The U.S. is one of the largest drone markets in the world. While the Asian market is the largest overall drone market thanks to massive growth in China, Japan and India, the U.S. on its own is huge. Combined revenue between the U.S. and China makes up over two thirds of the global drone market size.
And so it only makes sense that companies that were initially founded internationally would want to open offices in the U.S. With offices in the U.S., it’s likely easier to reach American customers, to work with U.S. regulators, and to get necessary approvals to do their work in the U.S.
With that many foreign drone companies have been looking to enter the U.S. For example, Switzerland-based Pix4D in 2019 opened an office in downtown Denver, Colorado to serve as the base for developing enterprise solutions tailored to the North American market. It didn’t take long for yet another Switzerland-based company to follow Pix4D’s lead. In February 2020, Flyability, which is known for its Elios 2 drone designed to carry inspection cameras specifically for indoor inspections, also opened a Denver office to better expand into U.S. markets and be able to provide better support to U.S.-based customers and partners.
And with that, the team at Flyability, which has over 100 employees, shared with The Drone Girl their learnings and best practices for foreign drone companies looking to enter the U.S. Here’s what Flyability CEO Patrick Thévoz and VP of Sales Alexandre Meldem had to say?
When should foreign drone companies expand to the U.S.?
If you have (or anticipate) having significant revenue from the U.S., then you should expand to the U.S. earlier rather than later.
“If a drone company sees a significant part of its revenue coming from the U.S, it’s probably a good time to try and open a U.S. office,” Thévoz and Meldem said. “Even if that revenue is not yet significant in the U.S. but projections show that it will be, it’s good to start planning for U.S. entry. Nobody ever regretted opening a sales office in their largest market.
Flyability, which was founded in 2014, didn’t expand to the U.S. until January 2020, but its single biggest market is the U.S. In fact, Flyability’s drones are now used in 65% of U.S. nuclear power plants.
“We probably entered a little late,” they added.
How is working in the U.S. different than in other countries?
There are a myriad of ways things are different, but pay attention to a few standouts:
“There are important HR differences when opening a US office, and navigating those changes for payroll, holidays/vacations, benefits, taxes, and other HR-related adjustments can be more time-consuming than you might think,” Thévoz and Meldem said. “The same can be true for navigating regulations in getting your company set up.”
Their advice for handling it? Hire a local consultant to help you navigate those operational differences. Relatedly, outsource as much work to other local workers including lawyers, accountants and bankers — especially when it’ll take you a long time to navigate it.
“That way, your local team can focus on growing the business, not waste their time on administrative tasks,” Thévoz and Meldem said. “Don’t underestimate the administrative challenge of a new office. Incorporation is cheap & easy. Figuring out the intricacies of PEO contracts and sales taxes in all 50 states, less so.”
Pace of adoption:
“U.S. industries are remarkably open to new technology, and are much more accepting and open to adoption even in conservative (e.g. nuclear, or oil & gas) industries than comparable companies are in Europe and throughout the world,” Thévoz and Meldem said.
From a policy and regulatory standpoint, what are the benefits of foreign drone companies opening offices in the U.S.?
Though it can feel slow at times, the Federal Aviation Administration is working to extend opportunities to integrate drones into the U.S. airspace. Programs like BEYOND, which is an extension of the Unmanned Aircraft System Integration Pilot Program (IPP) have created a way for the FAA to to use private-industry testing and data to help better understand drones.
“UAS opportunities and activities in the U.S. are strong,” Thévoz and Meldem said. “This work helps cultivate a generally positive attitude for new UAS technology and companies that are developing that tech.”
And the Flyability team said you don’t even need to have an official seat on groups like BEYOND or the Drone Advisory Committee (known as DAC) to reap the benefits.
“Even if you don’t form a partnership with the FAA you’ll still benefit from the climate created by the multiple private-public partnerships in place in the US, since they help create a general interest in new drone technology and awareness of it,” Thévoz and Meldem said.
Does opening a U.S. office actually boost customer acquisition?
Yes — at least according to the Flyability team. And it also helps you maintain ongoing customers.
“If you have U.S. customers, opening a U.S. office allows you to provide closer support to them,” Thévoz and Meldem said.
Many Flyability drones are actually sold through resellers, and even that requires the actual Flyability team to be nearby.
“By being more local and in the same time zone, we’re able to provide closer support to those resellers, as well as more closely ensuring the maintenance of standards for training and support.”
Some of it has to do with having a better understanding of cultural differences in U.S. customers. And some of it is more practical; we’re talking timezones.
“The time difference to Swiss time meant we only had a few hours a day in which we could meet with our U.S. clients. By opening a U.S. office, we could be more directly in touch and support those customers in the US quickly and on their schedule.”
Which city or region should you choose to open your office in?
All sorts of articles will try to tell you the “best cities to open a business.” Some will point to places like San Francisco, which is flush with venture capitalists ready to invest in your company. But San Francisco is expensive, and strict regulations can prove burdensome for businesses. Other articles will point to fast-growing regions that are attractive to younger people, like Austin, Salt Lake City and Denver.
It’s impossible to say what one city is the best, but you’ll have to choose the city that’s best for you. Other factors to keep in mind include:
- Is the city a major airport hub?
- Is the work related to that geographic area? (Ie. Drone companies doing oil and gas inspections might want to be in Texas, while a drone company that plants seeds using UAVs might want to be in the Pacific Northwest).
- How is the startup ecosystem in that city generally?
- Can local organizations help you (For example, Flyability says it benefited from the Denver Economic Development Group’s help.)?
For drone companies, it could make sense to look to places like Reno, Nevada, given its designation as an FAA test site or upstate New York, which has benefited from the work of the Northeast UAS Airspace Integration Research Alliance (NUAIR) including having a 50-mile drone corridor that stretches between Syracuse and Griffiss International Airport.
You also want to consider what other companies you’re working closely with. For example, it’s no coincidence that Flyability opened its Denver office shortly after Pix4D opened offices in Denver. That’s because Flyability, which is a hardware company, heavily relies on the products made by software company Pix4D.
And you don’t need to reinvent the wheel. Imitation is the greatest form of flattery, after all.
“Look at where other foreign startups similar to yours have already opened US offices and gauge their success,” Thévoz and Meldem said. “And don’t be shy about reaching out to ask them for advice, too.”
Other advice for foreign drone companies entering the U.S.
Start small: “Start with just one or a handful of employees and see how it goes,” Thévoz and Meldem said. “No need to build a giant team in the US when you can just dive in with a lean team that can test the waters.”
Look into synergies between International Trade and FDI (Foreign Direct Investment) programs: “The US wants foreign investment, and that’s what opening a US office means.” Thévoz and Meldem said. “Do research into FDI opportunities to see what’s out there.” For example, SelectUSA promotes foreign direct investment (FDI) in the United States and could be a good place to start in researching how to leverage FDI opportunities for entering the US as a foreign drone startup.
Be agile: “Most decisions can be reversed and changed very quickly,” Thévoz and Meldem said. “The biggest risk is paralysis by analysis in front of the multiple unknowns.”