Houzz and international expansion go together like peas and carrots

By Michael Carney , written on January 15, 2014

From The News Desk

For any entrepreneur worth their salt, the goal of expanding their business to reach as many customers as possible is an all-consuming goal. In most cases this means international expansion. But delivering a quality experience across borders is a challenging task. Add in the additional expense, language requirements, legal considerations, and hiring challenges and it’s no surprise international expansion has sunk many promising businesses. Which is why we dedicated an entire content series to the subject of going global last summer.

Today, one of the most promising consumer-facing companies of this generation announced its overseas ambitions: Houzz has opened offices in Berlin, London, and Sydney and installed local managers in each city. From these outposts, the nearly-five-year old online home remodeling and design community startup plans to immediately begin serving Western Europe and Asia Pacific. The next step will be language localization into German and French, with other European and Asian languages to follow.

Houzz is no middling upstart. The company has gone off like a rocketship here in North America, regularly being pulled into new geographic and industry markets by inbound demand from its community. Houzz has hired one of the best to duplicate that success overseas. The company’s international operations will be lead by Oliver Jung, a German investor and consultant living in Zurich who previously led Airbnb’s international expansion (notably, the companies share Sequoia as an investor).

To date, Houzz has grown to more than 16 million monthly unique users, 35 percent of which are outside the US despite no effort on the company’s part to serve an international audience. The platform has also seen one-third of its 12 million mobile app downloads coming from international users. In the US, Houzz has 300,000 home design and remodeling professionals, spread across 60 categories including contractors, builders, architects, and interior designers – 28 percent of which are international. And even before officially supporting international users, a number of the company’s North American professionals have been contracted through the site to complete projects around the globe, according to Houzz co-founder and CEO Adi Tatarko.

Houzz’s value proposition is connecting homeowners with remodeling inspiration through the millions of HD design and remodeling photos and thousands of pieces of editorial content submitted to its site by housing professionals. Given the fact that in nearly every country around the world, there are designs inspired by other markets, such as Italian villas, Spanish haciendas, and American plantations, cultivating a multi-national design community is a natural next step in the evolution of the company and its product.

Houzz has raised $48.6 million through its Series C round of financing, with backers including New Enterprise Associates, GGV Capital, Sequoia Capital, Comcast Ventures, Kleiner Perkins Caufield & Byers, and individual angels. Sequoia partner and former Zappos founder Alfred Lin called Houzz the best and most underrated ecommerce company in his firm’s portfolio and attributed the site’s torrid growth to its mastery of “the three C’s” of content, commerce, and community. To maintain this growth curve, the company will have to add the fourth “C” of crossing borders.

Houzz has seen a number of copycats spring up, both in North America and abroad. But none have achieved anywhere near the scale of the Palo Alto original. This is a fortunate scenario, given the number of companies including Groupon, Fab, and others that have had to accelerate their global expansion efforts in the face of stiffening competition in highly coveted international markets.

The timing of this expansion, according Tatarko, is a result of the inbound demand from overseas users. “We’ve always listened to our community,” Tatarko says. “It’s the same as when we launched Pro+ – professionals wanted a way to highlight and build their brands on a local basis.”

With the rapid growth of its community over the last year, Houzz has had to more than triple the size of its staff, growing from 50 to 170 employees from the beginning to end of 2013, and outstripping multiple offices in the process. The company will likely see a similar period of growth in headcount as it staffs up to support a growing global audience, according to its CEO. Among all the risks presented by international expansion, maintaining the quality and character of one’s team while hiring rapidly is one of the biggest, Tatarko says.

Houzz monetizes in North America through its Pro+ offering, which is a premium subscription available professionals seeking to raise their profile on the platform, with an emphasis on local markets. The program is now available in 425 markets across North america, up from 12 at the time of its launch. The company is also beginning to test various “PPC” (pay-per-click) advertising initiatives. Houzz will eventually extend these programs to its international community, but not initially. The immediate emphasis will be to build large, passionate, and highly engaged community overseas.

“For most people, remodeling their home is a miserable experience, but our users call it fun and exciting,” Tatarko says. The challenge will be to duplicate this phenomenon in the company’s new markets. “We don’t force any specific experience on our community. Instead we allow users to decide what they want to get out of the platform and drive that experience. It may be different in new markets.”

“Our biggest learning during our US expansion was to talk to both sides of our community to gather data and feedback, then go and build right tools and technology,” she adds. “Every market is unique.”