By Hazel Moore and David Smith
The Europe tech ecosystem continues to mature and is increasingly on the radar of Silicon Valley companies. Europe now has more serial entrepreneurs, more informed venture capital firms and more scaleup funding than ever before. The European Union itself just launched a new initiative to get up to €2.1 billion of extra capital for start-ups and scale-up companies.
Following the success of home-grown startups like Spotify, Supercell and iZettle, European companies are now thinking more globally about their product. Evidence of this can be seen with the larger late stage funding rounds from the likes of Improbable who raised $502 million and recent raises of Tradeshift and Revolut who both raised $250M. Dealroom estimates that there are now 37 European tech unicorns.
However, while about a third of Europe exits are to the USA and interest in Europe is picking up, getting on the radar of a big US organisation is still no simple task. You can’t buy what you don’t know and in our experience large USA corporates won’t necessarily have heard of even the best scaling tech companies in Europe.
There is a fantastic opportunity for US buyers in Europe but communicating this can be a huge struggle for European companies. It’s crucial that cultural differences are not underestimated in transatlantic dealmaking, particularly during the Marketing and Access stage of the deal.
Here are the three most common mistakes we see European companies make when marketing themselves to a strategic US buyer – and tips on how to avoid making them yourself.
Transatlantic M&A Error #1: Not getting on the buyer’s radar
It may seem obvious, but it really helps if the buyer knows who you are before you decide to exit. The Corporate Development / M&A teams in large corporates typically have a list of the companies whose success they’re following. If you’re not on that list, you will have to endure an extensive internal vetting processes, which can take several months. If you’re already on their radar, you’ve already done all that preparation and built that internal understanding of your value proposition and so you can move quickly.
Put in the effort to develop the right relationships. Many European businesses don’t invest the time, particularly if they see a competitive issue, to talk to people about what they’re doing but these types of connections can be critical. To familiarise potential strategic buyers with your offering, you’ll need to attend the same conferences, you should be presenting on the right stages, reaching out to relevant business units and talking about how you might cooperate.
We have a belief that SMART (ie strategic) deals don’t just happen, and it is rarely a question of “If I build it, they will come”. Developing awareness amongst your buyer group is key. As Deborah Magid, Director of Strategy at IBM Venture Capital Group, puts it, “We go to places where startups hang out. If they give a good pitch, I’ll go up and give them my card. We usually don’t meet startups randomly, we use the community and network that we’ve built up in order to meet companies who look really promising”. You can watch her full video on how to engage with IBM here.
Transatlantic M&A Error #2: Perception of a lack of ambition
Our experience with our European clients is that they tend to be very understated. A European business will typically want to have a greater level of certainty or proof behind their forecasts in comparison with their US counterparts. US strategic buyers and investors are used to confident pitches from companies that are “awesome” with moonshot growth estimates. A typically “conservative” pitch from a European company will have the US listener believing they are not ambitious enough about the future of their business, which impacts their perception of the opportunity.
Your achievements may be impressive, but they don’t speak for themselves. You need to highlight what is extraordinary about your business, some of your best accomplishments and your future potential. Imagine what you could do if you had the resources and stretch yourself. Pitch like a Silicon Valley company!
Transatlantic M&A Error #3: Underestimating the value of storytelling
Storytelling is really a fundamental component of any pitch. European presentations can be very technology-led, and can easily turn into a list of product features. You need think about the “so what?” and emphasise the benefits to customers and the growth opportunity. In the US market, the mindset is different – it’s more about the opportunity and the value your business can create. In Europe, the focus is more on what you’ve built, what you’ve already achieved.
Lead on your vision and don’t overcomplicate things. The opportunity is what the US buyer will be interested in, so be direct. Don’t resort to technical jargon, make your pitch easy to understand. The buyer of course needs to know why you’re relevant and if you’re worth engaging with, but your approach doesn’t have to be low-key. Get them excited about the opportunity and your plans for the business.
It can be challenging to adapt to pitching in the US market, particularly in terms of cutting through the noise and clutter of all the Silicon Valley companies on the doorstep. Buyers need to see ambition, enthusiasm and potential. The onus is very much on EU businesses to bridge the communication gap but, if you get it right, these relationships can work really well. We’ve seen plenty of success stories. If you want to explore how we can help with effective transatlantic dealmaking, come and talk to us.