Five questions to ask yourself before entering the US market

Out of the four years, I’ve been with Creandum, I’ve spent more than 2.5 years in Silicon Valley focusing on working with European entrepreneurs. During these years I’ve spent hours and hours discussing US expansion strategies with startups, and boiled these discussions down to a framework based on five questions:

• Why would it make sense for your business to establish operations here in the US?
• When is right timing to establish operations in the US?
• Where should your US operations be based?
• How should your US organization be structured?
• What are the main risks and how can you mitigate them?

No matter the answers to the questions above, something I recommend everyone is to start to feel out the US market early. Visit different startup cities like San Francisco and New York, preferably with a relevant business purpose but could also be a “worcation” where you are visiting an important event for instance. That will help you build a better understanding to answer the questions:

Why would it make sense?

As the world is getting more flat, it is possible to build big companies from basically everywhere in the world with a bit of traveling. There is a storm of challenges and risks associated with establishing operations in the US so make sure that you have a credible purpose — a lot can be accomplished with frequent trips. Common primary purposes are being close to important customers (marketing/sales) and to build deep partnerships (platform relations). Secondary reasons are access to experienced talent and funding.

When is right timing?

It always takes significantly more time and resources than you’ve planned — take into consideration that it takes 6–12months before you will see any significant business impact. The key here is to have a good foundation before making a move. A good action plan before making a move is to:

• Travel frequently early on to [1] test hypotheses (e.g. ensure product-market-fit), and [2] get to know, evaluate and select service providers to work with as working with the right service providers truly can accelerate your progress and [3] start build your network with customers, platforms, VCs, angels (also to evaluate your hypotheses)
• Build strong routines for communication already before you have moved over — communication is extremely challenging so start early with weekly meeting with obligatory participation (physical or video), and with communication tools like Slack, and don’t take lightly on documentation (meeting notes, CRM, etc.)
• Ensure that you have a good company foundation that can handle the gap from losing the people that will move over
• Secure and allocate enough resources — the amount differs between companies, but I would not recommend making a move if you have less than 12 months of runway including the budget for the US establishment + 1 x your estimated budget need for the US establishment as a reserve.

I’ll repeat: do not underestimate the time and resources needed to establish your operations

Where should you be based?

Go back to your purpose: where your customers/partners are — most possible if you are in tech San Francisco, New York, Seattle, LA, Austin or Boulder. To briefly zoom in on the two most common cities:

San Francisco

Here you are close to the main US platforms, most of the top tier VCs and talent. But, there is always a but: there is a very limited time overlap with Europe. In general, San Francisco is a good fit if you are within Social/Messaging/Community, Dev tools, and deep tech like AI, databases, etc.

New York

Here you have some great VCs and some great talent, but the 3 hours makes a huge difference, both regarding office hours overlap and also significant less jetlag when you are traveling back and forth. In general, a good fit if you are working with ad-tech, media/entertainment, fashion, e-commerce or fin-tech.

How should your organization be structured?

The recommended setup differs a lot depending on the company and the purpose of the US operation. If it is a really early stage, i.e. before you have a good foundation, the best setup might be to move the whole team. The most common setup for European startups, however, is to have the CEO moving over to establish a marketing/partnership office in the US while continuing building dev and product in Europe. Some general guidelines:

• Move over the CEO, or at least one of the founders to ensure that someone that understands the culture and company vision fully is a part of building out the operations
• Ensure right staffing — do not be alone: it is usually challenging to recruit local talent, especially in the beginning, so many companies bring at least a second co-worker from the original office
• Recruit local talent, especially for sales — great successful local hires will help you progress faster regarding to know the market in-depth
• Budget for mistakes — recruiting in a new market is very tough so plan for that you will have to make some people go

What are the main risks?

Besides the previously mentioned risks, common risks include

• Relying too much on a product-market-fit in your home market — it is far from a given that your local product-market-fit is a product-market-fit for the US market
• Besides general communication challenges, it often becomes a gap in the local organization when someone of the founders move over — you might think that you will be able to have the same responsibilities that you used to have but it is so much more challenging to manage people and projects on distance, and also when you are spending so much time and energy learning about the new market
• As you grow, you need to embrace the local cultural differences within your multiple offices and make it work — e.g. in San Francisco the salary level is significantly higher than in Sweden, while in Sweden you have 30 days vacation of which four weeks are spent without answering emails during the summer, etc.

Additional input? Any questions? Let me know in the comment field!