From Norwegian business newspaper Finansavisen February 10, 2014:
Report from Next Step and Venturelab AS cooperate: Norwegian entrepreneurs enter U.S. markets too early, lack knowledge about target markets and competition
Cautionary Advice for Businesses Seeking U.S. Customers
Of the many Norwegian entrepreneurs who try to launch in the United States, only a fraction are successful in their efforts. Jennifer Vessels, CEO and Founder of Next Step, blames poor preparation and a lack of familiarity with the American business climate as key factors in those failures.
Most of the Norwegian companies entering the U.S. have not researched the market or potential competitors, says Thomas Due, Founding Partner and Chairman of Venturelab AS. Next Step and Venturelab partner in providing consulting services to Norwegian entrepreneurs seeking U.S. sales. According to Due and Vessels, such services are greatly needed, as evidenced by a Next Step study of 20 Norwegian companies in the high tech, biotech, and consumer products industries. All 20 entered or tried to enter the U.S. market between 1997 and 2013. The study found that Norwegian firms’ revenue grew far more slowly than that of U.S.-based startups of similar size and profile. Far more discouraging – especially for investors – the Norwegian companies’ overall revenues were negative and actually fell during the start-up period.
Vessels lived and worked in Norway in the 1990’s, assisting Tandberg in their successful launch in the U.S. market. She says, “My impression is that know-how in selling and commercializing a product is far greater in the U.S. than in Norway, where the culture has been heavily influenced by an engineering mindset.” Vessels stresses that it is natural for a company to operate at a loss in the very early phases of an American launch. However, a successful company should reach the break-even point within 18 to 24 months. Vessels says, “Revenues should increase steadily and return profits as the company’s customer base grows. Prior to studying the Norwegian companies, we suspected their losses were due in part to overhiring. This was not the case. We also wondered if heavy capital investment played a role. It did not.” She strongly discourages a U.S launch before a solid business plan is developed and a demand for the product exists. “When an entrepreneur in Silicon Valley asks me how to obtain financing, I advise him to first ask himself how to generate customers and revenue. An investor wants to know who bought the product, what they paid and if they will buy it again,” Vessels says. In Due’s opinion, the vast size of the U.S market can create a pitfall for entrepreneurs. He says, “It is essential that you identify and understand your target market. Shooting at everything and hoping to hit something is a waste of time and money.”
One Norwegian company with a disappointing U.S. launch is Bipper, a developer of mobile personal safety products founded by Silje Vallestad. Bipper opened its Silicon Valley office in 2012 and received funding in several series, most recently a non-rights issue/offering of NOK 15 million (USD 2.5 million) in November 2013. Sales dropped from NOK 4.7 million in 2010 to NOK 4.1 million in 2011, and fell further to NOK 1.9 million in 2012. Losses have also increased each year, with an annual loss of NOK 7.7 million in 2012. The company is still seeking a major funding source. “Bipper is seen as a success story in Norway but we hardly hear about it in Silicon Valley,” Vessels says.
For more information, please contact Vera Popova, Next Step Marketing