How German SMEs can prepare for a sustainable US market entry
Global growth is the ultimate goal for many entrepreneurs and the USA is still a top priority for them. With a GDP of over 20 trillion US dollars, a good quarter of the global GDP, the USA is still the strongest economy in the world. The market is huge and offers limitless opportunities for German companies of all sizes.
But if you want to expand successfully to the USA, you have to prepare well. The Americanization of Germany since World War II suggests that the two countries are very similar. Too often, founders try to simply transfer domestic business models and products to the USA. However, there are huge differences between the two countries, economically, socially and culturally. If you don’t know how (and if!) you and your business idea fit into the market, you will quickly fail.
Our Startups & VC Advisor, Daniela Caserotto-Leibert, has been helping German startups successfully expand to the US for years. Daniela is also a Venture Partner at Speedinvest and has lived in both Europe and the US for a long time. She therefore knows the most common stumbling blocks when founding a company in the USA and has developed a guide together with her team.
Whether a startup or a medium-sized company, Daniela Caserotto-Leibert lists 6 steps entrepreneurs need to take in order to successfully enter the US market. But first, they should consider whether the US is the right market for them and whether the timing is right.
Step by step to successful expansion – this is how it works:
1. Be critical!
The grass is always greener on the other side… stop! Of course, one is tempted to look at things with a glorified view when (supposedly) “big money” beckons on the other side. The USA has always been a place of longing for all those who smell big business, and the American Dream is still a melodious promise that one would like to believe in.
Nevertheless, Daniela Caserotto-Leibert advises to approach the matter realistically and first of all to take a critical stock of the situation. Here, one should focus on two things: the market and the product analysis. Just because the product works in Germany does not necessarily mean it will work in the USA as well.
- Do I know who my buyer is?
- Do I know my target group and my competitors in the (still) foreign market?
- Does my product even fit into the existing market there?
- Does it perhaps need an adaptation so that it can be offered successfully in the US?
- What is my total addressable market?
- Do I have organic inbound leads from the US?
Only when these questions have been answered and clarified honestly, you should start implementing your expansion strategy.
2. Timing matters
As with many other things in life, the right timing is crucial. Even if the product is promising – sometimes it just needs some more time until the product or the company is ready for the step across the pond. It’s important to remember that expanding has personal and business consequences that need to be carefully considered to ensure that the plan doesn’t backfire.
Even if the USA seems similar to us as a western country – the culture shock may be significant. Many things here are different from what you are used to in Germany or Europe. In addition, the cost of living in many places and especially in the popular metropolitan areas like New York and San Francisco is significantly higher than in Germany. The product must also be able to keep up with the different culture: Is it scalable enough to survive in such a large market? Can my business even grow fast enough for the American market? Or should I perhaps focus on my local market first before going across the pond?
3. The product market fit
On the road to US expansion, the product market fit is an essential element that you should give sufficient attention to. Many companies automatically assume that they have a product market fit without questioning whether it is sufficient for the international market.
- What exactly is my value proposition?
- Do I know my TAM and have I already received positive feedback from the industry or from my target group?
- What is my USP, what makes me stand out from the crowd of competitors and market participants?
You should only expand to the USA if your product has already successfully proven its product-market fit on the domestic market. Low user engagement, declining sales numbers and a too slow sales cycle are signs that an expansion to the USA might be premature.
4. Immerse yourself in the foreign culture
To build a product market fit in the US market, it is inevitable to learn the culture and get an overview of the prevailing market situation there. So you should know about the local dynamics and, at best, hire people who are very familiar with the market and the needs of the resident customers – and perhaps even bring more expertise to the company. Hiring plays a big role in a market that is highly competitive. Needless to say: great talent has its price.
If I can demonstrably prove that my product solves an existing problem better than most of my competitors, it is innovative enough to attract the right target group, and I know my customers and their buying patterns well enough to be able to respond to them, these are very good signs that my product is ready for the US market. Ultimately, it’s all about one thing: knowing and being able to serve the market needs there.
5. Know your “enemy”
US companies are known for having a strong sense of marketing and to execute it with equal confidence and boldness, even if the product itself may not be quite as strong. German companies seeking access to the US market should not be deterred by this. Above all, SMEs and startups need a visionary mindset and an above-average product to disrupt the American market and its many competitors.
Get to know your competitors early on. Who are they? Who are their investors? How is my product different? What are barriers to entry to the market? These questions can help you to better assess your competition and derive the next steps.
6. Bureaucracy also exists in the USA
German bureaucracy is not the only one with its pitfalls. Likewise in the USA, a number of things have to be taken into account before you can do business there. Above all, tax advantages and disadvantages should be discussed with a specialist as early as possible. None of this is cheap, but it is advisable to do it in advance – the costs afterwards for any adjustment are usually much higher. Depending on the expansion strategy and implementation, it is not absolutely necessary to establish a new company, it is also sufficient to set up a subsidiary in order to hire US employees. Nevertheless, you should keep in mind that some US investors only invest in US based companies. Furthermore, the amount of the taxes to pay is measured by the value of the company, which is why it is worthwhile to officially incorporate in the USA as early as possible.
You should also think about insurance and visas:
- What insurance do I need in the USA, for my company and also the employees?
- What is needed in order to be competitive?
- Which legal form is best suited?
- And which visas do I need to take care of in order to either go myself or to send people over there?
Ready to go? We help you with your step into the USA!
Could you answer all questions for you and your company and are you ready to go? The GACC West is always ready to help you with your expansion to the States. Whether market studies, innovation solutions or business partner search: we offer various services to ensure your business success also in the USA. Contact us!
The official Guidebook
Find the guide from Daniela Caserotto-Leibert and her team here.
About Daniela Caserotto-Leibert:
Daniela has lived and worked in both Europe and the US. In more than 17 years she gained extensive experience in hyper growth startups focusing on scaling international business development, operations and strategic sales. An operator turned VC, she advises European companies on how to tackle the US market connecting them with the broader Silicon Valley ecosystem. Passionate about all things driving innovation and change forward.
