First published on the BDO Blog Site, by Jakob Sand
America is like the Promised Land for many companies in the technology, media, telecoms and life sciences sphere. It is a market with enormous potential, it offers great access to funding and is the place to be, if you want toscale your business as quickly as possible. However, this only holds true if you know the ins and outs of the American journey you are looking to set out on. It is more than likely that a company pursuing the US market will have blind spots, which can lead to unnecessary complications and delays. “We have seen many companies that try to take on the whole process of establishing themselves here in the US on their own. Often, they end up looking around after six months with a sense of frustration over the fact that they have not really gotten off the ground yet,” Mik Strøyberg, CEO of Lemonsqueeze, which specialises in helping companies establish themselves in the US, says. Done right, there is no doubt that the US holds great promise. This is doubly true in the country’s main technology and start-up hubs, like New York, where Lemonsqeeze is based, and Silicon Valley. “Silicon Valley is a unique area with an immense concentration of talent. Just being here can give you global recognition. It is, however, also an area where understanding the ecosystem and the likely challenges you will encounter is essential,” Aftab Jamil, Partner at BDO USA and Global Leader of the BDO Life Sciencesteam, says.
1: Make sure you all understand the ‘why’ of America
Ralf Drews, CEO of the German company Greif-Velox, spent many years working as a top-level representative of European companies in USA. He is co-author of ‘Market Entry into the USA – Why European Companies Fail and How to Succeed’ with Melissa Lamson, president and CEO of Lamson Consulting, which helps foreign companies enter the US market. One of their points is that you need ‘organisational readiness’ to achieve success. While it is debatable what qualifies as an organisation being ready, a minimum requirement is that the entire organisation understands the move, what it is meant to achieve and what it might mean for the rest of the organisation. This requires a clear strategy and goals, which should include whether the move is solely to seek entry to the US market or a stepping-stone in regards to further expansion. Alfredo Coppola is the Co-CEO of the US Market Access Centre (USMAC), a tech accelerator that helpscompanies with entry in the US market. He explains that a presence in Silicon Valley, where USMAC is based, can open doors across the whole world. “Today, a presence here is a stamp of quality that can be used in entering other markets. The early adopter nature and global outlook of Silicon Valley means that it is an excellent route to broadening your international presence,” he says.
2. Figure out how to make the business proposition work
One of the first steps in regards to making the move into the US is formulating a clear, detailed strategy. What is the market that your company is pursuing? What are some of the possibilities and challenges that face you in that move? What is your value proposition? What is the business model? What is the time frame? What are your goals and target? Does the way you make money work without any changes in a US setting? The list of question goes on, and all parts need to be answered before deciding to commit.
Often the best first step for a company will be establishing a sales office in the US and working from there, and potentially basing some R&D resources in the US market as well. For start-ups, there is the option of making the US your home market by founding your company in USA.
In regards to both strategy and establishing offices, it is often a good idea to consult your financial experts. This is doubly true is if they have US contact networks or US offices that can provide help with the process of setting up in the US. Alternatively, you can collaborate with experts or dedicated companies that offer to handle various aspects of the process for you.
3: Getting in takes lots and lots of paperwork
Setting up in the US will require – as is the case everywhere – filling out forms, followed by filling out forms, filling out forms and filling out forms. Partnering with a local company or a dedicated agency can be a great help for many companies to cut down the time spent on these tasks, which otherwise descend into Catch 22 situations. “In some cases, you cannot get a bank account opened, before you have an address – but you cannot rent anything, before you get a bank account,” Mik Støyberg explains.
4: The money is there – but so is the competition
You might think that market shares, talented employees and funding is readily available in USA. Definitely in a place like Silicon Valley. That is also true, but there is an equally strong competition for all of them. If you are looking for software engineers, you will be going up against the likes of Facebook and Google. If you are looking for funding, there is a line of companies going around the block looking for exactly the same thing. This makes it important to stand out to ensure that VCs notice you. Aftab Jamil stresses that it is important for companies to highlight their unique attributes, the problem that they are trying to solve with their product and the market for it. “If you are talking about entering a market worth $100 million, many of them will probably switch off. What VCs are looking for are products that can solve problems and occupy markets worth more than $1 billion a year,” Aftab Jamil says. The same approach applies to exploring markets and securing customers.
It is also important to realise that the huge American market is segmented and the needs of clients can vary greatly, depending on where in the country they are located.
5: You need at least two cultures to succeed
American work culture is something that non-American companies do not necessarily understand. This can become an issue when you hire US workers.“In some European countries, there is a three month kind of ‘honeymoon’ after you are hired. Here, in the US, you expect to come in and deliver from day one. This makes it very important to establish clear milestones from the beginning and have guidelines for new, US employees’ performance is measured,” Mik Strøyberg say. If not, what Europeans consider a relaxing easing into a new position can become a period of acute stress and uncertainty for the new US employees – whom you will want to hire.
Melissa Lamson has worked as lead consultant for many foreign companies looking to enter the US market and has written a number of books on the subject. Based on her experience, the optimal approach is to create office environments that include both Americans and people from the country your company is based in. “One of the most interesting things that came out of looking at the success rate of companies was that it is important to have a mix of locals and foreigners throughout the organisational structure,” she says.
“In my experience, it has been a good idea if many of the top VP execs are native. Your CFO can be European, but in many of the other roles it is a very big plus for the people to have a ‘native level’ insight into the way the market works,” Ralf Drews adds.