Market Expansion Strategy – Best Practice of SaaS companies
The sign of an effective Market expansion strategy: Successful stories of globalization and international development in the world of SaaS are spreading.
Many software editors become Unicorns (over 1 billion valuations)
European companies are aiming for the USA with increasing appetite. US Companies are expanding globally.
Artificial Intelligence and Data science are opening new opportunities for SaaS champions in a borderless world.
What are the challenges and success factors of the internationalization of a software editor? The conquest of international markets is essential for software publishers. Global expansion is a survival kit.
The ones making global expansion part of their DNA are described as Born Global
Case study: Kyriba
Kyriba is the world leader in cash management solutions. Recently acquired for $1.8 billion. Over 2000 customers and a presence in over 100 countries worldwide. Launched in 2003, the startup has now become a unicorn valued at over $1.2 billion. It has more than 1000 employees. Kyriba, an American SaaS, founded in Paris, is a spin-off of the company XRT. It aims for a revenue of $ 500 million this year.
Originated in Europe, Born Global in the United States
Shortly after its creation in Paris, Kyriba settled down and emerged in the USA. Kyriba is now the industry leader in the United States. With more than half of its turnover and a market share of more than 20%. Priority was quickly given to the US market, which is the world’s largest software market.
Become an American company and raise funds
In 2003, the choice was made to establish the head office in San Diego and to become an American company. This strategy raised over $80 million, which at the time would not have been possible had the company remained European. In 2019, the company raised $160 million and was acquired by Bridgepoint.
A regional approach in the USA
In view of the size of the US market, it was essential to adopt a regional approach. It is complicated to develop simultaneously in the East and in the West of the United States. After San Diego in 2003, Kyriba opened offices in New York in 2008.
A strong European presence
Alongside the American journey, Europe has not been left behind. Well established in Europe, mainly in France with a 35% market share, Kyriba is also hitting records in Spain and England. France is also the country where a significant part of the product, engineering, and development teams are located. There are more than 300 employees in this area.
A survey where SaaS companies land in Europe and how the choose their destinations can be reviewed here
Expansion in Asia and market strategy
In 2012, Kyriba started expansion in Japan where the company is rapidly developing. A close Business watch has been set up for Southeast Asia and more particularly China. This huge market is then the next major target. Half of the world’s financial flows are made with Asia, which makes it a destination of choice.
The international development model
It began with an analysis of the market opportunities and the possibilities of making an acquisition. The conclusion was that the market, the targets, and the timing were not right for an acquisition. It was then decided to open offices on the spot and to recruit sales representatives to conquer the first American customers. It is difficult to establish itself on the American market for a European company. Its financial strength and ability to scale are often questioned.
It was only after 3 years of effort that the signs of success appeared in the United States.
It was decisive to win major logos, in this case, Airbnb, Uber, and Dropbox, and use them as reference. This leverage has established credibility with other prospects.
Expansion models differentiated by country
International Development by direct incorporation is justified in large markets such as the USA.
To invest in less strategic markets or markets with a very different culture, other models are better suited.
This is what Kyriba has done in the Middle East and in Japan. They formed a joint venture with SunBridge Corporation in Japan. In this territory, the association with Japanese companies is essential. It is a model that works perfectly with a favorable acquisition cost.
Product Market Fit and Differentiation
The key to the success of global expansion is the adequacy of the product with the market. The office opening is combined with a mix of competitive positioning and differentiation factors.
You must clearly be able to define the nice-to-have and must-have solutions offered to customers. Also, it is preferable not to have to adapt more than 10% of the solution or product. Indeed, if the need for adaptation is too large, it is often because the market is not relevant.
In the case of Kyriba, this was the case in Brazil. The required level of integration of taxation, legal, and finance did not make this market attractive enough.
The development of Value Added Resellers (VAR) was also a strong development axis. But this mode of distribution nevertheless requires significant resources with a team that manages the resellers. It is necessary to ensure the partner’s training and to coach them intensively at the beginning. This model is particularly suitable for small and medium-sized SaaS companies.
Team management and mobility
To build a strong international corporate culture, it is an asset to move employees between different countries. This also allows good dissemination of knowledge and is an element of staff motivation.
At Kyriba, all employees go through an induction period in New York, San Diego, or Paris. This onboarding is all the more effective if it is carried out with appropriate tools and methodologies.
Apart from onboarding, transversal follow-up is essential. The implementation of global reporting provides visibility to all. Reporting and communication shall be performed at the local and global levels.
They are supplemented by quarterly meetings. The teams in each country are presented with the latest product and corporate developments, business results by region and future objectives.
At each stage of a country’s development, the strong managerial engagement is a key success factor.
Corporate culture and knowledge sharing
To successfully conquer international markets, the transfer of knowledge and the globalization of teams is necessary. For this, it is necessary to develop a playbook with processes and to globalize its action plans. This is instrumental to common corporate culture. It conveys belonging to the same group in all its countries.
Building Diversity
A good example of building a strong management team with diversity is given by Sisence
In a fireside Chat with Emmanuel Facovi , Sisense CEO Amir Orad demonstrated the power of building an incredible asset for his company. that of leader in Artificial Intelligence, Sisense will illustrate the creation of an international management culture.
Top Management’s Focus and commitment
Kyriba has opted to be strong in its main market, the United States, before stepping up internationally, and to initially focus on a few markets. The international is a project that requires strong investments and a lot of focus.
The implication of the leaders must be maximum. The start of a new country is led by example and hands-on from senior management .
Conclusion
SaaS companies, software publishers, have a natural International DNA. The cloud has made it possible to globalize software solutions and apps are real growth accelerators for clients. The fact is that alongside tremendous opportunities, international business development remains a challenge with many pitfalls.
Kyriba has adopted an organic growth strategy. Many players raise significant funds from venture capital (VC) and bet on external growth.An International Business strategy allows to accelerate global expansion.
It was not until 2019 that Kyriba made its first acquisition with FiREapps in the USA.
To effectively scale, international advisory is a strategic resource for SaaS companies. Experience, knowledge of markets, methodologies, and international culture are critical to lead an internationalization projects to success. Beyond the implementation of the international development strategy, carrying out a good diagnosis and getting the right advice is essential.
Ipanovia supports you in your internationalization and expansion process in foreign markets.
We advise growth companies, Start-Up, Scale-up, and their investors / VC towards a successful internationalization.
Our partner network covers local offices in over 20 countries and offers a high level of diversity, competencies, and experiences.