SaaS has been global from the earliest days, although how and when you go global can vary. Salesforce went very early into Japan (it takes a lot longer to add a lot of Japanese customers for most of us), which quickly accounted for almost 10% of their revenue in the early days. I had 15% of my revenue in the U.K. in Year 1.
And these days, the opposite is just as common. European and Indian SaaS startups in particular start selling in the U.S. early in their lifecycles.
The mistake most U.S. SaaS companies make however — that most European and Asian SaaS startups don’t — is they wait too long in setting up other offices. You’ve got to be near your customers and partners, at least, if the customers are larger. You leave too much money on the table, in renewals and upsells, otherwise.
But it’s expensive, not just in hard costs, but also soft costs. Managing other offices, especially many time zones away, is a huge time and mental energy effort. And done wrong, it can be a big distraction.
So my rough guidelines for most U.S. SaaS companies:
- Start marketing, supporting and talking to European customers as a distinct segment once you have 10 of them. If you can get 10, you can (of course) get 100. It’s OK to let the first 10 find you, though. But once you have a material group of customers in a specific geography, start a cadence and a discussion tailored just to them. At least make the product feel like it’s also focused on their needs.
- Consider opening a full European office, even just 1–2 folks, once you have $1m in revenue in Europe. That’s more than enough to justify the hire. Wait past $1m-$2m in ARR, and you are wasting a chance to be closer to customers. But add a great initial hire or two, and they’ll grow that $1m to $10m much faster than it otherwise would grow. That will more than pay for a few hires and a space at WeWork. Whether to start with a Customer Success lead or a Sales lead in the office is often the first nuanced choice. When in doubt which way to go, I vote for Customer Success. Worst case, you can still close from the U.S. but support those customers in-personal locally. The customer journey just starts when sales closes the deal.
- Expect it to happen, and plan for it. Europe and the U.S. are different markets of course, but most of the best SaaS apps organically cross borders. I’ve invested in 20+ European SaaS companies, and almost all of them organically acquired U.S. customers even without a full U.S. presence. Likewise, most top U.S. SaaS vendors are pulled a bit into Europe. At least the U.K. Even in my first year at EchoSign, we had 10%+ of our revenue in Europe.
- Localizing early is a strategic weapon. You will need to localize (i.e., translate and more) at some point. The longer you wait, the harder it is. And the earlier you do it, the more it’s a big competitive advantage over those than are English-only. Localizing into Japanese early was a big boost for Salesforce. Going global ahead of our competitors helped us win Facebook, Google, Twitter, and more when they were all English-only.
- The more enterprise you are, the more important having a local office and presence is. SMBs still want to meet in person, and feel like the product is “theirs”. But at a practical level, self-service products that are localized in language can go pretty far with SMBs. Maybe put this off a bit longer for a freemium or SMB product. For a truly enterprise product, with a solution sale … you’ll lose deals to competitors with a local on-the-ground presence, guaranteed. For SMB products, less so for a while.
Plan for it.
(Cross-posted @ SaaStr)