Unlocking US
A few months ago, I was talking to a large global investor. He made a few very pertinent points: US enterprise companies prefer to buy from US-based software companies (very different from their approach to IT services which can be outsourced); building an organic business in the US in SaaS takes a long time; for Indian companies to build executive teams to win in the US is very difficult and expensive, especially given the working relationship with the home office across time zones and culture; brand building and marketing in the US are very expensive requiring tens of millions of dollars of sustained spending; to achieve scale, Indian companies will need a product that sells itself and for which US companies will be willing to pay an MRR (monthly recurring revenue) of thousands of dollars else there will be a need for thousands of companies if sold at an MRR of tens or hundreds of dollars.
In Netcore, we have lived through each of these challenges over the past few years. Deepening our presence in the US was one of the reasons for the acquisition of Unbxd. The next challenge for us is how to do the next 10X jump – grow from $10 million to $100 million in the US rapidly?
In an interview with SaaSBOOMi, I outlined the three keys to unlock the US market:
- Top leaders of the company have to relocate and be hands-on with understanding customers, identifying verticals, finding product-market fit, and building a team in the new market.
- Sufficient capital for hiring the right people, fine-tuning the GTM strategy, and allowing for downturn effects and iterations.
- Deep product innovation for developed markets like the US, where competitors abound in every vertical, and not just pricing innovation.
A few points I made in the interview:
One of the lessons Netcore learnt while testing the US waters earlier was the importance of product innovation. “I thought initially that the same product at a cheaper price point could do well. But people are not that interested in the little extra savings,” says Jain. “At the SMB or mid-market enterprise level, they want to see how your product can do things 5x or 10x better than the competition.”
“The US market is 50 to 100 times deeper than in India. So there are lots of companies in each vertical. You need to figure out which vertical you will go deep into, instead of spreading yourself too thin. That means the product-market fit will be different… And finding all this out takes time,” says Jain.
… One constraint of being bootstrapped is that it can be harder to build for the US market from the outset, because of the amount of capital needed for a sales-led model. “If you’re bootstrapped and want to target the US market from an early stage, you need a product that you can sell from India without hiring in the US. Because you can’t hire just one person in the US; you need a team of at least three or four which is expensive. So you need a product-led growth model targeting the SMB market because it may not work so well in the enterprise market,” explains Jain.
A few Indian SaaS companies have succeeded and scaled up in the US, but they are more the exception than the norm. I know Netcore can grow 20-25% consistently in India and emerging markets, but if we have to get to higher growth rates (40-50%), we need to win in the US. This has been the question I have been thinking about for some time. LEMMMA is one possible answer: land, expand, maximise, moat, monopoly, acquire.
