‘A Swedishman in New York’ — Magnus’ thoughts on European vendors breaking into the US market

Over the years, from my Swedish base, I’ve spoken to hundreds of vendors in the European procurement space, many of them having the ambition to break into the US market, which I also know quite well! The basic question is “how do we do that?” There is, of course, no easy answer to that question, but we can always look at the examples of European vendors who've made it in the US and some of the differences between the average US vendor and its European equivalent. And before I go any further: yes, I’m generalising and no, this does not mean you Mr/Mrs Vendor specifically … and yes, I am aware that there are other markets but there are relatively few vendors in them (perhaps with the exception of India, but many of the Indian vendors are incorporated in the US and viewed as US vendors). So the advice for the European vendors in this article can be used for vendors from elsewhere as well.

The biggest difference I’ve observed over the years is in the difference in focus on sales and marketing vs. engineering. European companies are almost always run by a founder who actually created the product while the US CEO is much more focused on sales and marketing. The European vendor creates a great product and expects that to be enough, and the US vendor sells a product and then builds it! The European vendor underestimates the amount of money it needs to spend on sales and marketing in the US to make it and are often unwilling to take on outside capital because of a fear of losing control over the company. That said, I do believe we have seen a shift in the attitude towards outside capital over the past couple of years and European vendors now seem more comfortable with it.

Another major difference is that the US vendor immediately has access to a much larger home market than any given European vendor. Even if the EU has created “the single market” the fact remains that there is no single market from a go-to-market and cultural perspective. This means that if I’m in Europe and come up with a great idea and product I (usually at least) first establish myself in my home market and by the time I try to expand outside my home market one or more competitors might have come up with the same or a similar idea. So the direct access to a larger market gives the US vendors a bit of an advantage here along with the fact that some of the European markets are more open to US vendors than the other way around.

This makes competitive differentiation even more important for a European vendor, if I (I’m a customer now, by the way) should take a chance on a foreign and unknown solution it needs to bring something unique or extra to the table. And this is especially true if you are going to the US market where many buyers have a bit of scepticism of non-US vendors ... However, most vendors are quite poor at articulating their competitive differentiators. You would be surprised at how similar vendors sound when asked (“we focus on the client/customer success” and “we have the best UI” are the top ones). This means that the next European vendor to be successful in the US is probably a smaller specialised vendor that does something different. At this point it is going to be hard for a S2P vendor to break into the top five in the market unless you have very deep pockets. And many of these specialised vendors might be acquired before they make it that far (which might not be a bad outcome).

So to make it in the US you need to clearly identify and articulate what makes you different (in a good and tangible way) and be prepared to spend a lot of money. As for the differentiation, we at Spend Matters, luckily enough, can both help vendors to identify them and end users to evaluate them.

And of course the US market is different from Europe when it comes to investment and capital. My colleague, Jason Busch, spends time at the extremes of this community, working primarily with private equity, but also going all the way across the spectrum to angel/seed activity. He likes to say there is much more money in America, but it also plays by its own rules and codes (and metrics), especially earlier in the lifecycle of a firm. Think of capital a bit like the atmosphere and gravity on a planet. So a European vendor which is successful competing on “Earth” must then do the same on Mars. Newtonian physics still applies, but just about everything else is different -- but many miss this point.

 

 

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  1. Peter Smith:

    Great article Magnus -it would be interesting to maybe look at one or more case studies of European firms that did or didn’t make it in the US! I guess SAP (parent) have done very well. In our space, Ivalua would be one success story I assume… others (no names mentioned) less so… no sure which bucket we’d put Tradeshift into yet. As you say, a niche is good-I think Trade Extensions did pretty well in the US without a huge budget.

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