This week's depressing conversation with a European entrepreneur
I have been working since 93, in VC since 99 (yes, the bubble), and I have been directly involved as an investor with about 20 companies so far. I have probably heard well in excess of 1,000 pitches. And there is one answer which never fails to get me either depressed or combative, depending on how many lattes in the day I have had.
The question is: “what’s your international development strategy“. The answer is not the US or Asia, it usually goes: “we were thinking about … the Benelux“. Sometimes I drop the latte; other times I decide to become a tour guide of Brussels or Antwerp.
The most recent example relates to entrepreneur X (as in X-Factor), who I met this week. He runs startup #1,413. He has a great, highly differentiated product, whose sheer excellence seems sufficient to defeat the highly visible and competent US and Israeli competitors that he is facing. His go-to-market relates on well-oiled and highly efficient channels. He has 7-8 very obvious acquirers (all in the US) and could exit on tech prowess only or decide to execute further and go for the big winner. In either scenario he is looking at a chunky exit. I am all excited.
And then the dreaded answer comes: “we are going to expand into EuroCountry A than EuroCountry B, are looking to exit within 18 months for about $30-50m, providing everyone with a decent return in the process. We don’t want to go to the US because it is costly and most people fail to make it. Our investors advised us to raise less money and take this safer route”.
I am not going to pretend that it’s easy to make 10x+ returns in the European market, or that breaking the US is easy, or that increasing your capital intensity is the answer. However I will say that such a company has a duty to itself to dare to go for more than being the #1 in Spain and Holland.
When you have world class technology and a good team:
- Educate yourself about the type of investors you can get. Even Sequoia did a bunch of deals in Europe last year, and there is no reason why they would not invest in you…
- Make a point of going to your largest market first and go measure up against the best competition in your segment, and play to win. The European market is a field of dead bodies when it comes to once promising local plays who got crowded out when the big US players entered the fray.
- Do not let your investors dictate what you should do. Investing is a partnership, and a company is nothing without a management team. Defend a true vision.
- Raise your game. Get a great board member, court a great manager, pitch a great VC. [Yes, we are open for business 24/7 ;-)]
It’s a cliche, in fact this post is full of cliches. But you really need to plan back from your endgoal and ask the question: what will it take to become a real leader in my industry ?