In our third episode chatting to Phill Robinson, founder of Boardwave, the European network for the software industry, we discuss what has he learned about launching overseas and the pitfalls other CEOs can avoid.
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Transcript:
Fiona: In this third episode, chatting to Phill Robinson, a tech leader who’s worked in a number of international software businesses, and who helped to launch Salesforce in Europe. I ask what has he learned about launching overseas, and what war wounds can other CEOs learn from.
Phill: We built an organisation market by market. So we’d go to the UK, then we’d go to France, then we’d one by one go to Germany, and Italy, and Spain. And what we learned was the first, and all the people that you hire at the beginning of the journey aren’t necessarily the people that are the right people for the middle of the journey and the end of the journey. And so, unfortunately, we made a few errors in terms of hiring the right people at the right time, so I think be very clear about the skill sets you need in each of the markets that you’re in, to make sure that they’re right for the situation.
So you might be quite a mature business in the UK, but you’re still a fledgling, you know, start up in France maybe, which is different to the situation in Italy or Germany. And so in each one of those, you’ve got a different situation, you need to hire the right people for the right situation. And that’s not always easy, because certainly, if you’re in California, you’re seeing a different environment altogether, and you might see the business through one lens, and actually, you should look at it through a different lens, because in France it’s a tiny start up with five employees. So that was tricky for us, but eventually overcame that.
I think, actually, we talk about European software a lot, and why we haven’t been as successful as maybe the Americans have in the last generation, of building big global leaders, and we’ve always talked about…well, a few things. One is founder risk profile is one issue. In Europe, we’ll admit, we’ve got a lower appetite for risk. Or that’s the theory, anyway. The other one is that they’ve got one big market. So you build a software product that works in New York, it’ll work in Miami, it’ll work in LA, it’ll work in Chicago. It’s one market. And we have lots of small markets, so each one has friction, if you want to go from one market to another, and cost, and therefore, it slows you down. So in the U.S., you know, they could build a $100 million business in six or seven years, if they’re doing a really good job. In Europe right now, it might take you 15 years. So it takes a lot longer, as a consequence of that.
That also creates issues with access to capital, because you are more consumptive of cash, and it’s going to take you longer, and following on all that is more difficult, and the terms are more difficult, and less liquidity. So those are issues around European software, but actually, right now I think it’s changing a lot. The attitude of the next generation of founders is changing, and they’ve have got a greater appetite for risk, I think.
But also, the way that the European market works, it’s a $19 trillion market in terms of the GDP of Europe, and rather than accessing it through one market at a time, today, if you’re a software company, you can do one product for the whole of Europe, the way the U.S. can for their own domestic market. So you’ve got cloud computing, which means rather than having to ship software to different countries, and install it on different customers, you can build one piece of code on one server, and deliver it virtually to any desktop, anywhere in the world, or anywhere in Europe. You’ve got immediate distribution channels through things like App Stores, and Play Stores from Google, that will get your product to the right people, in the right place, at the right time. You’ve got the ability to change your product really quickly for each market using AI. So, you know, you can take a software product, and almost at a click of a button, it will translate the software into French and German and Spanish and Italian, almost immediately. And it will also help you to localise it as well very quickly and easily.
And then, finally, you know, there’s sort of the distribution channel. When we built up Salesforce back in the noughties, we had to have physical people in each country. Because anybody who was buying a software product, which was an enterprise software product, would expect you to visit them several times, do demos, do proof of concepts, build trust, and eventually, hopefully, they’ll buy your software. Today, after the pandemic, the buyer doesn’t expect you to come and see them, they’re prepared to do business over Zoom. So actually, now you can actually centralise your effort. It has to be multilingual, but you can centralise most of your sales effort in one place.
So for the first time ever, you’ve got this single-market opportunity, which is a big market opportunity for you to the Pan-European, through the changes of technology in the last few years, in exactly the same way as the Americans have. So one product that works in London can work in Paris, Milan and Munich, just the way the one that was in the States could in each city in the U.S.
So there’s a big shift, actually, in the platform, and I think we’ve got a real opportunity in Europe to build some great software companies in the next generation.
Fiona: So it sounds like, in terms of the difference between sort of scaling in Europe and scaling in the U.S., it’s getting more similar. Is there anything that’s still a difference? I mean, you mentioned sort of multiple languages, obviously, there, which is a challenge, but anything that actually is maybe even more of an opportunity in the European market, as you see it?
Phill: I think one of our disadvantages was there’s this concentration of wealth, concentration of capital, concentration of skillset in Silicon Valley. But we’ve had, you know, distribution of that across maybe a hub in London for startups, or a hub in Berlin, or a hub in Paris, both of them being that they’ll be in one central hub. That concentration is changing in Silicon Valley. So I don’t know if you follow the stats, but do you know how much it costs to hire a five year out university software engineer in California right now, or in Silicon Valley?
Fiona: I don’t.
Phill: $300,000.
Fiona: Oh, wow. Okay.
Phill: It’s a lot of money. And that’s the price being paid by the big mega companies, because there’s a fight for talent, so they can afford it with trillion-dollar valuations, whether it’s Google or Meta or Salesforce, or whoever. And of course, that makes it really difficult for a scrappy startup to get started and get going. So there’s a sort of a fragmentation that’s starting to happen, where some of these companies are beginning to move away, right? They’re moving to sort of Texas, or they’ve moved to Miami, or they’ve moved to New York, or Denver, or wherever, so there are multiple hubs now that are popping up as people distribute themselves elsewhere because the cost of labour is so high.
As a consequence of that, you’ve got the similar dynamic in the U.S., where you’ve got multiple hubs, with less concentration of skill set and capital, and it starts to look a little bit like the European market. So the sort of disadvantage you might have had with this concentration of wealth and concentration of skill set is changing. So actually, I think we’ve got an advantage over them now in that we’ve actually got a generation of founders that have the appetites to build big companies, big global companies, within a single market that’s huge, and not dissimilar in size to the U.S. economy. And we’ve got hubs in London and Paris and Berlin and Amsterdam, which are really capable of building great start ups and great scale-ups.
Fiona: Is there anything that a CEO can do in order to kind of stay innovative, and maintain that as you scale, do you think?
Phill: Just focus on the customer, and what the customer wants, and focus on the product. If you focus on nothing else, focus on those two things.
I’ve got a friend of mine called Leo, who used to be the CEO of SAP. He would say it needs to be not a vitamin, but a painkiller. So don’t build products that are vitamins, build products that are painkillers, that actually solve a real problem in the business, or business pain, and you’ll do well. And you do that by understanding what the business pain is of your customers, by talking to them regularly, and understanding the product you have today, and what it does for them, and what it needs to do in the future. So keying in on the customer, and making sure they’re happy and well-supported, and listen to what they need, and making sure that the product’s a painkiller not a vitamin, and if you do those two things well, I think you can build a great company.
Fiona: Phill Robinson’s top advice for maintaining innovation there, a focus on customer and product, that seems to be a recurring theme for CEOs we speak to, but also making sure your product is a painkiller not a vitamin, so it solves real business pain.
In the next episode, we ask Phill about his experience working with the private equity industry, including what mistakes both CEOs and investors can avoid.
