Derek Roos moved his software company Mendix* from the Netherlands to Boston in early 2012, hoping to kick-start the new market for “low-code” application development. The company’s software helps companies build their own custom software applications more quickly and efficiently. Mendix was acquired by Siemens earlier this month. Here, Roos talks about the company’s transformation from a small, European startup to a major U.S. technology player—and the specific challenges he faced moving his company “across the pond” to the U.S. This is the third blog post in our series about how European, B2B technology companies can successfully hop the pond and grow.
Q: Can you start by talking a little bit about how and when Mendix was founded, in the Netherlands, back in I believe 2005?
It’s been a while! I actually started the company out of my dorm room. And we started it with the exact same mission that we have today: Helping companies speed up development and having business users participate in that creative process. That was our big vision, and it’s still what’s driving everything we do today. What we didn’t realize then is that there was no market for us, at least at that time. Everyone thought we were crazy except us.
Q: So it sounds like it might have been difficult to get funding in those early years.
Out of necessity my co-founders and I wound up bootstrapping the company for the first few years, the first five or six years, actually, to make sure we really understood the customer and the market. We were the only ones out there.
In 2011 we raised our first round of funding, in October, from a firm in Amsterdam. We were a profitable company at the time. We had earlier raised only about $300,000 in seed money. But we were running a profitable software business; to help our customers, we were doing some services to finance the cash flow. Soon we started to see some competition come up, including with Salesforce, with its Force.com platform.
We realized we had a big competitor. And that was the cue for us to say, now it’s time, let’s go raise a real round of capital. So we raised nine million euros in 2011. The plan was to do two things: One, build a real leadership team. I was the only sales guy at the company, for instance. We wanted to build a real, experienced management team and give them the resources to build their own teams. The second goal was moving our headquarters to the U.S. A few months after we closed that first real round of funding, I packed my bags and moved to Boston.
Q: How did you know it was the right time to make the move?
Mostly it had to do with the market that was opening up. We weren’t the only ones in it anymore—competitors like Salesforce were moving in–and we felt that we needed some lift, some wind at our backs so we could anchor our category leadership. At the time it felt like a real big market that was about to open up. That was the cue for us to take a step. We also felt our product, and the good market fit we had, were at a level where we could start expanding.
Q: How many employees did you have at the time? And did everyone relocate?
We had about 30. I hired a person to run our business in Europe, akin to a country manager or VP of EMEA. And his mission was to continue to build out the team in Europe. And I basically focused my time on the U.S. I also, as CEO, continued to oversee product strategy and go-to-market and all those things.
But when we moved, I wound up essentially re-starting the business from a “day-one” standpoint; our product worked, but we just didn’t have the infrastructure in place for global expansion, so the U.S. part of the business felt like a startup.
Q: Why did you have to re-start?
We had to re-learn everything. How the U.S. worked, how our U.S. messaging should fit the U.S. market. It’s just very hard to get started in the U.S. without a team, without local customers, local references. I under-estimated that. Yes, we had a working product, we had a good idea of how to go to market, and an idea of how to sell. But from an operational standpoint and overall management standpoint, there was not much there.
That really changed two years later, when we did a financing round with Battery. By then, we had some good customers in the U.S. But more broadly, it was the first time that a major U.S.-based investor really understood what we were doing and committed to support us. It just changed everything for us–the talent pool we were able to tap into, the overall importance of the space, etc.
Q: For a lot of European-based tech companies, they move to the U.S. partly because of the logistical difficulties of trying to sell across an ocean. Was that a factor for you?
We never really tried that. For us, it was really a more basic and practical consideration. The day we started the company in 2005, we knew we were going to have to go to the U.S. We said, we want to be the leader in this space, and by definition that means we need to be the leader in the U.S. Of course we need to be closer to customers. But our main competition was also here. And it’s hard to do anything in the U.S. unless the CEO is in the U.S.
Q: Any other advice for other European, B2B companies struggling with selling in the U.S.?
That’s hard no matter what. My biggest learning is, you have to show commitment to the market as a European company. You can’t just hire a VP of sales and you, the CEO, stays behind in Europe. People want to work for the CEO or be close to them. It’s where they place their bet. Of course it’s hard to find good people no matter what.
Q: Once you figure out you’re ready to move, how do you think through finding the right financial and go to market partners?
As soon as you’re ready, or before you’re ready, I would try to raise money from a good U.S. investor. We tried that for our series A but couldn’t do it because nobody really “got it” then. The market wasn’t there, and the revenue wasn’t here, and the customers weren’t there, at least in the U.S. Right now, I see more investors that are open to making investments in Europe. But in 2010, 2011, it was a different situation. Investors were just not very interested in Europe. We had some interest then, but ultimately we felt that taking a step with the European investor who understood the U.S., at least, was the right step for us. But I wouldn’t say that was what we were going for specifically.
I would add that more important than the actual capital raised from a U.S. investor is really the partnership, and all the guidance and tactical help that goes along with it. Also, the U.S. ownership confers some validation on the business, and shows there is a U.S. component to the business. That helps attract different people who want to work at the company.
Q: How do you pick exactly where to go? Which city, which part of the U.S.?
That was a practical consideration. We moved to Boston for really two reasons: One, most of our customers at the time were in the financial industry–financial services and insurance. There are more of those companies on the East Coast than West Coast. There was also the distance from Europe. There is a six-hour time difference in Boston, compared with nine hours on the West Coast. Those extra three hours make all the difference, including starting work at 4 am or 7 am. If I were to do it again, I would probably put R&D in the U.S. as well, or at least the core product group.
Q: Was the move challenging for you from a personal perspective? I know you have a young family.
It all worked out. My wife was seven months pregnant with our first child at the time, so I realized it’s now or never!
Q: Once you make the move to the U.S., there are so many practical management issues to consider. Another big issue is company culture. Maintaining operations across time zones can be challenging. How did you make it work?
I’ve always made a big point of having one team. Not having multiple countries with their own little issues. Which is why we’ve always had a global team. When I hire, I look for people who are familiar with international environments. They know what it means to travel a lot and be in Europe all the time. We have management traveling back and forth all the time, almost on a weekly basis. And once a year we bring the entire company to Rotterdam for a kickoff.
Q: What are the implications of a move to the U.S. on sales and R&D? Is there a faster pace of activity?
I think being non-U.S. was absolutely harder in this respect. One, I think you don’t know the market that well. You’re learning while you’re trying to build a business. There’s added complexity, and then your European customers don’t really mean much in the U.S.—they don’t really resonate. For us, all the things we’d built up until then didn’t really have that much value in the U.S.
Q: What did you do wrong in this process? What would you do differently next time?
I could write a book about this. I mean, outside of the clichés of, hire the right people, don’t wait when you realize you made the wrong hire, focus on a few things and do them well . . . there are so many things.
Q: It looks like everything worked out for Mendix—though perhaps it’s somewhat ironic that you wound up being acquired by a German company, Siemens.
Which, by the way, wouldn’t have happened if we wouldn’t have been in the U.S.! Siemens is buying the market leader. You can’t be the leader in our market unless you’re in the U.S.