Considering expanding your operation into the bustling ‘new’ U.S. market? You’d be in good company and the rewards are surely there for the taking. However many international firms come up short, as Haresh Patel of Mercatus explains. Here, he outlines how to succeed where others have failed.
At the recent Intersolar in San Francisco, the news that seemed to linger in the air everywhere I went were the epic fails of Gerlicher and Conergy. For those of us that work closely with European developers, the news was a sharp reminder that even the most experienced players can be brought to theirs knees by a flawed entrance strategy. Based on our experience there are four common mistakes why foreign funds succeed in the U.S. or meet the same end as Gerlicher and Conergy.
Mistake #1: No man is an island
Trying to be mindful of budget, many EU entrants enter the U.S. with too lean a team, sending a single expat into the U.S. to assess and tackle the market.
Unfortunately, they soon find themselves overwhelmed by the sheer size of the U.S. market and the diversity of the project landscape.
Lacking the resources they need, they’re unable to quickly and efficiently assess projects – a phase we call Origination Management. No man is an island and no single person can handle the due diligence required to find the best projects before competitors do.
Mistake #2: Trying to be all things to all people
In Europe, the most successful companies tend to play many roles – from EPC to distributor to developer. But, in the U.S., attempting to emulate the same “all things to all people” approach simply doesn’t work.
Many EU entrants, assuming they can simply throw bodies at the problem of finding good projects, maintain the same headcount they had in Europe. The bloated organisation ends up spending its development capital on Opex, leaving it with little to invest on projects.
Mistake #3: Overly optimistic flipping expectations
In Europe, project life cycles are fast. Because of Europe’s relative size and similar tariff structures, project turnaround averages several months versus over a year in the U.S. So, when EU developers enter the U.S. market, they are caught off guard by how long it can take to flip a project.
Here, due to the complexity of the U.S. market, the average project takes a long time to mature and ready for sale. European investors underestimate how long it takes to flip a constructed project and as a result run into severe operating cash challenges.
