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Challenges of running an enterprise SaaS business in the UK

Startups Politics

Since starting Server Density in 2009, a B2B enterprise SaaS business, my biggest challenge running has been commercial.

This is a broad area but covers everything from sales and marketing to new customers through to account management and keeping existing customers happy. In recent years, the latter has developed into “customer success” as a specific discipline distinct from customer support or technical support.

In the last 12 months I’ve been involved with hiring for commercial roles in both the UK and the US and there is a clear difference between countries when looking for that crucial enterprise B2B SaaS experience.

My conclusion is that whilst you can quite easily build out product, engineering and customer support teams within Europe and the UK, it is very difficult to do the same with early stage commercial teams. There’s the occasional highly talented individual who has done it before in the UK, but otherwise it’s almost impossible to recruit for commercial roles here. The initial sales, marketing and customer success hires need to be in the US.

The reasons for this are as follows:

The UK and Europe have well established communities around technical roles: engineering, product development, operations, developer relations, community, events, and customer support. You can find people doing these roles at all levels of experience and seniority at companies of all sizes. There are plenty of academic institutions linking with industry to develop more of the theoretical experience, and mainland Europe in particular benefits from a significantly lower cost base which has made outsourcing popular. This all means that there is a large talent pool that scaling startups, corporates and other businesses can access.

For commercial roles in enterprise SaaS, this ecosystem simply doesn’t exist. There are very few SaaS businesses founded and being scaled in the UK or Europe.

The “founded and being scaled” part is important because it’s not the satellite sales offices that count - at the point where you’re creating a new sales office, you have already figured out the repeatable business model and are simply scaling it. It is the stage where you’re still figuring out product-market fit that needs the highly experienced people in key roles who have done it before.

Those people are in the US.

From the BVP Cloud Index, 42 cloud/SaaS companies have a market cap of +$1bn. Of those, 36 are HQ’d in the US and only 1 in the UK (Mimecast).

This is a problem because it’s self-reinforcing cycle. Companies start and are scaled in the US because that’s where the experienced people are and the people are there because that’s where the startups are.

London is the best place to start a technology business Europe. With 58,000 tech firms already located here and more venture capital investment than in Germany, France, Spain and Ireland combined, I agree that London will remain a major hub for the types of businesses that already do well here - fintech, fashion, design, consumer, retail, eCommerce and mobile. But SaaS is lagging.

There are signs of improvement, although there is still some way to go:

  • SaaS specific funds like Point Nine Capital and Notion Capital are sowing the seeds but their portfolio companies often relocate commercial operations to the US.
  • Box recently opened its European HQ in London, but they have already IPO’d.
  • Apple and Google have both announced major new HQs in London, although they are long past the challenges of startup scaling.
  • Mimecast has their HQ in London and IPO’d several years ago, although they listed in the US on NASDAQ.
  • NewVoiceMedia is a UK based company that looks like it might IPO in the future (given the amount of capital raised).
  • A second round has been launched by the GCHQ Cyber Accelerator specialising in security products, most of which will come under the enterprise SaaS category.
  • The UK is positioning itself to try and lead the world in AI, self-driving cars, space flight and other “deep tech” developments which tend to have a more B2B commercial focus.

In the meantime, what I think this means for SaaS businesses is that you can start off in the UK and Europe with an initial product and initial funding, but to scale the commercial model through to IPO you have to relocate that part of the business to the US.

Engineering, product, support and operations should remain in Europe because the expertise is available here at great value for money, but sales, marketing and commercial operations need to be where the talent pool is greatest - the US.

A different approach might apply if you’re not going for IPO or trying to build a big business - there are plenty of small, successful businesses in the UK and Europe. But then the risk of being outcompeted will arise instead.

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