“Any business from Europe, if they are serious, must relocate the CEO to the US. In terms of business growth, it’s simply the best thing they can do."
As part of our research for the Notion Insights report ‘Crossing the Atlantic’, we interviewed a number of experts. Each of our contributors shared their stories, advice and learnings. This week, we share our interview with David Skok.
David Skok is a General Partner at venture capital firm, Matrix Partners, where his credits include Zendesk, Hubspot, JBoss and Cloudswitch. A serial entrepreneur, he has founded four businesses, two of which have gone public. With a broad focus on enterprise software, his key market segments are SaaS, cloud, mobility, marketing automation and infrastructure
When it comes to understanding how to grow a business from Europe to the US, Matrix is a good VC to ask, as they were the lead investor in the second round of funding for what David believes may be “the best European company to come to the US in the past five years”: customer support business, Zendesk. What did they do so right?
“Zendesk’s key achievement was the realisation that great product design could lead to a simple product; and that a simple product could take a lot of friction out of the sales process. At the time, that really wasn’t well understood – how product complexity impacts sales viability. We realised that there was a new model of sales coming that used the product itself as the sales tool, and they had a brilliant execution of this model. The free trial of their product was so compelling that it effectively replaced the sales function. That is a key to what made them so successful.”
And a move to the US? “Zendesk’s second achievement was to embrace US culture in a major way”, says Skok. “CEO Mikkel Svane was a huge fan of the US scene, and along with another founder he didn’t hesitate to move his family across. Any business from Europe, if they are serious, must relocate the CEO to the US. In terms of business growth, it’s simply the best thing they can do. There are so many mentors and advisors you can connect to, so many other founders and CEOs you can talk to. In Europe, it’s much harder to find those people.”
David’s other example of a great transatlantic playbook is GrabCAD, the digital manufacturing hub with a community of over 4M designers, engineers and manufacturers which was successfully sold to Stratasys for $100M. “Founder Hardi Meybaum was exceptional”, he says. “His genius was to meet anyone and everyone who was key in his industry.
He knew everyone in CAD and opened endless connections for himself and those around him. He used his own charisma and hard work, so when it came to fund-raising or hiring, he had an amazing network”. Many of our other commentators and founders have noted that the ability to build and capitalise on a network is a crucial, perhaps even non-negotiable CEOs skill. It’s important for raising finance, and it’s just as important for developing beachheads in a new continent.
Europe is a key source of new deals for American VCs
David says that entrepreneurs will find surprisingly open doors at US VC firms. “I’m interested in Europe as its great source of deal flow”, he says. “European entrepreneurs are every bit as good, and there are some great ideas”. In particular:
- SaaS, David’s speciality, and very much a mature category, has been a profitable seam of productive businesses coming out of Europe.
- The start-up ecosystem is now evolved and as substantial as that in the US.
- Europe has excellent talent and ethical zeal.
- And as the VC focus begins to look beyond SaaS to the next wave of technologies and business models (from mobile, SaaS and big data to AI, augmented reality and even brain machine interfaces), Europe hosts many great universities and their associated academic and funding ecosystems; so that there is plenty of room for evolved businesses to incubate.
Europe has excellent talent and ethical zeal.
If you were to approach David tomorrow, he would be looking for some reasonably obvious commercial metrics: early evidence of a repeatable sales process bearing fruit thanks to evident product-market fit (e.g. $1M ARR) and clear evidence of bookings ramping up. He would like to see at least two sales people who are productive, to demonstrate that the product will sell on its own merits rather than thanks to the efforts of one superstar salesperson. And there should be some marquee deals in the US to show that the product translates well.
The founder is key
None of this should be surprising. Much more important, though is his high quality bar for the founder. “The founder is important beyond compromise”, he says. “They must have a ton of drive to make it in America – their drive needs to be head-and-shoulders higher than their peers in the US. And they have to have the segment insight – I want to know that they are the right person to solve the problem they claim to solve. If we don’t see that kind of entrepreneur, even great numbers won’t really turn our heads.”
Get a US VC on board, though, and they can help with the challenge that all our founders have said was their greatest in making the move to the US: talent. Says David, “A ‘Grade A’, brand-name VC can make a real difference. Their brand will be a real asset to attract and close the best talent. Most founders don’t know how high they should be aiming and the best VC can help them understand what exceptional talent looks like, and introduce them to some examples to set the bar (or even ideal candidates) and proven recruiters who can broaden the pool. They can help with referencing, benchmarking, credibility and ultimately closing the candidate.” To access that knowledge, though, founders must travel. In the eyes of the VC, commitment from the top is imperative.
- For SaaS businesses, great (read: simple) product design is a huge contributor to frictionless sales. The product itself is its best sales tool.
- To be serious, any European business must move its CEO to the US. Leaders must commit – the founder is everything.
- Get to know everyone in your market. Your network is the most powerful free tool in business.
- US VCs are very open to European business ideas.
- Europeans bring to the table a mature academic system which breeds technical talent.
- A good sign of product-market fit is that more than one lucky superstar salesperson can sell it.