Getting to Initial Scale

When To Open Your First Int’l Office? Maybe When You Have $1.5m in ARR There.

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Jason Lemkin

We’ve had a lot of discussions on SaaStr and at SaaStr events on founders from outside the U.S. and the Bay Area coming here.

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We haven’t done enough on the opposite.  When to go there.  When to open your first international offices.  We will do a couple of posts here from guest authors soon.

But let me throw out a few learnings, and perhaps an overly simple rule:

  • Opening an international office is distracting.  You have to talk about it.  A lot.  Hire someone.  Who do you hire?  Someone from here?  Or there?  A GM / jack-of-all trades?  Or a regional VP of Sales?  Or a customer success lead?  And it’s expensive.  You have to tour offices.  You have to go there.
  • You can service many international customers just fine without an office.  Inside sales works fine.  You can hire people here that speak French if you have to.  They can wake up early, or late, or whatever.  Yes, you can’t go there in person.  But a lot of times, that’s fine.
  • If you have a mini-brand, int’l customers will buy from you even without any local presence.  Buyers in the U.K., in Australia (key early local markets) are used to buying from U.S. vendors.  They’d rather buy the best solution for them rather than one that just happened to be built in Sydney.

So you can go quite far without ever opening an international office.

And yet.  And yet …

  • Bigger customers will buy a lot, lot, lot more if you visit them.  You know this.
  • Customer success in bigger accounts requires an on-site presence.  You know this.
  • A local team gets to know the local ecosystem much, much better.  The systems integrations.  The channel partners.  The integration partners.  It’s much easier to co-sell and co-market together when you and your partner are both local.
  • Referrals and second-order revenue works much better when you are present.  You can do better events.  You can do steak dinners.  You can do meet-ups.  If you don’t meet with people, they don’t refer you nearly so much.

So when to go international?

I don’t have a perfect answer, but I do have a simple framework to think about.  Once you have $1.5m in a geographic area, if you can hire someone strong to be the regional VP of Sales, or GM, make the hire.  The reason is, at $1.5m in ARR, let’s assume the next goal is $3m ARR from, say, “Europe”.  If you hire a local team, and you think they can get you to $4m in that time instead — then it’s totally worth it.  Spend that $1m delta, or at least part of it, to get there faster, bigger and stronger.

It may be a bet.  You may not be sure.  Too early is tough.  If you do this at $250k in Euro revenues, it will be harder to see it as accretive.  Although it might be worth it even then, if you have higher-touch customers.  Just one great hire might get you another big deal or two.

Done right, if customer success, if upsells, if referrals matter to your business, and rough-and-tough, your deal sizes are big enough ($30k+) … I say at least go Euro, go Asia, go even Australia once you have $1.5m there.

Second order magic will happen.

Published on March 4, 2016
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