The U.S. Playbook
When Should European Startups Expand to the U.S?
Frontline Library » The US Playbook » When to Expand
CONTENTS
The question of when to make the move to the US is one of the hardest to get right – and the cost of getting it wrong can be life-threatening for a startup. The following chapter will give you an indication of whether you’re ready to go or not. But first off, let’s start with some basic principles:
1. Do not rush your expansion
2. This move does not have to be sudden and overnight
You can only be effective as a go-between for so long. It is at this point when you need to understand exactly what you want to accomplish and commit to the expansion. Perhaps it is to boost North American sales, better position yourselves for acquisition, or to raise US funding. Those goals will help answer when to go.
3. Consider the regulatory environment
So we reached out to subsidiaries and satellite offices of US organisations in Ireland through our existing networks, and we were lucky enough to secure local leaders who sponsored us to get in front of senior leaders in the US. Both Netgear and VMWare were wins that came through this route, and having those American logos gave us a lot more credibility once we started cold approaches.”
A framework for U.S. expansion readiness
It can be difficult to gauge whether your team and product are mature enough to level up for the States. The most accurate answer to the question is “it depends”, but there are a number of milestones that we see as essential for the vast majority of companies, and others that are simply ‘nice to haves’. These milestones fit into four key categories: resources, product & traction, operational set up, and the lay of the market.
You have enough resources to grow in both continents
The process of international expansion isn’t just about growing your presence in the new market, you also need to maintain your momentum in your home territory. Before committing to a presence in the States, you must have enough capital and team members in place for your HQ to continue hitting targets for the next 18 months, whilst also funding regular travel to and from the US, and any essential hires there.
And remember that you're not just trying to keep the lights on in HQ, you also want to give them the budget to continue their growth trajectory.”
As well as having the financial resources for expansion, your CEO also needs to be prepared to spend at least 50% of their time in the States in the next 18 months.
If that’s not possible – for whatever reason – we recommend founders to spend at least 50% of their time there in the first 18 months, and certainly no less than 30% of their time there.”
Despite what you might assume, you don’t need to have US investors on your cap table for you to successfully expand into the US – in fact, in some cases US VCs will only invest in companies that have a presence, customers, and are incorporated in the States.
European investors with strong ties to the US (like Frontline) or independent US advisors can offer the same type of expansion support.
Your product already has traction in Europe, and you understand the regulatory hurdles to the U.S. market
Europe is a cheaper testing ground than the States, so you should focus on reaching a viable level of product-market fit (PMF) in your home territory before making the investment into the more expensive market.
That means that you must have existing customers paying for your product in Europe before entertaining any customers in the US. For most B2B companies (excluding healthtechs), PMF will look very similar in the US as in Europe (but you should be prepared for go-to-market motions to look different between territories).
You also need to be aware of the regulation and compliance requirements for your product in the US and the costs involved with obtaining them, so that you can adequately plan for them in your budget and go-to-market plan. For example, if you’re selling to large corporates you’ll need to pursue SOC2 compliance, and if you’re dealing with any protected health information you’ll need to be HIPAA compliant.
WSGR
Actually meeting regulatory requirements can be a long process (depending on the regulation) that requires product iteration and a formal US-presence.
You can use a Trust and Security Platform like Vanta (part of the Frontline Growth portfolio) to obtain and maintain compliance certifications.
The exception to this tends to be companies in fintech, healthtech and companies selling to Enterprise customers who need to lead with a SOC 2 or HIPAA, and commit to the investment upfront.”
Vanta
You have the operational foundations in place to support international expansion
Your company must be internally operating in English before you expand to the US – you cannot successfully scale a small business if employees aren’t able to communicate together. This may take some time for your workforce to adjust to culturally if you are used to operating in your native language. Specifically, your CEO needs to be able to read, write and speak fluent English so that they can help win American clients and secure US investors.
By the time you are looking to hire anyone in the US, you must be able to articulate what your company culture is – without a strong sense of what your culture is, you will inevitably miss-hire, which can have an expensive and long-lasting impact.
Lastly, your management team must be able to run and scale the company effectively from HQ without the CEO present. Not only will the CEO not be present in your European office for most of the initial expansion process, they will be operating on a different time zone – so it’s essential that processes can run smoothly without their immediate input.
You understand what U.S. customers want from you
Before you plant roots in the States, you need to do what you can from Europe to understand the competitive market over there and the solutions your target customers are currently using. These are unlikely to be the same as in Europe, so this research is essential to hitting the ground running and generating US revenue. You can do this via desk research and by speaking directly with potential customers.
Whilst you’re at it, you need to understand their expectations of you and your product, what it will take to close sales and how you can keep your customers once you’ve won them. In most cases, you’ll be able to make some US sales before you have feet on the ground there.
On top of this education piece, you also need to get a headstart on your outreach plan. Build out a top of funnel list of at least 50 target US accounts whose revenue potential would be meaningful to the company, and map out a way into each of them. Start with your ICP – will your existing structure work for the US or will it need adjusting?
Use tools like Linkedin Sales Navigator, Crunchbase and Zoominfo to identify companies and the key decision makers within them. Check your networks to see if you can identify a warm route in.
Essential milestones for U.S. Expansion Readiness
So what does that timeline look like in practice? It’s difficult to ascertain the date that a company has expanded to the US – do you count the date of the first US sale, the first feet on the ground in the country, or the date they open the doors on their new satellite office? The real answer is that expansion is gradual and none of these are a perfect measure, but the first US office opening year is the most concrete and publicly available, so that’s the measure we’ve used here.
Of the startups we’ve analysed that were founded in Europe in 2010 or later and since expanded to the States, the average time from founding date to first US office was 4.6 years. Before 2020 — the year that COVID brought the world to a halt — the average was just 4 years, and since then has increased to 5 years.
Years from founding to first U.S. office
This indicates a couple of trends:
One-off data distortions: Some companies paused their expansion plans entirely, or postponed getting a physical office in the States until later down the line, skewing the data (e.g. Workvivo hired their first US employees in 2020 but waited until 2021 to find an office to lease)
Long-term impacts: Companies can break more ground in the US from Europe now that the world is more open to doing business remotely, and don’t need to physically move to the US until a little later on in their growth. Once they do employ US workers, companies can have them work remotely for longer periods before moving into a physical office space.
Introduction
Where to Land
