So you are a B2B SaaS company and looking to grow your revenue outside of the US, looking out across the Atlantic you think let’s expand in Europe, how hard can that be…
A significant number of US-funded B2B SaaS companies have been successful in entering Europe and dominating their sector but not necessarily in every country, so what do you need to know as a B2B SaaS founder?
What do you need to think about when expanding to Europe?
There are a lot of things to think about, the perception is that by entering Europe that you will be using similar language across all countries (English) with one currency (Euro) and that tax law are the same. However, In Europe, things are not quite that easy!
- Most of Europe uses the euro € whilst the biggest SaaS market the UK uses sterling £.
- Companies prefer to purchases in their local currency rather than the dollar and need an invoice
- We have 24 ‘official languages’ in Europe (in reality English is commonplace)
- Some countries will mainly want to negotiate and discuss a sales deal in their natural language
- All countries are not alike – from a SaaS point of view, the UK is ahead by some margin, followed by Germany.
- SaaS adoption is much lower in other countries but is accelerating. Also culturally every country has its own differences in it how it trades and deals with purchasing.
- Culturally Ireland and the UK are the closest fit to US culture.
- Think of Europe as being made up of different states, cultures are different in northern Europe compared to southern.
B2B SaaS experience is in short supply and hiring can be challenging particularly for unknown SaaS brands.The core SaaS hubs/cities are (Dublin), Ireland, (London), UK, Berlin, (Germany), Lisbon, (Portugal) and Amsterdam (The Netherlands) although pretty much every other capital city is positioning themselves as being SaaS hubs and have their own ecosystems and talent available.
Great sounds easy what else do I need to think about?
Now that I have solved the challenge of where to get initial traction, you need to think do you need boots on the ground or can you service your clients remotely, if you are based on the west coast that will be a night shift requirement and the same for sales, marketing and all other business units, east coast time-wise you have a fighting chance of supporting and selling remotely. When you start to get set up will it be easier to bring someone over from the US to do the initial setup, get the company established and running for then bringing on your new hires or does it make sense to find a small European company who you can acquire to accelerate your expansion?
The next area to look at which city/country meets your requirements are there enough local skills there, the right culture for your organisation and is it tax efficient? You need to think carefully about the location and company structure as this is a significant investment and one that will be locked into and hard to back out of, review other SaaS companies in your sector who have expanded and map out their model to see if it worked for them, test before jumping in fully.
Who has succeeded in crossing the Atlantic?
Xero / Slack / Stripe / Salesforce / Intercom etc. Most large US SaaS companies have come to Europe via the UK as they key market and with Germany being a close second and starting out they have tended to go via Google Ad PPC model for inbound and LinkedIn for outbound lead generation, following a typical POD model as they expand the teams.
What are the main differences between Europe and the US when it comes to SaaS?
The US as a whole is a larger domestic market with North America having 350M+ residents (inc Canada) against Ireland 5M / UK 66M with a more mature ecosystem in play but Europe is closing the gap on investors and focused tech journalists. US companies tend to have larger raises and quicker, which drives bigger teams and resources but this doesn’t necessarily translate into the European entity which can provide its own challenges. Data privacy is a key area to look at with the introduction of GDPR countries are more sensitive now around data being taken out of the EU and to sell into larger corporations and certain sectors then a European Data movement has to be in place, this is a large consideration as if you can’t sell to a client as you don’t have a European hosted solution then this can be a show stopper and allow your local competition to take you out in each deal.
What is the context like in Europe for SaaS companies?
So Europe is a much more fragmented market and there will likely be local competitors in your sector who could be smaller but will have the brand reputation in place already, whilst you will find that smaller team sizes are in place and that resource constraint also limit companies acceleration in growth, against a backdrop of a SaaS ecosystem that in comparison is immature when viewed against the US and the investment philosophy. Domestic markets if viewed individually would be too small to enter as individual territories, you need to view expansion as international but driving this through one language support, countries such as Finland, Poland, Portugal and The Netherlands have a small domestic footprint compared to the US but have influence within their countries on what companies are successful.