8 common traps when expanding startups to the US and how to avoid them
The US market is a crucial stepping stone for European startups. At the same time, it’s a step that can feel scary and overwhelming. A successful US expansion absolutely requires looking at a new market with fresh eyes, but it is much less scary and unknown than it sounds.
European startups that fail tend to share similar flaws, repeating the same mistakes others have made before them. Some may recover in time to make a second attempt, others may enter a downward spiral that significantly sets them back.
Here we outline the mistakes we see most often in US expansion from Europe. The good news: these mistakes are entirely avoidable!
1. Delegating the Founder’s job
A common misconception European founders have about US expansion is that it can be done by hiring someone based in the US. This strategy fails because winning the US market is not just about taking your product and selling it there. For most companies, especially in B2B SaaS, there is a lot of groundwork and customer discovery that needs to be done by the founders before any sales meetings can even take place.
2. Underestimating cultural differences
Not doing enough research on differences in business culture generally means burning too many bridges too quickly. Examples include underestimating the importance of a first impression, being too humble, or exaggerating the importance of labels. More details here.
3. Outsourcing market research
While sometimes tempting, outsourcing customer discovery to firms or consultants is costly, slow, and more often than not leads to the wrong conclusions. Only an entrepreneur thinks about pain points, needs, and solutions like an entrepreneur. Outsourced market research tends to also be quantitative whereas the need is to do qualitative research through customer discovery calls. There are no exceptions, even when it’s a complex market - rather than relying on a third party, invest in getting educated and up-to-speed yourself.
4. Assuming Product-Market fit is the same in every market
Every market is different. Customers behave differently. There is different price sensitivity and expectations about the sales process. The US market is particularly complex due to its size, maturity, and level of competition. Founders need to approach the US with curiosity and an open mind to understand how their product can be adapted to fit this new, vast market and find their ICP.
5. Hiring salespeople too quickly
Sales executives execute on playbooks, they don’t write them. It’s always tempting to outsource sales as quickly as possible, either because it’s a ton of grunt work (100 sales calls per day, anyone?), because we’re worried that we aren’t good at it, or because we think it will go faster. The reality is different - in any new market, founders need to write the full playbook: who buys, why, what’s their pain point, how do we price? Without a solid answer to each of these questions, the startup will inevitably waste money and time on salespeople who aren’t empowered to achieve objectives.
6. Falling for the Big Talkers
Americans are natural storytellers: they have a much easier time embellishing their resumes and selling themselves than Europeans do. In a culture of overstated achievement, it can often be awkward when you realize that your newest recruit actually leaves much to be desired. An efficient way to solve this is through behavioral interviewing, or asking questions that describe specific moments. Don’t hesitate to ask a candidate about the major challenges he faced or the budget processes he ran. Such questions will eliminate generic answers while highlighting – or minimizing – a candidate’s claims. More details here.
7. Disregarding the rules of the US job market
Many European entrepreneurs get very confused by the way Americans look at work and the legal constructs around employment - for example, the concepts of at-will employment (I fire you when I feel like it but you can leave whenever you want too), short termination notices, or lack of trial periods. Behaviors of candidates are also vastly different: American candidates will sell themselves much more than the average European candidate and will negotiate their compensation package accordingly while valuing equity much more too. Not understanding this different set of rules and behaviors will likely lead to hiring the wrong people or offending candidates with packages that don’t meet basic expectations.
8. Waiting too long to take the leap
More often than not, founders wait too long to cross the Atlantic. They wait for the perfect moment, for the company to be in good enough shape - often not realizing that that perfect moment may never come and that the market will continue to evolve without them. We’ve seen successful startup move to the US at the pre-seed stage, so consider testing the market early so you don’t miss the time window