Software as a Service or SaaS is one of the most profitable models for startups and scale-ups, globally. Recovery from the pandemic shows a promising path for SaaS companies in Europe and for accelerated venture investment. In fact, it’s what supported so many organizations in their sudden transition to work from home. And while many industries stumbled at least at the start of the global crisis, the SaaS market grew almost 12% in 2020.
This is an exciting time for European tech companies and you may be thinking of making a move into Europe, which often, in the tech community, broadly includes Israel and Turkey. We certainly see it. Over the past more than 18 years, the majority of our clients have been in the SaaS space, and while they saw a drop in Q2 2020, the sky’s the limit this year.
This Sifted report shows that SaaS is having a huge year and certainly doesn’t show any signs of slowing down. Capital raised for SaaS companies in the U.S., Europe and Israel is projected to more than double by year’s end.
Once you decide on European expansion — whatever your vertical — the next move is to decide on location. Specifically, where to launch your SaaS company in Europe — an extremely robust and growing market.
With a group of countries speaking 24 languages, you will want to target those that are just right for your target audience. Whether you’re making the move for the first time from the U.S. or want to expand into other European countries apart from your own, ensure that you know the best new location where to launch your SaaS company in Europe.
Europe is the next largest market for B2B software after the U.S. Choosing the right location is only half of it. Having a global mindset and the ability to think the bigger picture is also important. You may want to eventually expand into as many European locations as it takes, but starting with the right entry country, acting like a local and following best local practice is a winning combination.
Ask yourself the obvious questions as a first step. What’s the target market size and what shape is the competition in? Does your SaaS app support remote selling or do you need people on the ground? Following on from that, are you prepared to go through the hiring process in a new country or would it be better to leverage local European outsourced sales staff?
This practical guide from Medium advises to balance a trade-off between three things: the competition, market opportunity, and your ability to replicate your current value proposition with minimal product tweaking, in order to gauge the time required for a successful launch.
If your product is horizontal then it could be feasibly done from anywhere or a mixture of on-site and remote from a European destination — with the caveat that financial, employment and healthcare SaaS may need to comply with more local regulations. And, depending on the country, even a horizontal app may need localization with both language translation and currency exchanges.
What matters in the beginning is getting to a first version of the product-market fit which primarily requires a small talented and driven team. You may also need to localize your website, domain, and sales and marketing tools to fit — and ultimately appeal — to your target market in their native language, in order to effectively scale your European expansion.
For American tech companies, London has often been the obvious choice for expansion, particularly with media, content and marketing apps. The benefits are easy to see. There’s no new language to learn, it’s a booming capital city that’s easy to get to and at least an hour closer than most other European hotspots. However, for just those reasons it’s also an overly saturated market.
Taking that into consideration, plus the high levels of competition and possible ramifications post-Brexit, you might be better off looking at European locations for your tech SaaS company launch, as well as London. You might decide that London is best-placed for your company’s inaugural office to kickstart your European venture, but look west of the U.K. to Ireland too, a popular European hub for SaaS companies and with a huge talent pool of skilled people that is also perhaps better culturally aligned to the U.S. than other European countries. As well as Dublin and London, Berlin, Lisbon, and Madrid are SaaS hubs of note for the tech industry and your SaaS European venture, but in reality, all European capitals are in on the action.
With the U.K. hosting COP26, climate change and the environment are hot news topics right now. In fact, a lot of our clients are tech solutions to this global problem. Yara International is revolutionizing farming, including in response to the climate crisis via their recently launched Agoro Carbon Alliance. It’s a great time for the growth of environmental and greentech companies who work to allow organizations to manage their ESG (environmental, social and governance) criteria, like our client APlanet. Likewise, ENGIE Impact helps corporations manage their sustainability transformations. And then InPost offers a tech-backed solution to cut down on the environmental impact of ecommerce delivery.
Should your company provide SaaS in the green energy and environmental sector offering software solutions, then you will find a ready market to explore in these countries, which are often more advanced on the Paris Agreement than the U.S. You will also discover a thriving target sector to explore in Eastern Europe, in countries like the Czech Republic, Bulgaria, Croatia and Estonia. And don’t forget the very green Ireland, which is also a bit closer to the U.S. and with the English language, while being a burgeoning tech hub. Germany too, where you might research what the competition is like. Germany is home to Ecosia.org a non-profit start-up that strives to donate most of its search ad revenue profits to the aiding programs that plant trees in Indonesia, Peru and Madagascar and is one of the best-known German SaaS companies.
Back in 2012, to allow authorities and companies to exchange information, Germany’s Alliance for Cyber Security was created by the Federal Office for Information Security. Twenty years later, there’s a solid domestic German-based cybersecurity market, with both well-established and growing companies acting as an essential component of the German economy. Who’s there already offering Saas solutions to the thriving German cybersecurity industry? Adjust is one SaaS success story, founded in 2012 and operating out of its headquarters in Berlin, and offering marketing automation products and anti-hacking solutions.
Cybersecurity is so essential that this vertical has gone horizontal — no organization can afford a breach. We find a lot of our IT security focused clients are looking to Europe for expansion. That includes companies like Zivver which helps enforce GDPR across all corporate communications. Our client Deep Instinct is the first company to apply deep learning to cybersecurity in order to arm you with a 99% accuracy in detecting unknown threats. And you can't miss Fidelis Cybersecurity which offers a unified platform to automate threat detection and response.
With Volkswagen, Mercedes-Benz, Audi, BMW and Porsche, there are few better choices in which to launch your automotive SaaS in Europe than Germany. Not only is it located centrally, it’s a cosmopolitan and switched-on location with a highly skilled and engaged workforce. Bertha Benz may have been the first person in history to drive an automobile over a long distance, but it’s unlikely she could have foreseen the success story its automobile industry has become in Germany, opening up plenty of opportunities for your automotive SaaS product. Just make sure you are speaking their language and culture!
Much of the innovation in the automotive industry comes where technology meets hardware. Our client Cambridge Touch Technologies is gaining traction fast with a patented solution that enables touch technology even if you're wearing gloves for cars and everywhere you go.
When it comes to fintech, the United Kingdom had it all wrapped up for a long time with London leading the race — certainly our client, London-based scale-up SumUp is disrupting the brick-and-mortar by enabling small businesses across Europe to embrace mobile payments. Heavy investment in the fintech boom has risen more than substantially in the past few years across Europe. However, a relatively new kid on the block, Lithuania, is now home to almost 200 fintech companies such as Coingate, Stockinvest and Satchel as well as being a country known for having one of the fastest internet speeds in Europe. Estonia, the first country to embrace e-citizenship, is also very welcoming of neobanks and other paperless tools.
The Netherlands, Italy, Sweden, Germany, France, Spain and the UK are all home to some of the top fintech companies worldwide, making it easy to promote your SaaS company into Europe. In fact, since the U.S. tends to lag behind Europe in digitalization of finances and banking, Europe may even be a better place to start launching your fintech.
Now that you know where to launch your SaaS company in Europe, what are you waiting for?