Big market or mid-market?
March 8, 2012 Leave a comment
As we develop our Trans-Atlantic growth model, investing in businesses with some UK traction and expanding them into the US, my mind is constantly being drawn to competitive advantages/disadvantages of the respective geographies. One of the advantages that is often quoted but I’ve never really heard explored at a more granular level is the size of the market, and I’ve been thinking about this particularly in a B2B context for SaaS or cloud companies. The fact is that US SaaS companies of a similar vintage seem to be an order of magnitude larger than our European companies, which often gives them access to more firepower in terms of financial resources, people on the ground, marketing spend etc.
While the fact that the US market is bigger is not disputable, my thoughts are drawn to the key aspects of the US market that provide an advantage to US start-ups versus their European compatriots, and whether we can consistently take advantage of those characteristics.
While I’m no expert in the vagaries of the mid-market itself I do get the sense that UK SaaS businesses tend to rely on big name companies and/or government for their business, while US businesses of a similar vintage seem to amass huge numbers of customers, most of them from the mid-market. Closing deals regularly is excellent for providing that drum beat that dictates the cadence of an organisation, irrespective of the size of those deals.
Some of the key advantages of the US mid-market appear to be:
- Its big enough to provide a segment that aggressively adopt new product
- Procurement is simpler
- Getting to the relevant buyer is easier (though he/she isn’t always thinking so clearly about what they want)
- The balance between getting things done and protecting your job is more favourable for suppliers
- The American culture of risk-taking is conducive to adopting new products and services
Now clearly there are risks that go with these advantages – some good points here http://bit.ly/xF5eeI, notably it’s big so “aim before you fire”. But if we Europeans want to compete head on, we need to master selling into this segment quickly.
It was interesting to hear Eric Reis defining the three engines of growth (viral, paid and sticky) – but there are other ways of thinking about engines of growth – the British middle class driving consumer spending, the German Mittelstand driving their economy (arguably Europe) and today, the American mid-market driving efficiency and hence innovation through their demand for start-up products and services. We should be proud of the innovation coming out of this country, but the best way to shine a light on it is to turn it into big valuable companies exploiting the best markets to sell into that are out there.