US start-ups drawn to Europe

Some 70 per cent of US-based technology companies plan to continue overseas expansion into Europe in spite of the economic slowdown. However, the way these US companies are approaching expansion differs significantly from the approach recommended by VC’s and could be ruining European MD’s chances of success, according to a survey commissioned by Protege Group.

The first annual Measurement of CEO Attitudes on Global Expansion highlights contradictions between the views of VC’s and CEO’s. VC’s suggest international expansion should be driven by strategy and not undertaken until a solid US base is established. However, some 82 per cent of CEOs say opportunistic client wins were the catalyst for moving to the UK and other new territories.

VC’s also believe local managing directors should be given authority to make local decisions. But only six per cent of CEO’s grant authority over business strategy and just 12 per cent release authority over marketing strategy to their local managing directors.

The importance of understanding local business cultures was stressed by VC’s, but only 60 per cent of the CEOs were aware of the differences in buying behaviour between Europe and the US.

The survey was commissioned to discover how CEOs of technology companies perceive international growth opportunities in the current environment, said Larry Levy CEO, Protege Group. “The good news is that many of them understand the importance of continuing their international growth activities. As the VC’s suggest, however, the bad news is that CEO’s may not be equipping themselves for success by pursuing highly disciplined strategies and vesting their local management with real authority,” he said.

Virage is a streaming media company based in California that partnered with Protege to launch into Europe. Virage CEO, Paul Lego, said: “These findings are worrisome. You can’t just take a leap into Europe. You need to employ a strategic approach, first to understand your markets, customers and value proposition thoroughly before you embark on anything.” He added that at the right time and with the right homework, expansion outside the US is critical to the future of a young company.