3 Questions to Answer Before Entering the US Market
At Speedinvest we are strong believers in the opportunities the US can offer European founders. Many young companies see demand for their product beyond the European market and want to expand operations to the US, the most active tech acquisition and investor market in the world.
Despite the fact that a US expansion offers a much bigger market opportunity, the US is very competitive. An estimated 90% of US startups fail. Being successful in your home market doesn’t necessarily mean you get a ticket to the US, whether you’re a technology startup or aiming to disrupt an entire industry.
Things are always going to be harder and different than you’ve planned, but a framework will help you ask the right questions, make better decisions and chart a clearer path towards the big move into a new market.
With that in mind, our US Business Development team brings you a top-line, sequential checklist to help you gain a clearer picture of when you’ll be ready to enter the US market, how to do it, and what to do once you’re there.
1. Should I launch in the US?
It is time to assess your current position. This is, by far, the question that requires the most time and honest reflection. It requires one to take a step back and evaluate one’s assumptions. The best way to do this is to engage with other people. Get their perspectives. Maybe they can help shed light on your blind spots (we all have them). The points to consider at this stage are a mix of basic personal (friends, family, costs of living, etc.) and business (staffing, product, etc.) questions, like:
- Is my family ready?
- Can I cover the cost of living? (San Francisco is 2x Berlin)
- Am I aware of the relevant cultural differences?
- Do I need to incorporate in the US?
- Who in my company will move to the US?
- Is my product ready to scale out to the US market?
So, do you really know what you’re getting yourself into? Don’t be fooled by tunnel vision. Take the time to evaluate every step. Relocating internationally is a major decision and life change by itself. Expanding your business at the same time is even more difficult. But once you’ve taken a step back and thoughtfully planned out the above points, then it will be easier for you to focus on the key question: How can I quickly grow and scale my US business?
Your family is on board; your team is set; you’re clear about US working visas, and have budgeted associated costs. You’ve successfully incorporated in the US and understand your US tax liability while you’re doing business in the US and hiring people on the ground. You’ve analyzed the market and received positive feedback from industry experts and potential customers.
2. How do I frame the product and understand US customers?
While you might have a well-defined customer profile for your existing market and product, you have to rethink assumptions when trying to target the sophisticated US market. Consumer habits and budgets might be very different than what you’re used to. Here are some questions to ask yourself:
- How does the product need to be adjusted for the US market?
- What is the unique selling proposition?
- What is the ideal customer profile?
Always try to get a second opinion if you believe you have product-market fit. Use local market feedback and own the audience. Understand who your target user is, get out of the office and into the field. Ask your users. Make use of early US adopter advocacy, referrals and reviews.
It would serve you well to take some time to examine the comparative size of the largest US vs. European companies in your industry. You may find this to be a humbling reality check about just how much larger the US market is.
Germany only represents about 5% of the Global Fortune 500 companies vs. 25% for the US (and China is still #2 after the US). That’s why the total addressable market (TAM) in the US is so much larger.
Setting the right expectations and being focused is crucial! Nothing ever goes as smoothly as you anticipate. There will be setbacks and strategies have to be adjusted. That’s also where US startups shine. They’re super agile.
3. How do I launch in the US?
While one size doesn’t fit all, making sure you have product-market fit is crucial for expansion. Product-market fit can differ in the US market. There are many things that need to be specifically considered with this market entry and defining a go-to-market strategy that is localized is important. Things you’ll have to ask yourself include:
- What is the total addressable market (TAM) in the US?
- Who is the competition and who are their VCs?
- What’s my distribution strategy and how do I get leverage from partnerships?
You’ve identified that your product could be a multi-billion dollar industry disruptor and is global in nature? You’ve also identified key metrics to track your progress and have done a top-down and bottom-up TAM analysis. Great!
This provides you a clear understanding of your company’s potential and guides your prioritization. Together with a competitive analysis that assesses the strengths and weaknesses of your competitors, it helps you define your US expansion strategy and sales playbook.
It’s all about focus!
It’s good to keep in mind that it’s a marathon, not a sprint. The mythical overnight success of the best companies is often, in reality, the result of many iterations and old fashioned hard work.