This is the fourth post in a series on the top five mistakes European startups make in US expansion. This post addresses mistake number three: hiring the wrong people.
Hiring is a veritable minefield for European startups expanding to the US. I have heard many CEOs say, “at first we hired the wrong people, it took a while to figure that out, and then we started over – costing us at least a year.” In this post, we’ll dive into the seven ways hiring goes wrong in US expansion and what you can do to prevent these all-too-common mistakes.
(In addition to my normal reference-style links, I’ll use links to definitions in this post when I think my writing gets too idiomatic.)
Europeans tend to create factual and even modest resumes or CVs, while Americans tend towards the opposite. In the US, when it comes to resume embellishment, the question isn’t, “should I” but, “how much?” Failing to understand this can have disastrous consequences on your US hiring.
A European startup CEO once told me, “when I first started recruiting in the US, I thought, ‘these people are Gods.’” Only after several quarters did he figure out what was actually happening. Someone unconsciously trained to inflate modest European resumes gets handed a pile of inflated US resumes and then inflates them further.
In the US, we are taught to take credit and present business results. So you might see a line on a resume that says:
“Implemented a new sales strategy which drove an increase in revenues by 50% to $15M.”
On the resume of a sales VP that means one thing, which you can usually take at face value.
On the resume of a product marketing manager it means quite another: typically, that they worked at a company while it implemented a new sales strategy and they did their small, product-marketing part to help the company grow revenues by 50%.
This is one reason why many American companies use behavioral interviewing to assess candidates. By focusing on experiences (e.g., “tell me about a time”) that are relevant to the candidate’s expected future duties, you get a better sense for what the candidate actually did and how they behaved in various situations. For example, I was once interviewing a CFO about the planning and budgeting process, asking questions like:
While it wasn’t my intent, I quickly determined one thing: the candidate had never run a planning process. The resume had left me with the impression that the candidate had run the whole finance team in their last job, but in reality they were simply a supporting actor. (And this was a last-round interview for this a C-level job!)
Here is what you can do to avoid hiring posers as you build your US operation:
My broader thoughts on recruiting and interviewing (i.e., those not specific to European startups and US expansion) can be found here.
Salaries in the USA generally run much higher than those in Europe. While some of the gap is closed from a cost perspective by larger European employer social contributions, there nevertheless typically remains a significant delta between US and European salaries.
I know of early-stage startups where the first US employees were making more than the existing executive staff members in Europe. While this is certainly awkward, the executive staff will have much more equity in the company and the appropriate benchmark should be against their position in their local market. The question is not what your French finance director makes compared to a US seller, but compared to other French finance directors at similar companies.
If you’re new to this problem, adjustment can be difficult and you may hear surprised statements from your European finance and HR leaders. There is however only one answer: you need to base pay on local market conditions, even if it leads to results that some people do not like or understand. After explaining that principle a few times, you may need to tell the disgruntled: “if you want to get paid like a US seller, move to the USA and take a US sales job.”
The mistake, of course, is to yield to your own feelings and/or pressure from your European leaders to hire on the cheap in the USA. Instead of hiring a senior seller from Salesforce to sell your call center application, you hire a junior one from a no-name company instead. This frequently leads to disaster. You end up with a weak, underperforming US operation who will likely blame you for their shoddy performance because, “the company doesn’t understand the US market.”
Perversely, at one level, they’ll be right. The company didn’t understand the US labor market which is why it hired them in the first place. The result: you blow it up and start over, with years lost and millions wasted. All to save some money. Penny wise, pound foolish.
While this is generally not a problem for rank-and-file positions, in leadership roles there is sometimes confusion about the scope of a job.
For example, when an early-stage US company hires a VP of Marketing in San Francisco that job is assumed to be worldwide in scope. Same for a VP of Sales, ironically, even when the new-hire may speak no additional languages or have any prior international experience. In fact, they may not even have a passport, but it’s simply assumed that the VP of Sales is the VP of (Worldwide) Sales. While the distinction is moot in the early days of US startup, for a European one expanding into the US, it is not.
When a French company hires, for example, a VP of Marketing in the US, it needs to be clear about the scope. Will the person run branding and corporate communications? Drive product launches? Will they be VP of (Worldwide) Marketing or VP of US Marketing – exactly akin to a VP of European marketing in a US company, a role more focused on demand generation and local events? By the way, few American marketing VPs have any experience as a regional marketing leader so they may not understand the job. By contrast, most French country marketing VPs have only done that job. Very few leaders have done a US general manager (GM) role, because most American companies don’t have one.
If you get this wrong, here is what it sounds like:
The point here is simple. To avoid problems driven by the definition of the role itself:
Sometimes founders convince themselves that one magic hire can change everything. That hiring a magic VP of Sales will fix all their go-to-market (GTM) problems. Or that hiring a magic VP of Marketing will produce messaging that casts a buying spell over customers. Or that hiring magic versions of either will mean that the founder doesn’t need to bother themselves with learning about sales, marketing, competition, and why and how customers buy. They can simply delegate GTM and resume a peaceful, product-focused life.
When framed in this stark light, these beliefs are obviously false, but in my experience many founders nevertheless, deep down, want to believe in magic and still somewhat secretly hope that one big hire can change everything.
Sadly, this often leads to an overhire – e.g., hiring the VP of Sales you need three years from now, instead of the one you need today. That usually results in the new hire quitting about 12 months later. Think: “you guys are great but there are still too many things that aren’t in place and I made a mistake by joining you too early.” This, particularly after having hyped the new person as the magic answer to all the company’s problems, can have a devastating effect on morale. Not only does the Great Hope quit, but they take most of the good people they brought with them.
It can also lead to hiring a poser – someone who sells themselves as magic, talking a good game about how easy the company’s problems are and how quickly they’re going to fix them – but with the same sad result: flaming out in a year and leaving behind a damaged organization. The big difference between an overhire and a poser is that employees are typically bittersweet about the overhire’s departure and ecstatic about the poser’s.
To balance this, a great VP of sales or marketing can make a big difference to your company. But they cannot do magic. They cannot compensate for a lack of market demand for your product, a product that doesn’t work, or a product that is materially inferior to alternatives offered by your competition. They also cannot relieve founders of their duty to understand sales, marketing, success, competition, and product.
In order to avoid the magical hire trap, do the following:
Some European startups end up staffing their US operation with too many expatriates from their home country. They might relocate a handful of Europeans to the US headquarters and then compound that by hiring home-country expatriates who are already resident there.
Sure, it’s fun because you’ll serve home-country food at the company’s Friday lunches and play home-country music at company parties. Employees who are parents might become friends outside of work because their kids all attend the same home-country school. Heck, you might even hire some additional expatriates via the school’s parent network.
But when you do this, you’re not creating a US operation. You’re creating a home-country outpost.
The problems with this are:
The answer here is simple:
Diversity, equity and inclusion is an important topic and for good reason. For more information on Balderton’s views on DEI, and more generally, on ESG, see the Balderton Sustainable Future Goals and the first annual progress report on them.
In this post, we are looking at DEI in the context of a European startup expanding into the US. While Silicon Valley itself has a long way to go on DEI, European startups expanding into the USA should focus on these things:
You might ask yourself if this matters when you’re just starting to expand your company into the US. The answer is: yes, it does.
Take DEI seriously from the start and you won’t regret it.
In this post, I’ve covered the seven types of hiring mistakes European startups make in US expansion and I’ve offered sets of actions to help ensure that your company hires the right people, the first time.
In the next post in this series, we’ll dive into mistake number four, underestimating the importance of sales and marketing.
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