and customs
One HR topic of importance revolves around employment regulations. I have seen several guides for American companies planning on entering the European market that focus on how difficult it is to fire employees in Europe! It strikes me that a more positive approach would be to focus on how to find and hire the best talent. This probably reflects a significant cultural difference between the US and Europe when it comes to employment – but that is an article in its own right.
And on the financial side, I would recommend establishing a local legal entity as soon as possible – this gives your company a level of credibility from the start. Some customers may insist on contracting with a local entity (even if they require a parent company guarantee) and along with a bank account will enable you to obtain credit should you need it with suppliers later on.
There is a lot to think about when setting up a new direct operation in a different country, but hiring the right talent is the most important. This has been a very brief overview of the subject and there are topics such as budget responsibility, reporting lines, etc. to be discussed. Please comment and let me know which areas you would like me to expand on in future posts.