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How to Expand into the U.S. Market

By June 14, 2011Article

We launched Clarizen, now a global provider of on-demand project management software, in Israel in 2005. In December 2006, we secured $7 million in first-round funding from Benchmark Capital and Carmel Ventures. The two General Partners of both firms also joined Clarizen’s Board of Directors. From the beginning, the plan was to go global to expand our growth options. With Benchmark Capital, we determined we should establish a presence as soon as possible in North America – our largest target market.
Obviously, there are cultural and language differences, as well as other variations from country to country as to how business should be conducted. These differences are risks that can become hindrances to success in establishing a company in a foreign market within the necessary timeline and budget. So the decision to go international must be made carefully. Yet, it need not be intimidating.
Having set the strategic direction for our company, we forged ahead and successfully established our North American headquarters in Menlo Park, California, after having been in business in Israel for 1.5 years. The following points represent the best-practice techniques we employed to reduce the time and effort to bring a company into the U.S. market and mitigate the risks of navigating cultural business variations.
1. Create Market Presence Before Moving to the U.S.
A well-proven business mantra is that timing is everything, and that was true in Clarizen’s case. A key to success is to make preparations with respect to the market before setting up shop there. Don’t wait to come to the U.S. before getting acquainted with and developing relationships with customers, since this will impact your timeline and budget.
Understand where your market really is. I came to the U.S. several times before we opened our sales and marketing presence here. Every two months we held one-day meetings attended by our board and potential customers. An American executive connected with our company helped me in this effort. The meetings were invaluable, as it helped us understand where our market really was and how should we sell into the market.
Generate demand and identify customer issues. Mitigating the risk of wasting money involves ensuring you don’t move until there is some demand for your product(s). During my trips to the U.S., one technique for establishing market presence was giving potential customers a better version of our product than the beta version. This strategy helped to generate demand for our product. But even more important, their evaluation helped us understand the level at which customers were making purchasing decisions and identified their concerns regarding our product and business model.
Become part of the various circles of influence in the business community. It’s also important to become part of the American business community by participating in events and forums. We found this was especially key in the Bay area. Becoming a part of the community not only helps to market your company but, more importantly, helps in understanding the American culture. We participated in events that were relevant to our business, such as SaaS and Office 2.0 events, Microsoft sponsored events, and Interop/Software 2008 where I gave a presentation. Such forums also helped us establish a presence in the second circle of influence – the analyst community.
2. Determine the Best Location for Operations
Determining where to set up operations as a start-up in the U.S. is another decision that is key to success, as the location will impact several ongoing operational issues that need to be balanced. For instance, communication challenges could be reduced by locating in a city with minimum time zone differences from our team in our headquarters in Israel.
Recruiting and retaining the right talent for your business is crucial to success, so it factors as an important criteria in deciding where to locate your company.
Funding issues also come into play in considering the right location. In our case, we knew we would need to raise money from a second round of VC funding, and it would be helpful to be located near the right set of VC firms.
Last, but not least, it’s important to consider where your spouse and family would enjoy living.
After evaluating various locations against these criteria, we chose our Menlo Park location, despite it being many time zones apart from Israel.
3. Be Prepared to Quickly Build an American Team
Set up your company in the U.S. and market only when you’re ready to hire employees. Keep in mind the following principles:

  • Start with a minimal amount of people in the U.S. location – but enough to ensure the capability of responding quickly to customers
  • All of your marketing and sales team should be Americans, as they will have the best understanding of the U.S. market
  • Bring as few people as possible from your foreign location-mainly the product marketing operation. On my trips to the U.S., I asked questions that helped me determine who would be the right people to bring from our operations in Israel
  • It’s critical to have a board member located where you’ll be trying to raise money. In Clarizen’s case, that meant we needed at least one board member in the Valley. As it turned out, that was not an issue for us.

After starting with a minimal number of U.S. employees, grow your team only according to the need. We started with one salesperson, eventually added a second person and now have five in the United States. A start-up needs to be flexible and have a strategy for scaling with the business growth; contracting or outsourcing administrative, legal, and other non-core processes to a third party in order to be agile.
It costs less to hire local talent. For instance, by using as many American employees as possible, we reduced the cost of having to fly Israeli employees back home to see their families.
4. Align the U.S. Team With the Original Team
Companies starting operations in the U.S. must avoid the pitfall of not aligning the U.S. team with the one from your home country. Here are a few key factors to consider.
Mindset. Critical to successfully establishing your foreign company’s business in the United States is the integration of the teams in both countries. The teams in each country have different cultures and approaches to life and business operations. It is important that both teams be open, flexible, and willing to adapt to change. It’s also important for management not to allow either team to focus on only one way of doing things; any employee exhibiting this type of behavior or mindset will not enable your company to be successful.
Communications. At the outset, our American team had challenges in communicating with our Israeli team. While some Americans now know how to work with foreign companies, they may not know how to integrate with a specific country. For example, working with a company in Israel is not the same as working with a company in India.
As the ability of our American team to communicate effectively with our team in Israel was key to our success, we established the following communication structure:

  • Weekly meetings between our American sales and marketing team and our Israeli R&D team
  • Weekly meetings of Israeli and U.S. management teams
  • Meetings must use technology that enables visual communication to eliminate potential issues; one of the first investments we made was in a video conferencing technology

Such a structure admittedly requires a lot of energy and effort, as well as some additional operational investment. However, it was well worth it, as communication issues cannot be neglected. It’s also critical that management be sensitive to customer reactions to communication issues (if any).
5. Ensure Strong Customer Commitment and Feedback
Knowing your customers’ feelings about your products is critical in understanding how to improve your product to meet customer needs and expectations.
For example, people generally don’t like to use project management software because it basically plans a project but doesn’t help in the execution of it. So we founded Clarizen with a clear vision of bringing the power of team collaboration to project management in order to enhance the plan execution. Having information about customer adoption is crucial to our success. So we put mechanisms in place to get detailed customer feedback about the following issues:

  • Whether our customers are impressed with the product’s ability to align efforts across the entire value chain in their business
  • If they think it’s fast enough or too slow
  • Do they find it’s as simple to use as e-mail
  • If they’re using the product to obtain up-to-the-minute knowledge that helps them align project data with their business objectives.
  • If they have a strong commitment to our product
  • Whether they’re too busy to use our product
  • If they’re using the system as we’ve intended

Clarizen, like many companies these days, is an SaaS and an on-premise vendor. Some vendors believe they can manage their product adoption and improvement strategies by using business analytics to observing what their customers are doing with the product. While the SaaS model provides a good possibility for obtaining that type of customer information, we believe it’s not enough to answer the issues I listed above.
We’ve found that being successful in the SaaS domain requires excited customers. You can’t get close to customers’ feelings by simply using business analytics to observe how they use the SaaS product. It requires being close to the customer, having face-to-face meetings, and maintaining a presence in the market (through a Webinar, for example). Here, again, our strategy is paying off.
The great thing about excited customers is that they become the best salespersons for a product. Clarizen has now been in the United States for one year, and we’re making great progress. Although we sell also in Europe and Asia, 80 percent of our market is with excited customers in the U.S.
Avinoam Nowogrodski is co-founder and CEO of Clarizen, a provider of on-demand, online project management software, allows businesses to easily manage all of their projects and resources in a single environment. Prior to establishing Clarizen, Avinoam co-founded SmarTeam Corp., a provider of collaborative product life cycle management solutions.

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