03/2004, p1 copyright © 2004 by petri i salonen a few experiences of setting up a business in...

03/2004, p1 Copyright © 2004 by Petri I Salonen

A few experiences of setting up a business A few experiences of setting up a business in United Statesin United States

Global Software III, Boston, MAGlobal Software III, Boston, MA

March 23March 23thth, 2004, 2004

Petri I. SalonenPetri I. SalonenChief Executive Officer, InfoManager GroupChief Executive Officer, InfoManager Group

[email protected] or [email protected]

Visit also Visit also http://www.petrisalonen.com


Agenda 03/23/2004 Background information

Historical timeline for our US business

Taxation, cost of living etc. in Dallas area

InfoManager, Inc office– Organization, corporate governance (both Corporation as well as subsidiaries)– IT infrastructure, marketing activities, sales process etc.

InfoManager, Inc business-model

A few comments on personal experiences– Management issues, common mistakes to avoid during the way etc.

Family matters to consider– Relatives, wife, husband, children, schooling, accommodation, keeping heritage

intact, pet’s, keeping wife/husband and kid’s active with hobbies, meeting other native people


Presentation objectives To provide an example of a Finnish organization that do not have

venture capital but has still achieved to sign enterprise deals with several market leaders

To give you a few ideas of what NOT to do when you enter the US markets

To provide some examples of how to approach the US market when one does not have money to spend in marketing or public relations

To provide some examples of cost of living in Dallas area as well as provide a ”Finnish perspective” on living in the United States

This presentation is NOT to give you one perfect answer but to give you hope that you can become successful with the right attitude, product and personnel.


Things happened since my last presentation in 2003

InfoManager has changed its strategy– InfoManager has a strong external Board of Directors team that provide support in

our strategies– InfoManager US is responsible for worldwide sales– InfoManager Finland is the product development center– InfoManager will set its EU operations closer to central Europe– InfoManager has added a Professional Services Group in Indianapolis, Indiana

InfoManager economic performance– InfoManager had its best year ever in 2003 for its entire 17 year history– InfoManager signed several new enterprise deals (Discount Tire, Sunbelt Rentals

etc.)– InfoManager has signed new ISV partners in United States

Personal things– We received our permanent residence in March 2004 (it took almost six years to

get it)


A few things I am reflecting on... Selection of business model for our organization

– Do I want to be a software product company, service company or a combination of these (hybrid)?

– How do I attract the best people to my company?

– How do I keep my competitiveness even if our company is bootstrapped with incoming revenue?

– How should I divide my sales, should my products be sold directly, indirectly or a combination of these two?

– How do I keep my company profitable with long sales cycles specifically as I am targeting large customer organizations?

How can I become a virtual organization?– Work globally using an web-based information system

– Have people to accept responsiblity without physical presence

– Have cultural boundaries removed as much as possible

I have been told to be too aggressive and US minded to sell in France


InfoManager EU and US Business Model InfoManager US business model

– Based on a combination of direct- and indirect sales model

– Our approach is to get market leaders for our software solution

– Our appoach is to have partnerships with other ISV’s

– We buy lists from organizations like Harte-Hanks and combine this with a business portal

– Use local people in your organization, do not have too many Finns working in your US organization

InfoManager EU business model– Only Sweden and Finland has a direct sales force

– European partners sell directly and provides consulting services

– European channel development is challenging as different countries have different requirements


InfoManager, Inc market areas InfoManager, Inc is responsible for North American,

(Canada included), Central- and South American markets– Currently we have good coverage on the West-coast, Midwest and

Northeast

We have currently around 15 partners across United States

– We also have a partner in Puerto Rico, Colombia, Brazil, Chile (that covers Peru, Ecuador, Argentina, Bolivia)

North American IBM-related business hardware business is driven by three major players (Avnet-Hallmark, Supportnet and Agilisys)

– These vendors have hundreds of IBM business-partners (second tier) that our prospective partners


Historical timeline InfoManager products have been sold in US since -94, -95

My first visit for relocation purposes was October 1998

I relocated to Dallas in January 1999

I brought my family to Dallas in late April 1999– My wife was pregnant and it was questionable whether she would deliver our daughter in

Texas or Helsinki– My daughter was born 5.5.1999 in Grapevine Baylor’s Hospital– My son started his kindergarten in August 1999

InfoManager bought our US business-partner in September 1999– Management (CEO, COO, CFO, VP of Marketing) was selected during August 1999 –

January 2000– Our results from accounting year 2000 (ended 31.8.2000) were catastrophic with huge

losses– Initial CEO had to go (British), COO was selected as CEO for a few months

– Board of Directors of the group asked me to become CEO for InfoManager, Inc in June 2000 (I was Chief Technology Officer for the whole corporation)


Historical timeline Management was selected without really knowing whether they could do it

or had the right skills or background for a startup– Expensive executives with hardware sales background => not something a software vendor

should ever consider

The US operations relied completely on its business-partner network, which was a huge mistake

– It is like driving in fog and hoping for the best

Senior management did not have the passion for the software or solution area or prior experience of how solution selling should work

– That became very evident in the initial stages => negative feedback from customers that our US management did not know the solution/application domain

US management relied on Finland to send money, which became a huge burden for the corporate HQ

– My belief is that a fully owned Finnish subsidiary should ALWAYS have a senior Finnish executive in the subsidiary management => cultural differences are huge and Finns are not able to separate/understand when specific actions needs to take place => several examples of this during the years


Historical timeline I restructured the management team (previous CEO and VP of marketing had to go)

I was asked to become a director of InfoManager Corporation board in June 2001

I became the only internal sales person for the US operations as well as builder for our business-partner network

– Every month from June 2000 profitable and initial large deal signed with United Rentals in late fall 2000, which was a huge turnaround for our US organization as this gave us credibility amongst Fortune 500 companies

– Second large deal (Scholastic Publishing) was signed in March 2001

– We ended our accounting year 2001 in December 2001 (extended 16 month) and US operations were the most successful subsidiary and brought all the profit for the overall organization

– Currently our software license revenue is roughly (year that ended 2002) 40% of overall corporation and we expect that to be more than 50% for budget year 2003

– Average deal size in US is $80k to $120,000, while the comparable size in Europe is $30-50k

August 2001 I took on board our first account executive

In January 2002, the second largest shareholder of the company (development manager for the server product) emigrated to US to help with large enterprise customers => US market is our key market for growth for the next few years


Historical timeline January 2002 was still very good but from February going

forward, we could see IT spending to take a huge hit – Enron changed and scared large organizations and we could see delays

in IT spending within large public organizations

In June 2002 I was asked to become CEO for the whole corporation (I am still President and CEO for our US operations)

Hiring process going forward– One direct sales representative every 6 months

– One presales consultant to our Dallas office


Historical timeline Early 2003 I did some restructuring in our European

operations

During 2003 we added direct sales personnel to our US markets

InfoManager US has become the most successful unit from sales and profitability perspective

During latter part of 2003 we concentrated in closing deals and making sure that we would get most of them closed before the end of the year

First quarter of 2004 has been challenging and we have participated in several conferences during January, February and March


Taxation, cost of living, cost of office etc.

Things to consider if selecting Texas as a new place to live and have an office


InfoManager offices in US and Finland We moved into a new office

location in November 2002=> current economic downturn was very good for negotiating affordable leases.

Reason of having a nice office in US as well as Finland

– Several customers have checked our facilities before signing a contract with us

Our HQ office in Finland is very close to the Helsinki Airport

– More info can be found from following URL: http://www.airportplaza.fi


Taxation in Dallas area No income tax for Texas state

Income tax only for Federal Government (IRS)– Taxes are reasonable compared with the taxes in Finland (typically from

20% to 30%)

Other taxes– Social security 6.2%

– Medicare 1.45%

House owner pays:– School tax, County tax, City tax (our tax for our 3000 sq house is

$6,000/year)


Typical office expenses and rent

Monthly expensesRent (3,162 square foot office suite) $4,875Telephone (landline and cell phones) $2,700Travel $2,000Accounting $1,000Conferences $1,100Other general admin costs $3,000


InfoManager Inc Service Providers Office space and services – Georgetown Monticello

Partners, Ltd.

Travel – American Express Travel– All our domestic and international travel

Legal – Flagg Law Group– Contract negotiations with large enterprise customers

Marketing – Graphics Systems (give aways)

Immigration - Joyce Paul & McDaniel

CPA – J.C Cooley & Co


InfoManager IT Infrastructure We have introduced a global CRM where I can get an overall view of

our worldwide customers– We will sign with Salesforce.com (http://www.salesforce.com) which will become

our new worldwide CRM

– We will also introduce a web-enabled self service helpdesk solution that enables us to move more of our support to customer themselves

Externalized IT support from a third-party vendor– Manages InfoManager IT infrastructure (servers, telecommunications etc.)

– Each subsidiary has its own domain and infrastructure and is managed by each subsidiary (http://www.infomanager.fi ; http://www.infomanagerinc.com ; http://www.infomanager.se)

All iSeries/400 servers are located in Helsinki, Finland– All business-partners, subsidiaries use the same centralized hardware


InfoManager US organization Currently 7 employees in US office

– 3 in sales

– 2 in administration (CFO and marketing assistant)

– 2 in presales/consulting/support

We have plans to add on more personnel– 1 presales consultant

– 1 sales account executive each 6 months

InfoManager Professional Services Group– 1 Director of Professional Services

– 3 consultants


InfoManager, Inc administration We have a local CFO who reports to corporate controller

in administration matters– Our CFO is also our local office manager and participates in

marketing/communication and preparation of proposals

– CFO is also responsible for accounting (bookkeeping) as well as regular reporting to corporate in Helsinki, Finland

– CFO is responsible for payroll with corresponding procedures

Marketing assistant – administration roles– Participates in marketing like sending literature, software, operates the

our phone system, orders office supplies etc.


Hiring people in US – things to remember InfoManager characteristics

– We are a privately held company without VC money and therefore each an every hire is done very carefully and this is the only way to have profitable growth

Things to remember in US employment– Finnish companies should not make rules that are two distant from the

corporate rules of the corporation

– Rules of interviewing is very different

You can not ask age, marital status etc. => might lead to discrimination charges

– Hiring and firing is easy as long as you stick to some rules

When I had to let people go, it was done in the presence of another member of the management


InfoManager US Business Model

Sales process, development of business-partner network, etc.


InfoManager, Inc business model InfoManager has a combined direct and indirect sales

model– Direct sales is needed to balance and increase predictability of sales =>

bad experiences on a model where InfoManager relied only on its business-partners

Lead registration will hinder possible channel conflicts with our US business-partners

– Direct sales account executives target large enterprise accounts that will give InfoManager, Inc high visibility


Different strategies in US and Europe Our US strategy is to sign contracts with market leaders like:

– United Rentals, Scholastic Publishing, Finishmaster, IBM, etc.)

– InfoManager US operations will educate these organizations to build solutions

InfoManager, Inc gives helpdesk, training support for North American, South American and Canadian customers

US business-partners do not give support on the product => more or less lead generating organizations

The strategy in Europe has been to sign partners that have a consulting organization and will provide consulting services and first line helpdesk support

– We are also introducing new partner models in Europe, Cap Gemini & Ernst Young in Italy has selected InfoManager as the solution for iSeries hardware platform

– New partners have been signed in Holland, Belgium and several new ones to follow


Business-partner profiles in US InfoManager, Inc has different types of business-partners

– Some have very strong hardware background => typically need a lot of assistance

Hardware margins are extremely low in US and InfoManager is very appealing for companies

– Some have background in solution selling (like ERP packages) and have therefore a good understanding of solution selling

Some business-partners should have never been signed in the first place as they did not have any understanding of solutions and expected InfoManager to provide everything on the plate…

– Some partners are purely marketing partners with the role to provide leads to our direct sales force


Differences in European and US approaches Sales using ROI as the main criteria

– Sales in US has been very different to that of Europe

Easier to convince management to buy if we can prove ROI measures

US management have more streamlined decision process in their decisions => you do not have to second guess if they will buy or not

– Sales in Europe is very fragmented compared with US => cultural differences in our application domain are in some cases considerable

Example: Italians like dash board technology, Finnish organizations have not found the value of using them

– InfoManager product development has to take these cultural differences into consideration when planning its products


InfoManager Sales Processes Sales processes

– InfoManager business-partner generates leads => these leads are registered in our global CRM

InfoManager participates in the sales process by arranging Internet demos using WebEx Internet presentation tools

InfoManager participates in qualifying the leads InfoManager provides resources for prototyping with data provided by

prospect– InfoManager prepares proposals to its own deals as well as deals that will be

worked by business-partners– InfoManager will create a contract and these contracts will be signed by customer

and InfoManager, Inc InfoManager, Inc will invoice the customer Contracts are sent to Finland after signature InfoManager, Inc will send software CD’s to customers Once InfoManager, Inc receives payment from customer, InfoManager,

Inc will send commission to business-partner InfoManager, Inc invoices for maintenance on annual basis


Sales process -indirect Business-partner responsibilities

– To qualify the lead and to register the lead, which will be registered in InfoManager global CRM

– To arrange the time for WebEx demo

– To act as an account manager for the prospect and make sure that “we are on the radar screen”

– Market and initiate campaigns with InfoManager

InfoManager, Inc. responsibilities– To re-qualify the lead by calling them up and to be able to decide the contents of

the demonstration and to identify “hot-spots” for the demonstration

– To perform the demo using WebEx in most of the cases

– To discuss about possible prototype details, InfoManager is on the driver seat when going forward

– Create the proposal templates


Process of signing new business-partners We have adjusted our requirements for business-partners

– Not anybody can become a business-partner today!

– New strategy of signing solution partners that provide value to customers via analytical applications.

Today, when a business-partner signs, the requirement is– That they have sold solutions previously and that they show signs of commitment=>

we do not want to be just one product among others

When a business-partner signs a contract, the next steps will include

– 2 days sales training with prospect visits (basic requirement) => new business-partner sees how the sales situation is managed

– When initial prospect is qualified and possible prototype is planned, InfoManager consultant will train the business-partner on site with the prospect as well as business-partner consultant


InfoManager US Business-Partner Network

b


Marketing and Channel Development We have selected a few well

known conferences both from business-partner as well as customer prospecting

Marketing is very important to be kept focused on selected vertical markets and geographical areas

We have selected a few IBM conferences (as we are IBM business-partner) as well as conferences from a selected vertical domain like equipment rental


Marketing Materials for Business-Partners We have created a business-partner folder that includes

everything that a sales-rep needs to do business with InfoManager, which includes

– Pricing

– Fact-sheets

– Template proposals for different kinds of solutions

– Telemarketing scripts

– Brochures

– etc.


Marketing efforts in US marketplace Advertising – effectiveness of advertising?

– Showcase technology, ad during 3 quarters – did it work out for us– News/400 – very lame response even with high dollar ads– Midrange Computing – several Midrange issues had ads and stories of InfoManager Suite

It is now gone out of business

Seminars– Joint seminars with IBM / business-partners– Activity with the largest IBM hardware distributors

Mailings– Buying mailing lists

You have to be very careful when buying these mailing lists

– Effectiveness of mailings

We have lost our confidence in mailings => US market is flooded with mailings

– Telemarketing together with mailings => more effective, but we have still decided to concentrate on pure telemarketing


Telemarketing in US marketplace InfoManager has defined a generic script that is available

to business-partners– Business-partners will redefine it to their own purposes

– Telemarketing is the most effective marketing approach to generate opportunities (like Source Data Products in California)

– Usage of external telemarketing companies to generate opportunities – does it work?

If you use these companies, make sure you train them well with product info

– We have had both good and bad experiences in the past


What have I learnt while in US ?

More than 5 years of trial and error


What to do when you decide to emigrate? I contacted SEFEC (Ekonomiliitto) and asked for material, everything that

related to relocation to US

I tried to find books of personal experiences => none could be found in Finland

I worked with immigration lawyers to file the necessary paperwork => everything was paid by my employer

– My contract is a local US contract, so I do not have any benefits that are typical for Finnish organizations

Make sure you cover everything that you need to cover as this will typically be your only chance to get your life started decently in US

I have heard of cases where families have suffered due to ignorance from the sending company

– We lost our social security and are therefore not able to use public healthcare in Finland – Our retirement in Finland does not accrue anymore, all plans are based on 401k plans and a

genuine belief that money will not be a problem in the future

Immigration issues and lawyers– We filed initially H1, which is typically very hard to get– Later my H1 was changed to L1, finally green card in March 2004


My personal experiences and recommendations Finnish companies and emigrating employees seem to

have the tendency not to listen to other companies and their experiences of entering US marketplace

– Why do we always have to make the same mistakes => a few known companies came to US with high expectations and tremendous press thunder

Did anybody hear from them when they quietly retreated from the US marketplace

– Make sure you meet a local Finnish company to discuss about

Local employment contracts

Cost of living (housing, insurance, etc.)

Family activities

Do plan ahead to have your social security card => without it you will be an outlaw


Common mistakes – personal experiences Overly optimistic expectations of getting immigration approvals

– Plan for the worst, I have several examples of how things should not have gone

Underestimating the cost of living– Finnish organizations do NOT have an understanding of how expensive things are

in US– Specifically entrepreneur driven organizations will run into typical and famous

Finnish jealousy

Specifically shareholders do not understand why professional management should be making more money

Cultural differences are typically underestimated– I believe in a model where corporate management should initially be from

originating country

I would be a millionaire if all the promises that have been given to me would have been realized

You should not populate all company positions with Finns => that will not give the right message to our customers


Transportation, housing etc.

A few examples from my own experiences


Transportation There is almost no public transportation in Dallas

Metroplex– Everybody has to have a car => we had to buy two cars which put our

finances immediately into some constraints

– Cars, motorcycles are more affordable in US compared with any European country

A typical midsized car is between $10,000 to $20,000

Motorcycles are far less expensive in the US when compared to Finnish prices

– Dallas Forth Worth Metroplex does not have a working train/bus network (only within the cities of Dallas and Fort Worth)


Selection of housing - rentals We decided to rent a house for one year before we made a commitment to

buy one– Very good experience and saved us tremendous amount of money as we had time to look

for the “right one” => our rent for a 3,300 square foot home was $1,600 We bought our home 2 miles further down the road

Experiences of renting a house– Make sure you use a real estate agent when renting to make sure your paperwork are in

good shape

Use references when selecting real estate agent => you will save a lot of money

Take pictures of the house, both inside and outside to avoid loosing the deposit

I have learnt to deal with the types of people that will do things that you would not even imagine

– Landlord did not return $2,000 of our money, probably due to our blue eyes and good faith => I did not have time to go to court with the matter

– Renting for a year should be obligatory to everybody, only later you can tell whether the neighborhood/school district is something that you want to live with


Experiences when buying a house in US Very different from buying a house in

Finland– Several steps that did not make any sense to

me….! Several layers of profit takers

– Local banks laughed at us when we tried to use our 15 yrs of banking history with the third largest Finnish bank

– Average buying price for a good house in good school areas is $200k to $350k

– Houses can be rented (recommended for the first year) with a monthly rent of $1,500 to $3,000

– Apartments can also be rented with a typical rent of $1,000 to $2,000

– Property taxes are pretty high in US as well as insurance premiums, especially in US

My property tax is around $6,000 / year

– You usually have to hire a gardener that will take care of your garden

Cost will be $1,000-2,500 on annual basis


Vehicles – some considerations If you have been in executive

management in a Finnish organization, you might have had a company car

– Company car’s are not that typical in US => an investment that has to be done

– A family needs two cars and in our case we spent $60,000 in two cars

I did not realize all the related costs and this came as a surprise to me

– Buying a car has been one of the most horrifying experiences that I have had so far during my few years in US


Family, You and Your Organization

A few examples from my own experiences


Your Family values – Personal Experiences Your family will become the most

important asset that you have when trying to navigate in the new culture and marketplace

Without a balanced family environment your chances of becoming successful will decrease dramatically


What should you do with your relatives? It is very interesting to find out

that how popular you become when emigrating

– Relatives/old friends that you have not seen or heard of in 15 years suddenly want to visit you => and your task is to provide five star accommodations for 2-3 weeks with 5 different meals per day

How should you treat your family members?

– My mother-in-law expressed herself in a way that it cannot be referenced in this presentation

I promised to take good care of their princess


How about your family – kid’s What should happen when you enter the country from kid’s perspective?

– Contact immediately a local school => my family emigrated late April and my son was very frustrated for several months as he did not know English (only Swedish and Finnish) and could not communicate with other kids

If not planned carefully, months of isolation could cause problems in future and school might become a problem

Be careful in selection of school district, there are big differences compared with the Finnish school system

Maintaining their roots to Finland – create an action plan– Finnish language school in Dallas is very active and let’s kids to get together every second

Saturday to play and learn

Kid’s school– My son when to kindergarten for non-native kids when he was 4 years old– When he turned 5, he went to pre-school

Wakeup call 6.30, school bus will pick him up 7.00 and he will return from school 15.30 PM (every day)


What about your family – kid’s Kid’s leisure time

– One of the most important things for long-term success of a family

– Has been a good way for my wife to get to know other wife’s in the neighborhood

– Will also give a tremendous opportunity for your kids to learn the language as well as get new friends


How about your family – your wife Make sure that your emigration

is defined, agreed upon with your partner/wife/husband

– I have seen several couples that will end up arguing when to return to Finland and this is very counter effective to the company

– My suggestion is that each family should talk with other families that have already experienced emigration to avoid future problems

– You might be busy and traveling, but what about your wife that has 24x7 duty with the kids?


What about your family – pets If you have a dog, cat, horse,

snake or any other animal– Make sure you check with officials

what type of vaccination should be arranged

– Veterinarians are very expensive in US => our dog was too old to even get insurance

– Our house in Finland was 69,9 square meters with not too many opportunities to take out the dog => there is plenty of room in Texas and our dog has been a happy camper!

– Our dog was a true companion to our son when we emigrated => there was nobody else to play with


Family time – a few considerations Make sure that you budget

some money for travel (quite expensive in US)

– I have seen many cases, where there is no money due to extended costs and this will impact the family life in the long run.

– Our 10 days 2002 Colorado trip cost our family around $4,000


Questions and Answers

Thank you for your attention!

03/2004, p1 copyright © 2004 by petri i salonen a few experiences of setting up a business in...

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