Live from SaaStr Europa 2022: Cantina Stage

You can change the referral bonuses. You can obviously do more marketing, can do more PR. Secondly, do we know how to be more efficient now than we were back then? So ideally, every new country you go into— every country is going to have issues. We'll talk about that in a second. But you want to know that you're learning something you're improving the playbook each time. And lastly, back to that scalable acquisition model. So some of the measures here, from the playbook, you can obviously look at what's the CAC, which is obviously going to vary by market, and therefore how much are you prepared to invest in each new market depending on how those first few months go. As I say, you should be improving the playbook and a lot of the same referral rate, organic acquisition that we mentioned in the previous one. I'm gonna skip over this because I think I've covered it, but a couple of more relevant examples to you perhaps. So GoCardless, I was fortunate enough to also invest when I was at Balderton. I think the— in that kind of company where you have a regulated entity, you've got some additional questions around, you know, the key thing for them was they needed to be— to get a sort of pan-European license that allowed them to scale across Europe rapidly. But they were also waiting for a lot of European countries to implement the sort of direct debit, the common— it's called SEPA direct debit platform— before they could really scale. And so they were kind of dependent on external forces. Plum Guide, um, actually, just sorry, one, one other thing on GoCardless was, um, they were scaling nicely in the UK, but perhaps they were going after the wrong customer initially. So they were, they were particularly going after, uh, companies that sold a lot of consumer direct debits, but Shortly after I stepped off the board there, they, they figured out that actually the biggest market they could go after was B2B invoice payments. And the moment that they figured that out, that was suddenly a much, much more scalable business that they could roll out way faster. And again, perhaps if they had been trying to manage too many markets too soon, they wouldn't have figured that out. So, and the Plum Guide is a kind of premium Airbnb that I've been close to for a few years. And I think for them this is a different proposition because obviously travelers don't want to only go to one city. So you can launch in London, but it's very, very hard to market only to people coming to London. So it was very key for them that they rolled out to a lot of cities quite quickly. The trouble was that they had— because they're a very premium proposition where they were testing every, every home and making sure it lived up to their standard, and they were only approving 10% of homes, um, that's hard to scale. Uh, but the pandemic actually helped them because, you know, it forced them to be way more efficient, it forced them to conserve cash, and they managed to automate a lot of those tests and they changed the model slightly so that— I hope I'm not betraying confidences here— but they don't actually do the test until the first booking comes in. And then obviously if that isn't up to scratch, they find an alternative home. But the, you know, their biggest problem was they were having to test all these homes before they knew whether they were actually going to be profitable, good homes that people wanted to book. And once they figured that out they were way more able to scale. Thirdly, do we understand what is different? This is a very, very old article: Carrefour exiting Japan and Mexico. And another one, this is from 10 years ago: Tesco's American dream over. Do you remember? They, um, they— the Brits in the room may know, or the Americans in obscure parts of California might know that, um, they launched a new retail concept in California. They invested well over a billion in it. And despite the fact that Carrefour had failed in multiple markets, despite the fact that the endless roadkill of retailers going internationally, you know, Tesco did acres and acres of research and focus groups and consumer testing, and they were absolutely convinced that Fresh and Easy was gonna solve every consumer's problems in California, but, you know, it failed. And, you know, it's hard. So I guess really, really understanding what's different about the market. Now these are the questions that Uber tended to ask when they entered new markets. Firstly, what are our non-negotiables? And secondly, where do we have to adapt? So As you know, Uber played a little bit fast and loose when they were expanding. They definitely asked for forgiveness rather than permission. And that worked in some markets. Somewhere like Cape Town, it's probably the right strategy. But maybe not in Berlin or Copenhagen, where I think they've really struggled because they've fallen out with the regulators so much. And then where do we have to adapt? You know, clearly every market, you know, particularly in financial services or fintech, every market has its nuances. And some of those are worth, you know, investing in solving for. And sometimes it's just not worth it. My learnings from the Firefly days, you know, I mentioned obviously we had to translate all our labels into multiple languages. And I mean, I do remember this sort of hilarious moment when our Japanese distributor was having to stick— manually stick a label on every single one of, I think, 2,500 bottles. She said she organized a kind of party for her friends to come and help. It doesn't sound much of a party. But, you know, we also had some ingredients because we were using various herbal medicinal products. The regulations were different in every market, and they were allowed in some markets and not in others. So then we found ourselves more and more constrained because obviously we didn't want to make a drink that could only be sold in some of our markets. But ultimately, that kind of meant the product got a bit watered down. You know, it wasn't quite as powerful as it might have been. It obviously slowed our product development because we had to, you know, verify everything in multiple markets each time we changed the product. And as I say, it took away our focus from having a scalable, repeatable model. And I think if we had really, really focused on, okay, what is our playbook in the UK to, you know, reach true product-market fit and really, really figure that out, I think it would have been better. Um, the, um, that black logo was supposed to be Revolut. Sorry, I don't know what happened. And it must be Mac to PC conversion. But Revolut, as you probably know, is in about— it's in the whole of Europe and Australia, Japan, Singapore, Switzerland. I was lucky enough to be part of Revolut's seed round, and they, you know, they've rolled out rapidly. Obviously, they've had a number of, you know, regulatory challenges as they've grown. And one of the key ones has been obviously their crypto trading, which is a big revenue driver for them. They're allowed to do that in some markets but not in others. Likewise, their share trading regulated differently in different markets. And obviously them, you know, being able to offer full banking services as opposed to just deposit services is something they're still working on in many markets. But clearly, they were keen to be international from day one. But compare that to SeedLegals, where I'm an angel investor. That is— that allows— how many people know SeedLegals? Cool. SeedLegals allows you to do all of your legal setup of your company and raise money in a sort of automated way. They're only in the UK and France because the legal system is so different. In every country, that to replicate that in every market is possible but requires huge investment. Then, do we have the right team? I'm going to speed up a little here, but clearly this was a massive part of Uber's success. They gave a lot of autonomy to teams in each, in each city. Jambu at one point was, as I say, hiring a team in, or at least a leader for a new city every week. And, um, uh, and then I guess looking at how well they execute compared to other cities and making the changes rapidly when they're not working out. Um, but also, do we have the talent centrally? Um, clearly, you know, you need a reporting structure. You need someone like a Jambu who's able to motivate the team and check how it's going. And Firefly-wise, by the way, we operated in a different way, which was that we had a whole lot of distributors come to us and say, "Hey, can we distribute your product in Denmark or Sweden or wherever it was?" And our management, we eventually hired someone who just made sure that everyone was sharing best practice between those markets. So, you know, here are the latest marketing materials here are the latest things that we're finding are working. You know, this is how to do a sampling well. This is the kinds of stores that you should be in. This is the best shelf space to be in, the products you want to be near, all that kind of thing. That was my Firefly team when we were in 30 countries. It wasn't a very big team. And I think that was probably part of the problem. But obviously awesome people. Is it worth it? What's the upside of the expansion? Can we reach a large TAM of the home market, as mentioned, and do we have the cash? Clearly, we've seen a lot of companies fail because they splash out a lot of money to expand internationally and then find actually the new market just isn't as good as the previous one. And in the current climate where it's a little bit harder to raise money, particularly if the unit economics aren't there, You know, it's a big risk. So do you want to test, you know, that, that, that second city a little bit more gradually first and prove yourself? And look, you don't have to go international. Gusto— again, I've been an investor while I was an investor in a previous fund, and Gusto is the, the, the sort of more premium HelloFresh in the UK, if you like. And they've become the market leader in the UK. And by relentlessly focusing on executing in the UK, you know, they've built a really valuable business. They recently got valued at well over a billion. And they made the call early on, look, we just want to be the winner in this market. And because they're able to bring a whole lot of automation into their, into their, you know, factories, because they're able to really optimize distribution they're able to build a more profitable business than perhaps if they tried to do multiple markets at once. Oh dear, sorry, these logos didn't come through, but this was supposed to be some of the more successful companies I've worked with, like Revolut, like GoCardless, that obviously did go international and are all now multi-billion-plus valuation companies. Just a reminder that you don't have to, but obviously it's great if you can. And there are alternatives. You can go deeper in your home market. You can go vertically versus horizontally. I guess Firefly-wise, we tried to expand in terms of the range. A water range. We looked at doing shots, we looked at more occasions for the drinks, but ultimately I think, you know, the right strategy there would probably have been more of the kind of Red Bull-like strategy, which is have one really kind of ownable proposition. Revolut, as I said, you know, they've expanded into crypto trading, share trading, business banking, whereas someone like Stripe has just been, you know, very, very horizontal and, and global. In terms of expansion models, a few things to think about: the role of technology, clearly. How centralized are you going to be? Are you going to give autonomy to markets like as Uber did, or are you just going to have the same product everywhere, more like Paddle, for example? Are there partners you can work with? That was our strategy at Firefly. How capital intensive are you going to be about it? And who can help? Who's done it before? Who, you know, hopefully your investors have done this. Obviously, Oma Ventures has people in Toronto, in New York, in Palo Alto. So, you know, we'd like to think we can certainly help with expansion that way. Plug over. And then obviously, which country first? So where do you have a structural advantage today? If it's a law company, you're— and you're in the UK, you've probably got a structural advantage in other companies that use English law, or that certainly look to English law. What's the regulatory climate? Clearly some are more similar than others. And when do you take on the most competitive market? This is a big question that often comes up on the boards that I'm on, which is that, um, uh, clearly taking on the most competitive market is going to be really expensive and really risky. But the downside of not taking on the most competitive market is that maybe you don't have to kind of force yourself to get up to the standard of the very best. And what we have seen in Europe quite a bit is companies that became, you know, regional winners, but then the global winner came in at some point and kind of steamrolled— not completely, but, you know, eroded their market and stopped them from growing. And so, look, I think if you do believe that you've got a superior product that can win internationally, I would embrace it. But clearly there's a lot of roadkill of companies that probably could have become regional winners, but tried, you know, too hard to compete against someone better funded with perhaps a better product. So just coming back to Uber, back to Jambu, the guy in the woods in our team, and here are sort of his key lessons from that experience. So they were very good at I'm just going to change hands. Sorry. They're very good at building a playbook and constantly iterating it and improving it with every market they went into. And this playbook came— literally every detail of how to launch a market. It was basically an Asana, but it was a full project plan. And you could give it to someone and say, go. And obviously there were plenty of questions, but they went. Clearly you need to understand what's different. And I think Uber would say that they probably didn't do a good enough job of this in some markets. But in Uber's case, it might be how much drivers are paid, or how good is the existing taxi competitive infrastructure. Or, you know, how aggressive are the regulators in the city. Build culture carriers. Again, Uber got a lot of bad press as they were growing for some of their cultural errors. I think at the same time though, they did have an incredible culture where— a culture of performance where people were incredibly motivated and, you know, worked incredibly hard. And I think you're always going to have things that go wrong in that climate. I think perhaps what they could have done a little more is have a few more examples from senior leadership of, you know, making the right call rather than always the most aggressive call. And I think, you know, they might have ended up in a better place today if they had. And keeping the hiring bar high. I learn every day from my colleague Jambu on this, that we all know that one B player in a team can lead to a lot of C players quite rapidly. And making those calls early and keeping the bar high and only entering a market once you've found that A player, I think, is probably key to their expansion. A few final thoughts. So clearly when you're expanding internationally, the second market is usually the hardest because you don't have a playbook yet. And you're going to be hit with a whole lot of surprises. Write the playbook once you've done it because you're going to be busy. You're going to be running around solving issues. Every time one of these things comes up, note it down. Put it in the plan for the next one. Try and avoid it happening again. Clearly, lesson for me particularly, you know, you're unlikely to find product-market fit in country 2 if you haven't found it in country 1. And sustainable scale models. Clearly, there are, you know, there are the models of let's go to 50 markets and let's raise hundreds of millions and you even if we get massively diluted, hopefully we'll win. There are also models where you grow sustainably. I mean, in the UK, Pizza Express, for example, for many years rolled out by taking the cash flow from the successful restaurants they had and deploying that into the next restaurant. It allowed them to open 2 a year, and then maybe 3 a year, and then maybe 4 a year. And they built an amazing business worth hundreds of millions. In that approach and retained a lot of the equity. And so, you know, don't rule that out. And just to reiterate, the team, the team, the team. You know, getting the right people to lead this. You probably heard Jason M. Lemkin yesterday talking about sales directors. Probably the hardest role that I see in the companies I work with is, you know, a European team hiring their first US sales director, and they always seem to get it wrong. And they probably always give that person a bit too long before they realize they've got it wrong. But, you know, take advice from the good founders you know who've managed to get it right. Do all those referrals. Don't fall into that kind of optimistic trap of, we found someone, I want them to be right, so That's just confirmation bias our way into hiring them. Sadly, we've only got 2 minutes left. So I might have time for one question, if anybody had a question. I'll have to probably give you the mic if so. Oh, there's a mic, a roving mic. Somebody be brave. And if not— ah, there we go. Hi.

Hi. Thanks for a great talk. So as a founder who is considering international expansion, you talk a lot about doing research and even big companies like Uber getting it wrong. How do you, for example, let's, we are a Spanish company, let's assume just for the sake of discussion that we want to expand to China, right? Worst idea in the world, but let's assume that. There are so many unknown unknowns that we wouldn't even know how to start. So how to start doing research for a new market when you know nothing about it? And I mean, China is an extreme, an extreme example, but let's say France, Italy, the UK? Even within Europe, there are many things that you wouldn't know unless you are an expert or you have lived there for many years.

It's a great question. So how do you get into a market that you know nothing about? I mean, look, the only company I've been involved with that has expanded to China successfully was the Hut Group out of— which is an e-commerce player. And the reason that they expanded was that they started to get demand there. They happened to be selling, for example, a whole lot of protein that a lot of Chinese consumers were nervous of buying the local protein. And when they saw that start to happen, they started to explore it more. And I mean, obviously, I don't know what your business is, but I think when you start to see organic demand from a market, that's often a good way to start because then you can go to those customers and say, you know, why are you buying this? You know, what are the local alternatives? What's the difference in your market? And certainly we found with my drinks company, you know, we learned more from talking to the people that loved us than anything else, really. You know, you're trying to find more of those people. So, um, oh, I've got a sort of flashing thing going on here, but thank you so much everyone for listening and enjoy the rest of the day. Thank you. Cheers.