Dear SaaStr: What does a US-Based SaaS company Need to Know Before Expanding into Europe?
Let me simplify it all to 4 simple pieces of advice:
For most U.S. 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.
- Consider opening a full European office, even just 1–2 folks, once you have $1m-$2m in revenue in Europe. That’s enough to justify the hire. Wait past $1m-$2m in ARR, and you are wasting a chance to be closer to customers. As the CEO of Braze put it at SaaStr Europa this year, they could close tech startups as customers without a local office. But to close more traditional customers, and non-tech ones? They had to be there, on the ground.
- 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 Adobe Sign / 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.
Plan for it.
51% of Zendesk’s revenue is international
47% of Cloudflare’s revenue is international
46% of HubSpot’s revenue is international
45% of MongoDB’s revenue is international
38% of Asana’s revenue is international
34% of Twilio’s revenue is international
22% of Okta’s revenue is…
— Jason ✨Be Kind✨ Lemkin 🇮🇱 (@jasonlk) October 29, 2023
In the end, “most” B2B companies whose product can be used anywhere end up with about 25%-30% of their revenue in Europe.
Zendesk is a great example, it’s a lot like most of us. It sells a workflow app in an unregulated segment to customers Small, Medium and Large. And 28;9% of its revenue is in Europe / EMEA. Just half is in the U.S. HubSpot as you’ll see below is pretty similar.
And a few other examples:
Learn in early here, pull ahead.