dossier

New entrepreneurs in Technology and Science: 

New entrepreneurs in Technology and Science June 21 Swiss House for Advanced Research and Education ENTERING THE US MARKET EXAMPLES OF EUROPEAN COMPANIES

Agenda: 

Agenda Entering the US Market : Why? When to enter the US Market? What product to offer on the US Market ? How do you finance the US expansion ? How do you choose your partners ? How do you create the US team? How do you build a loyal team? Where do you locate your US entity? Entering the market through acquisitions Examples: Business Objects, ILOG, Sangstat Strengths and weaknesses of US market

Entering the US market : Why ?: 

Entering the US market : Why ? “Beyond internal operations, the United States makes for an attractive investment largely because it is the largest single market in the world and the center of the NAFTA region” Helge H. Wehmeier, president and CEO of Bayer 41% of worldwide market share in computers, 73% of worldwide market share in software A mass market where Internet plays a key role: - 108 M Americans are connected to Internet more than 1 hour / day - 50% of US households have a PC - 30% of US households are connected to Internet - 50% of 10 millions medium sized companies in US use Internet for e-business

When to enter the US market ?: 

When to enter the US market ? For a niche market: Develop the products in Europe, test in one European market the company can finance part of its US expansion. - Swan (network management) develop and test its products in England and Germany before entering the US market - Plan View entered French Canada before the US When your company is prepared for American expansion: - Part of the executive team is dedicated to US ( Perform prepared its employees) - Production ready to execute the US orders with large volumes - Financial Budget that forecasts that US marketing and communication expenses are twice development expenses. - You have completed a “real life” market study, competitive landscape analysis, trade show and feasibility test.

When to enter the US Market ?: 

When to enter the US Market ? It depends on the “advance” of the product over its competitors: - Internet Project : set-up in the US as early as possible - Biotech projects: enter early in order to develop the product for the US market. Do not launch at the same time the business in Europe and in the US : mistake done by Plan View, project management software. Too many difficulties to cope with: - Development for 2 different markets - Cultural differences

What Product to offer on the US market?: 

What Product to offer on the US market? The Product must be presented as the solution to very specific problem (do not mention some functionalities) . An adapted product for a targeted market. Position your product against your competition (no competition = no market). Get the technology analysts approval (Gardner Group, IDC, Giga Information Group…) This “focused” product is the basis for the marketing message and to identify the company.(The best technology is not necessarily going to win on the US market ). The Product must have a value added demonstrated by a Return on Investment Launch a reliable version of your product. (Debug and test before selling in the US). The product must be more simple, more user-friendly than its competitors

How do you finance the US expansion?: 

How do you finance the US expansion? Entry Ticket : $1- 2 millions include market studies, office set-up, team recruitment, travel, prospection, trade-shows, lawyers, specialized public relation agencies ($250 000 per year). Prepare a business plan- demonstrate your business model - knowledge of the US market Contact investors that have experience with European companies expanding in the US Venture Capital, Business Angels, self-financing - Eukarion- research of synthetic molecules imitating enzymes- scientist- launched with business angels - Bootstrapping strategy: get the first references

How do you choose your partners?: 

How do you choose your partners? Enter the US via partners that will integrate your product within their offer. - Infovista concluded an agreement with 3 Com and reached the US market (access to the sales network, references…) Establish alliances for complementary technology with market leaders: takes time - exclusivity risk. Select carefully the first team in charge of US expansion: difficulties to recruit the key people - Business Objects: 1991 in San Jose- Nasdaq since 1994- Bernard Liautaud, one of the founders, leading the US team in 1991

How do you create the US team ?: 

How do you create the US team ? Locate your US entity near a skilled and loyal labor pool CEO must choose a manager for US expansion: - somebody he trusts and reports to him directly - somebody who understands the US market - somebody who controls the US operations - somebody who builds a loyal team Sales and Marketing positions: hire American people (hard) Choose a recruitment agency (sell a European start-up) Genset : Production of synthetic DNA and genetic analysis – The founders and executive officers were deeply involved in US expansion. CEO , since the US entity set-up, spend more than 33% of his time in the US. To be credible on the US market , founders set-up a US production entity and a unit of pharmaco-genomic research. Company created in 1989- US entity in 1992- Nasdaq and le Nouveau marche entry in 1996

How do you build a loyal team ?: 

How do you build a loyal team ? To attract and keep your employees : stock-options. Typically, CEO asks for 10% of the company, a Marketing Vice President : 2 to 3% with compensation around $200 –250 000 per year. - Business Objects mistake: issued few stock-options with high value. Americans want more stocks with low value. Gemplus: founders were reluctant to stock-options To create a loyal board of directors include : active investors and industry experts with a good network (motivated with stock options) to build company credibility.

Where do you locate your US entity?: 

Where do you locate your US entity? Close to your clients (ex Genset in California) Close to skilled labor pool Close to your investors Where the time difference is minimum (working hours window is very narrow on the west coast) The most popular locations : Silicon Valley and North-East (Boston- New York) - ILOG : Mountain View – close to Silicon Graphics, Sun Micro systems, HP – problem : employees loyalty Set –up technical support in the US Keep the R&D team in Europe to avoid their departure for a competitor.

Entering the US market through acquisitions?: 

Entering the US market through acquisitions? About 1000 French Companies have subsidiaries in the US Among 1000 : 300 are small/medium sized companies 70% of French investments are done through acquisitions: - direct access to US mass market ( imports: niche market ) - direct presence on the market: better relationship with distributors, … examples: Saint Gobain acquired Bird Corp $40 billions CGE = its subsidiary Sithe Energies bought at Boston Edison 12 non-nuclear plants in Massachusetts and Maine for $ 657 billions Lectra systemes acquired Computer Design for $ 13.5 billions Alcatel acquired DSC communications Corp and Packet Engines Biomerieux acquired Micro Diagnostics

Business Objects : 

Business Objects 2 Founders: Bernard Liautaud and Denis Payre both from Oracle Feb 1991: First round of financing $1M. creation of American and English subsidiaries. revenues of $1.6M 1992: Second round of financing $2M. Opening offices in Chicago and Dallas. 1993: Third round of financing $2M.Offices in Boston, Washington and Germany - revenues of 14M$ 1994: Introduction to the NASDAQ + Japanese subsidiary with Fujitsu 1995: revenues of 300MFF (profit: 40MF & growth: 101%) 1997: revenues of 700MFF, 800 employees, net income of $2.9M over 13,100 customers in more than 80 countries

ILOG : 

ILOG Founders: Pierre Haren & Patrick Albert specialized in software components C++ Revenues of 104MFF in 1995, 61% of sales abroad, 72% comes from annual licenses of software components 1997: Publicly held on NASDAQ and Le nouveau marche $71.3 M in revenues for the year ended June 30, 2000 520 employees in 7 countries, subsidiaries in England, Singapore, Germany, Spain, Japan Over 2,000 customers throughout the world like Hewlett Packard, Thomson CSF, British Airways… Partners and distributors in more than 30 countries Capital equity: founders & employees:32% venture capital : 42% (Oak Venture, Atlas Venture, Banexi, Eurocontinental) Inria : 26%, financing from the French & European government

Sangstat : 

Sangstat Founder: Philippe Pouletty Biotechnology company specialized in organ transplants Research teams work also in France Held on NASDAQ since 1993 on a basis of $3.3 B March 1995: international capital raising of $45M, just 1% in Paris In 8 years, $100M have been raised and 85% from the US Revenues of 300MFF in 1998 From 1994 until 1999, 40MFF have been raised in 3 stages In Oct. 1999, funds of 140MFF have been also raised with a valuation of 360MFF First positive net income forecasted for 2003 Capital Equity: 70% by investors (ABN Amro, auriga ventures, CDC Innovation, Financiere de Brienne, Nomura International…) 20% from Philippe Pouletty and 10% from the employees.

Strengths and weaknesses of the US market : 

Strengths and weaknesses of the US market Strengths Customers and partners approach Product development Competence network Tax system Stock option flexibility High-qualified executives involved in start-up Weaknesses Expensive NASDAQ introduction (over than $100 000) legal protection (intellectual property protection) Permanent communication to convince the technology analysts Cultural differences

Pros & Cons of the NASDAQ: 

Pros & Cons of the NASDAQ Advantages Millions of $ can be raised rapidly Followed and studied by the best analysts Allow to distributes rapidly stock options Disadvantages Expensive legal consultants and introduction expenses over 10% of the funds raised Numerous and expensive information obligations, Volatile market with big changes