Why European Start Ups Are Non Starters at Scale
September 17, 2016
I read an interesting and probably irritating article “Why European Startups Fail to Scale.” I was sufficiently intrigued with the premise of the essay to send it to some executives at European start ups which have failed to scale. Nota bene: None of these managers wrote me back which suggests that the content of the article was not germane to their firms’ commercial success.
I learned from the article:
European startups fail to recognize that when they expand to a new market they have to adjust themselves to the rules, standards and requirements of that specific market.
Interesting idea. I have noticed in my own experience that companies from some countries struggle when they try to sell their search systems to the US government. The procurement process and some of the regulations make no sense. What’s interesting is that in some European countries one must have a receipt for utilities before being able to rent an apartment makes perfect sense. The notion that a software vendor’s code must be verified to be backdoor free makes zero sense to European vendors who want to take money from the US government.
The write up points out:
No matter if the startup was located in Western, Central, or Eastern Europe somehow most people did not understand that there could be fundamental differences between themselves and consumers inside this new market they were planning to enter.
How does one address this issue? The write up offers some suggestions; for example:
you need to optimize your product for your new markets.
Seems obvious. Another tip is that the company trying to cash in on the exciting US market should have a value proposition and pricing scheme suitable for the savvy American buyer.
The US, unlike some countries, is big. It is, therefore, expensive to advertise “on social media or search engines.”
Whereas a lot of B2C companies in Eastern Europe are talking about Euro cents, in the US a click might cost several Dollars.
The idea I highlighted in grammar gray was:
text is far more important. Whereas Europeans are lenient to typo’s or faulty grammar, Americans are not and expect to be addressed in the catchiest way possible.
How have search engines from Europe managed in the US market? Let me highlight several examples from my historical archives:
- Antidot. Announced a footprint in San Francisco a couple of years ago. The traces of the company are faint.
- Autonomy. Sold to HP for $11 billion after more than a decade in business. Since the sale, Autonomy has been a legal and M&A football engaged in continuous knock abouts
- Fast Search & Transfer. The founder ended up in legal hot water because of some tiny math errors resulting in allegedly misstating revenue. Microsoft ignored these gaffes and paid $1.2 billion for the system.
- Exalead. Made a splash and ended up selling to Dassault. Largely invisible in the US market after a run at the US government market and the usual commercial targets.
- Pertimm. Dabbled in the US market and ended up forging a deal with a European company for a Euro centric search system.
- Sinequa. Announced a push into the US a year or two ago. No one seemed to notice.
At this time, the major success seems to be Elastic, the open source search vendor. One assumes that the European search vendors who have failed to gain traction in the US market would emulate this firm. But if a European search vendor does not acknowledge that Elastic is doing something that works, why change?
Some European search vendors and “experts” are pitching governance and indexing. These are two market segments which strike me as either difficult to sell or very narrow. Change and sustainable may be difficult to achieve regardless of the lipstick applied for the theater of marketing.
Stephen E Arnold, September 17, 2016
Comments
-
- Subscribe to Beyond Search
Feature archive
News archive
-
