What are the industry dynamics in the US?
Many European entrepreneurs see the US as an incremental progression from the work they’ve done in the home market, when in most cases, a US operation is a return to square one. The expertise you’ve amassed at home could lead to blind spots in this new environment, if it steers you to make unfounded assumptions. Successful entrants question what they know.
• What are the existing market restrictions?
• How easily and how frequently can your consumers switch between different companies that sell similar products?
• Why will it be easy for you to enter this industry, but difficult for others to follow in your footsteps?
• How many companies can the industry reasonably sustain?
• What is the value chain for your product/vertical in the US? Who is currently capturing value and how are they doing it?
• Do industry participants in the US control any proprietary methods or processes that are crucial to your expansion?
A cautionary tale is that of London-based ridesharing app Hailo. Hailo invested heavily and then spent less than six months in the US before it realized there were almost no margins to be made due to the price war between Uber and Lyft.
When Hailo arrived in New York in 2013 it tried to use the same go-to-market strategy it had for London – working with local cab drivers to launch its service. It failed to build a close relationship with New York cab drivers and since Uber dominated the more expensive town car market, Hailo was left to try and make money from inexpensive rides. It didn’t work.
Hailo was forced to lay off 40 employees in New York, and the undertaking eventually led to CEO Jay Bregman leaving the company.
Despite raising more than $77M from high profile investors in the US and Europe, the company pulled out of North America in October 2014, shutting its operations in Washington, Chicago, Boston, Toronto and Montreal.
“ In the US, you can build to $10M in revenue and not have product-market fit – we treated the first customer as beacons and to prove the fit of our products.” – Tim Robertson, Vium
Who is your competition?
With a large opportunity comes more competition. A detailed competitive analysis is a cornerstone of a sound decision-making strategy.
In 2017, US per capita advertising spend was $610, compared to $365 in the UK, $276 in Germany and $184 in France.17 Most Europeans underestimate how crowded and loud the US market is, and the sophistication of the marketing and lead generation efforts of the competition. A great product, crisp value proposition, and effective differentiation are paramount to traction in the US.
• Who are your competitors — direct, indirect, adjacent, up and down the stack?
• What are their growth rates?
• Where will they be in one year when your US operations are up and running?
• What are the barriers to entry in your industry?
• If you do well, are you going to be hit by a wave of new entrants – all chasing after the same market?
• What moats can you build around your offer?
• What are your key differentiating factors? Are these sustainable?
Want insights on your competition? Head to the library
When it comes to evaluating the competitive landscape or conducting bottom up market sizing, you should explore the many resources available behind research paywalls.
University libraries: University libraries hold a treasure trove of resources for conducting market or competitive analysis. Many offer free access to otherwise costly research databases such as IBIS World, Gartner, and Frost and Sullivan (though subscriptions may vary across universities). In most cases, one can access these resources remotely if affiliated with the university.
• University libraries can also provide access to pricy equipment, such as Bloomberg terminals.
• A formal affiliation with the university typically grants you access to these resources. However, having members of your team that are students, faculty, researchers, or alumni could also grant you access.
Public libraries: Many city or county public libraries similarly offer access to a variety of databases, though access can be more limited than that of university libraries.
• If you’re in New York, a great resource is the New York Public Library’s (NYPL) Science, Industry and Business Library (SIBL).
• If you’re in Boston, the Boston Public Library (BPL) also offers industry research articles and abstracts from over 600 leading trade and general business periodicals from over 30 countries.
• In order to access public library’s resources, you usually need to sign up for a library card by presenting ID and proof of residency in the area covered. In some cases, merely visiting the library and accessing/requesting the data from a librarian is an option.