In the European tech ecosystem, a common hallmark of growth is expanding to and successfully cracking the US. Those European tech companies that achieve this holy grail often go on to raise more funding from US-based funds — and challenge incumbents in their own backyard.
But what happens when you’re faced with the reverse: a well-funded US competitor launches in Europe aiming for your customer base?
For some companies, this scenario can prove fatal. And whilst it can be tempting for founders and their teams to go into full-attack mode with an aggressive marketing plan to scare off the competition, this could do more harm than good. Instead, a considered strategic approach could be the making for your business.
Here’s what to do.
Double down on customers
Your current customers are in your competitors’ CRMs as hot prospects for a rip-and-replace, so you need to make sure you’re offering the best possible service to prevent this.
Meet your internal champions (often the head of engineering or the data team lead who are interacting with your product several times a day) and the ultimate decision-maker at your top 20 or 30 customers — usually the CIO or CTO. Having multiple contact points in a company helps you spider-web the key person you need to influence.
Speak to them individually or bring them together on a Customer Advisory Board. Ask them: what are the most valuable use cases for your product, and if they can measure the ROI? Where is your product missing the mark? What is slowing them down and how better could your product be integrated?
If you can take this feedback and transform it into new product areas even better; this will demonstrate that you are there to serve their needs.
Get ahead of any potential issues
Step up engagement with your wider customer base beyond that top 20 to help minimise any defections. How does the community your customers belong to like to interact with? If you have a distributed sales and channel team, they could run localised community meet-ups in different cities.
Enterprise customers will have time for in-person meetings — but will want to be treated with white gloves. Organise a day at their offices to meet with several teams using your product and gather feedback from all stakeholders. Treat it like a big onsite and review and pack the agenda with as much value-add as you can. This will help you to tackle any potential problems head-on which could be solved through product development or increased customer support.
Think about your positioning
There is a lot of enthusiasm in Europe from customers to support local companies: buying from European-based businesses and technology, keeping data processing in Europe and not taking it offshore. Consider utilising this marketing tactic to reinforce your position as the European leader who understands the specific needs of your European customer base. This is something a US competitor cannot copy.
Consider partner support
When faced with this problem recently, one of our portfolio companies — a recruitment and job search platform — was able to work with a partner which solely advertises roles through them to help re-engage with one former customer who left to work with the US competitor.
Depending on your business model and relationships, it can be possible to align with a strategic partner to help bring back a former customer to the fray. Channel and technology partners, such as Salesforce or Microsoft, can be a big help here, especially if they’re bigger players. If you have a partnership with the likes of Accenture, then this can provide a ton of value as the Big 4 consulting and data teams are often very embedded in companies to execute large-scale digital transformation projects.
Contemplate a roll-up strategy
Who are the smaller players in Europe offering a similar service to you? Is there potential to consider an acquisition? If you operate in a niche sector with slow-moving incumbents, this could be the opportunity to acquire a partner to provide a stronger front to the US. As with all acquisitions, make sure due diligence has been done before proceeding with an offer. Speak to your existing investors: an inside round could help fund an acquisition. Alternatively, M&A debt financing could be an option to enable the acquisition — but make sure the strategic rationale is in place.
Look ahead to expansion opportunities
If Europe is your only market, consider where else is in the pipeline for expansion. There are myriad opportunities for European tech companies to expand into regions such as the Middle East, South Asia, Australia and New Zealand and Asia-Pacific. Not all budgets will extend to this, but working on a new strategic ambition for the company can help provide the right operational improvements for the team now and in the future.
Maintain perspective
Just as not all European startups will be immediately successful when they expand to the US, not all US tech companies will be successful when they expand to Europe. Fintech giant Robinhood recently launched in the UK for the third time after failing to crack the market in its previous attempts, whilst e-scooter company Bird retreated from a number of European markets including the UK, Germany and Sweden after failing to see off European players. Investment firm Coatue shut down its London office earlier this year, less than two years after it opened, and Instagram head Adam Mosseri relocated to London for only a few months last year before Meta U-turned on the idea.
It can become easy to obsess over every loss to a competitor but that often creates a bias that blinds us to their failures. Keep a watchful eye on competitors’ activities but focus on your strengths as a business and remember that this is your home field.
