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The time has come for your company to expand globally and get a footprint in Europe. But how do you succeed with opening a European office and launching your products and services on the European market? What are the pitfalls, the steps that are easily overlooked and the main success factors? We spoke to David Foy, Head of International Business Development – Digital Economy at national innovation agency Luxinnovation, Brice Lecoustey, Consulting Partner at EY Luxembourg, James Monnat, CEO of European market-entry specialist Foundry Europe and Leesa Soulodre, General Partner of deeptech and medtech innovation advisory R3i Ventures, to find out.

What type of questions do international companies have when they start the process of opening a Europe office?

Brice Lecoustey, EY LuxembourgBrice Lecoustey: The very first question is generally whether their products or services fit the European market. This is not a given, even for products that have been proven in markets elsewhere in the world. The mismatch can be due to different working habits, technical systems or behaviour, for example, so adaptations to the European context might be necessary.

The EU market presents many different culture and market combinations. This may seem daunting, but it also means that it is almost always possible that there is an opportunity or niche where your product will fit.

James Monnat: As an economy, the EU is on par with the US, so it is definitely a region to consider for strategic growth. However, it is not as homogenous and presents many different culture and market combinations. This may seem daunting, but it also means that it is almost always possible that there is an opportunity or niche where your product will fit. The challenge is to find out where.

Brice Lecoustey: Understanding the structure of the demand in Europe and the environment in which they would operate is also essential. Consumer behaviour, public spending and the industrial landscape vary significantly in different parts of Europe. The retail structure also differs from country to country.

Leesa Soulodre: The three most significant challenges for the deeptech and medtech companies that we work with relate to regulatory requirements, the availability of grants and government reimbursement, and the possible need to relocate intellectual property (IP) in Luxembourg. Securing a safe IP harbour and new non-dilutive funding pathways that underwrite the testbedding through to local market fit has proven an efficient approach to mitigating the early risks of a broader European expansion.

Companies need to define their go-to-market strategy, which can be completely different from the one of their own continent.

David Foy: Companies frequently come looking for someone who can help them find their way on an unfamiliar market. They need to define their go-to-market strategy, which can be completely different from the one of their own continent. So they need partners, distributors, integrators and, of course, their first clients. Finding talent also tops the list of concerns. The first question is often what it is like to hire people, in Luxembourg and in Europe.

Are there any hurdles or difficulties that international companies often encounter when opening a European office?

Leesa Soulodre, R3iLeesa Soulodre: Often, early stage companies have not yet achieved product/market fit in their home market, or raised capital prior to landing in Europe. This puts them at a great disadvantage. While Luxembourg is the ideal landing pad for regional European headquarters, securing a strong legal and administrative footprint takes time and capital. European investors, particularly Luxembourg ones, require demonstrated market traction and proof of substance in markets in order to invest.

Some companies overlook technical and legal hurdles, and forget to do their due diligence on local regulations.

David Foy: Some companies overlook technical and legal hurdles, and forget to do their due diligence on local regulations when opening a European office. A first point that comes to mind is the General Data Protection Regulation (GDPR), the EU law on data protection and privacy that impacts any company using personal data. Administrative procedures such as visa requirements and opening bank accounts can also slow down the deployment. Some companies are surprised by the cost of living in Luxembourg, but it is important to look at the total price of ownership of the whole process. Real estate and salary costs might well be offset by other factors.

James Monnat: Companies that do not wish to relocate to Europe tend to focus on finding a partner such as a distributor that will do the work for them, but in my experience, this often does not work out. They hand control of their market launch to an agent that might not always act in their best interest, and they may find it difficult to expand beyond that partner’s geographic scope.

Companies that do not wish to relocate to Europe tend to focus on finding a partner such as a distributor that will do the work for them, but in my experience, this often does not work out.

David Foy: Another essential point to keep in mind is the different cultures within Europe. While the EU is a single market with a single set of rules, you cannot address Spain, the Netherlands and France, for example, with the same approach. You need to be aware of the cultural differences that impact how people see things and react.

What do you see as the main success factors?

James Monnat, Foundry EuropeJames Monnat: Three factors make or break any new venture: the right product/market fit, the necessary financial means, and the right team in place to execute. Luxembourg offers an amazing set of support and tools for addressing all three, but building a team that fully understands the European marketplace and has the right networks is indispensable.

Brice Lecoustey: Finding the right people that can help your company grow locally and across Europe is indeed crucial when opening a European office. You also need to find a partner that can provide you with support that corresponds to your actual needs, such as finding staff, finding land, getting access to specific grants or building links with universities.

Finding the right people that can help your company grow locally and across Europe is indeed crucial.

David Foy: People need to have thought out their strategy for coming to Europe and have a valid business reason for coming here. Having a full overview of regulations and certifications needed is also essential – if you miss one, it can bring the whole pack of cards down.

Leesa Soulodre: Our experience is that the number one success factor is having a growth mindset and playing global, not local. In any new venture, things do not often go perfectly to plan, so being able to adapt, demonstrate resilience and be agile to attract the market opportunities is critical for a successful business. Luxembourg is only one market in the European Union, so building for scale will underwrite your valuation and success.

David Foy, LuxinnovationDavid Foy: The willingness to invest the time and resources needed in the new market is another key point. If you do not put in the effort when opening a European office, you will not get anything back. Connecting with the right people is also one of the key success factors, in particular here in Luxembourg. Make sure that you get involved with the local community by attending networking events, conferences and so on. There are so many decision centres in Luxembourg, and people who are directly connected to decision centres elsewhere in Europe, but they need to know who you are.

What do you recommend companies to keep in mind when they choose their specific location in Europe?

Brice Lecoustey: You need to see where your market and clients are, and where you can find the right skills for your business. However, while it sometimes makes sense to set up your first office in a large market, it can also be a better option to start in a smaller market where you can test and adapt your offering to the European context.

Leesa Soulodre: To us, Luxembourg is very much like Singapore: a proof of concept laboratory, ideally curated as a testbed ecosystem for the regional or even global market. Luxembourg is also one of the largest foundations in Europe, and indeed the world, for family offices and private equity, so it can be an interesting location for companies looking to diversify their investor base and raise smart capital. It is also the new home of the European Innovation Council (EIC) fund, so we have a 10-billion fund in our backyard to support game-changing innovations throughout the lifecycle from early stage research to proof of concept, technology transfer and the financing and scale up of start-ups and SMEs.

A final piece of advice is to choose a place that feels right, not only for your business, but also where you feel that you could live and work.

David Foy: I recommend opening a European office where you find an active ecosystem of peers and support. It is often very complicated to find and get access to key decision makers when you come to a new country. International companies frequently point out to me how easy this is in Luxembourg, in particular when we are there to open the doors. So do ask for help – it is there, so there is no reason to do it all alone. A final piece of advice is to choose a place that feels right, not only for your business, but also where you feel that you could live and work. I have seen companies leaving because the managers just did not feel at home. On the other hand, when the match is right, you have found the right base for long-term success.

Photos: © Luxinnovation/Eric Devillet

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