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When Should A Startup Expand Internationally?

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Uber first launched it’s service in San Francisco in 2011. I was there when they went international later that same year, launching at the Le Web conference in Paris. Less than six years later they are live in 84 countries.

For startup founders it’s getting easier and easier and easier to expand globally. The world is getting smaller every day.

However, international copycats are cloning businesses earlier and earlier making it increasingly important for companies with global aspirations to plant flags around the globe sooner rather than later. But, and this is a big but, going international too early risks costly mistakes that can and do sink entire businesses.

Judging the right moment to go international takes careful consideration.

Key takeaways

  • Go international as early as you can
  • Avoid duplicating cost in an unproven model
  • If possible, start by selling internationally from your home base

When I started investing in startups in 2000 the generally accepted wisdom for founders with big home markets was to crack your domestic market first and only worry about going international after that. That’s changed dramatically and the most aggressive founders are now thinking about growing sales globally from day one.

Looking at our portfolio two examples spring to mind. Live Better With and The Dropboth started advertising and building their customer base in the US within a few months of launch. The founders of those companies knew that they could sell internationally with minimal incremental cost and that if they were successful, they would increase their growth rate and demonstrate conclusively that their addressable market extends beyond the UK, both big drivers of valuation.

Beyond growth and proving to investors that they should factor other countries into their market size calculations the other driver for going international early is to preempt copycats. There are investors on both sides of the Atlantic who are scanning Crunchbase and other sources of data on startups to look for ideas that they can clone in their home country. If you are an American company, European and Asian clones can be an annoying interference with your global aspirations, but if you are a European founder you have the larger concern that a US clone can deprive you of your largest market.

These are powerful reasons to make international expansion an early priority, but caution is warranted. As noted above at Live Better With and The Drop international expansion was easy from an operational perspective. They were both able to leverage their existing logistics with US addresses substituting for UK addresses. At Live Better With there was a slight increase in delivery costs which they passed onto the customer and The Drop didn’t even have that. The suits they sell are made in China so shipping to the US rather than the UK comes at no extra cost.

For businesses like these, it’s a no-brainer to run an Adwords or Facebook campaign in the US very early on and see what takes. For that first test it isn’t even necessary to localise the site. If the proposition is going to fly internationally then some customers will convert even when the pricing isn’t local currency. Only once it’s clear that international demand exists does it make sense to invest in multi-currency checkout and other conversion optimisations. Then the next stage is to open an international office when it can be justified on a cost basis or when it becomes necessary to keep driving growth.

However, for other businesses international expansion is more difficult. If sales and marketing or delivery or implementation of the product requires activity proximate to the customer then local capability has to be built prior to sales, necessitating investment ahead of any validation of demand. In most cases the initial investment amounts to a couple of heads, a small office and a commitment from a member of the founding team to move to the new country, or at least be there for a week or two a month. That’s a big deal for a small company, and more so when you factor in the amount of time the rest of the team will spend thinking about and supporting the international office.

For companies that fall into this category judging the timing of the investment is critical. The best advice is to wait until you have got your model working in your home country before setting up abroad. Otherwise you are, in effect, running the same experiment at once in two different geographies, which doubles the cost of learning. That might sound manageable, but bear in mind that there’s an organisational cost as well as a financial cost. You will be making the same mistakes in two different places, which can often mean changing people’s roles or even letting them go.

The advice to expand internationally once the model is working is attractive in its simplicity, but can be challenging to follow, because there’s often no clear moment when the model is ‘working’. One great way to think about the life of a startup is that it is a never ending search for perfection. At the beginning perfection is miles away, and over time it gets closer and closer, but there is always room for improvement. The question then becomes whether the model is ‘working well enough’ to expand internationally. Two thoughts here, firstly, many startups experience a moment when it feels like the focus of the management team moves from continually fighting fires to optimisation. If you haven’t reached that moment yet then think hard about whether it’s too early to set up your first international office. And secondly, pay attention to how important the international office is to the goals of the company. The more important it is the more tolerance you should have for going international sooner rather than later.

It’s also important to think about who will go. It’s tough to execute well on an international expansion strategy and more companies fail than succeed. It’s key that the new office is headed up by a trusted senior executive, and ideally one of the founding team. That will make sure the international expansion effort gets the attention it needs back home and maximise the chances of cultural alignment across your two offices. If you can’t spare someone of the required calibre then best to wait until you can.

Finally, there’s one special case of international expansion that I want to mention here. Some founders consider expanding to the US because they want to increase their chances of raising venture capital from US investors. I think the important thing to understand is that US VCs rarely invest in seed or Series A companies that are outside the US. There are a few who do so occasionally, and a number of them advise founders that having somebody on the ground in the US is either a gating factor or will make it much easier to get a deal over the line. However, they will never guarantee that if you do open a US office they will invest, making it dangerous to do anything you wouldn’t otherwise do in the hope of getting them to commit to your business. The bottom line is that if you really want US investors in an early stage startup you should move the company HQ to San Francisco or New York. Anything else is playing at the margin.

In conclusion, getting the first international sale and opening the first international office are exciting and value creating moments in the life of a startup and ambitious founders want to get these milestones under their belt as soon as possible. However, expanding globally is riskier for some startups than others. Best practice in deciding when to pull the trigger is to build a solid understanding of that risk in your company and to balance that with the reward you will get if you are successful in executing on your international strategy.

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About the Author

This article was written by Nic Brisbourne of the Path Forward. The Path Forward was developed by Forward Partners, a VC platform that invests in the best ideas and brilliant people. Forward Partners devised The Path Forward to help their founders validate their ideas, build a product, achieve traction, hire a team and raise follow on funding all in the space of 12 months. The Path Forward is a fantastic startup framework for you to utilise as an early stage founder or operator. The framework clearly defines startup creation as being comprised of three steps. The first step of this framework involves understanding customer’s needs.Nic is Head of PR & communications at Forward Partners. Over the course of a 10 year career in communications, he has working with global brands including Orange, Warner Bros., BBC, and amazon.co.uk.

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Entrepreneurship

The 6 Habits of Amazing Leaders

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Great leaders all seem to have this commanding and magnetic force about them that follows them in and out of each room they enter. It’s that something that you can’t quite put your finger on. Maybe it’s charisma, ambition, drive or personality. In many ways, it’s probably a little bit of all those things, which is why great leaders always seem to be the total package.

But it’s also accurate to say that these effective leaders didn’t just wake up one day with all of these skills and expertise. On the contrary: any good leader knows that, in order to be effective, you need to make time for personal growth and develop good habits that hone these skills.

There are many lists out there with great suggestions, but we’ve put together the six most important habits of truly effective leaders.

1. Lead without title.

Some of the best leaders out there got themselves started by stepping up in the work place and self-leading. Having personal initiative is the key to personal professional growth and turning your methods and attitudes into a productive and, at times, commanding presence. This doesn’t mean arrogance. In fact, it really means the opposite.

As you continue to grow and develop as a leader — and actually gain titles — it’s important to remember where you came from. In this way, you can identify other individuals under your leadership that exhibit the same type of self-motivation you did. Be understanding and welcome failure as you lead. If you don’t get caught up on your title in the workplace, you’ll foster an environment that encourages inquiry and innovation.

2. Take responsibility.

And when failure does indeed happen, don’t create a scapegoat. You’re the leader of the group, and you are responsible for that group. Take this moment as an opportunity to teach and mentor those around you instead of assigning blame. You’ll keep the work environment productive and positive this way, and encourage more and better dialogue between your team members.

Remember: failure is ultimately necessary for truly great success, because it serves as one of the best teaching tools out there. Knowing you support them, no matter what, will allow your team to really get creative.

3. Think outside the box.

Leaders are innovators — there’s no question about it. Really effective leaders tend to look at things in very different ways than most people, and they encourage those they work with to do the same.

This also means reframing an idea once the first attempt has failed. If you can continually inspire flexibility, invention and adjustment — and treat them as positives — you will sit among truly world-class leaders like Steve Jobs of Apple, Sheryl Sandburg of Facebook or Reed Hastings of Netflix.

4. Have a vision and objective that’s shareable.

Nevertheless, this innovation and out-of-the-box thinking has to be easily communicated to your team. You not only need to be clear, organized and honest, but you also need to be a persuasive communicator that’s adept at listening to grievances, questions and feedback (without arrogance).

If your grand vision can’t be shared and adopted by the team you’ll be working with, the likelihood of success is virtually non-existent. There’s a reason why leaders have a team: people are stronger together.

5. Don’t be afraid to delegate.

Working together with others means that, as a leader, you recognize you can’t do everything by yourself. The best leaders learn to delegate and the most effective daily habits of business leaders focus on ways to involve the whole team. Accounting for the importance of effectively organizing and delegating tasks not only makes others feel included, but is essential for the daily functioning of your business.

6. Find time for relaxation and rejuvenation.

Finally: remember that all this talk of productivity is useless if you’re feeling burned out, or less than 100%. It’s extremely important for strong leaders to make sure they maintain a work/life equilibrium. Don’t shy away from physical activity or time off. These two things are extremely important for maintaining your sanity and health.

Practice daily meditation exercises, and make sure you take time to disconnect. This also sets a great example for your entire team and has a ripple effect. If they understand that you place importance on self-care, then they’re likely to practice the same methods — which will make everyone more productive in the end.

If you’re toying with the idea of a leadership position, take the plunge! Be a self-starter and inspire others. Leadership can be difficult, it’s true, but the results of carrying a team successfully through a project and inspiring them to step into new roles themselves is extremely rewarding. It will also give you the opportunity to push your limits and grow personally and professionally.

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About The Author:

This article was written by Kayla Matthews, an editor of Productivity Theory.Kayla is a freelance writer, blogger and topic researcher and, because I want to churn out tons of articles and blog posts every week, I have to manage my time as efficiently as possible. I use lots of Google Sheets, Google Calendar reminders, tons of apps and lots and lots of personally cultivated habits to stay on top of everything.

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Callum Connects

Andrew Schorr, Founder of Grata

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Taking a different route throughout his life, Andrew Schorr ended up in China and started several businesses.

What’s your story?
I moved to China after I graduated from college in 2004. English teaching was the easiest way to get there, so I looked on a map and picked a small town in Hubei, because it looked to be more or less in the middle of China. I was the only foreigner there.

Back then, everything was about the upcoming Olympics in Beijing, so I moved to the capital after my year of teaching. Pretty soon after arriving, I met the co-founder for all three of my companies. We decided to start a company together the first day we met. He has now moved back to the US and builds flight software at SpaceX.

Our first company, an online city guide, was re-purposed into our second company, GuestOps, a web concierge platform. We sold GuestOps to most of the major international hotel brands in China and still operate it. The genesis of our latest company, Grata came from looking at the intersection of hotels and WeChat in 2012, when WeChat was just starting to blow up. Grata expanded from hotels into a live-agent customer service console.

What excites you most about your industry?
Our thesis with Grata has always been that what is happening with WeChat in China is the future of messaging platforms globally, and as an international team building on WeChat, we would be well-placed to capitalize on that trend. It’s taken longer than we expected for the industry (and us, for that matter) to get there, but finally, we’re starting to see messaging as a platform to get better traction in other markets.

What’s your connection to Asia?
I’ve always been a bit of a contrarian. I grew up in Texas, where all my friends studied Spanish in school. I studied German for no reason in particular. I took a similar path in college: Chinese and Japanese seemed like languages that not a lot of people who look like me studied. I was one of only two students in my third-year Chinese class.

Concur conference in San Francisco, Calif., Wednesday, Oct. 2, 2013. (Photo by Paul Sakuma, Paul Sakuma Photography) www.paulsakuma.com

Favourite city in Asia for business and why?
Shanghai. I should live there, but Beijing has been home for so long. I take the night train down to Shanghai every two-three weeks to meet with clients. Domestic flights are way too unreliable here.

What’s the best piece of advice you ever received?
Don’t plan too far ahead; otherwise, you plan yourself out of good opportunities.

Who inspires you?
Has anyone said “Elon Musk” yet? Barack Obama would be another.

What have you just learnt recently that blew you away?
The gravitational waves recently detected from neutron stars colliding, were so subtle as to only affect the distance from earth to our closest star, Alpha Centauri (4.24 light years away) by the width of a human hair. Perhaps in another life or in the future, I’ll be an astronomer, but a telescope doesn’t do me much good in Beijing.

If you had your time again, what would you do differently?
When I give advice to students looking to get into entrepreneurship, I advise them to work for a post-Series A startup first and learn from a company that’s already doing things well. I learnt everything on my own, which is slower and you pay for your own education. If you work for a startup that’s small in the beginning, you risk learning bad habits.

How do you unwind?
I Hash! The Hash is a drinking club with a running problem. The Hash attracts good people from all walks of life and doesn’t take itself too seriously. It’s a great way to meet fun-loving people all over the world. It’s also how I met my co-founder, our first lawyer, and my girlfriend.

Favourite Asian destination for relaxation? Why?
Pulau Perhentian, Malaysia. A fantastic beach and where I first learned to scuba dive.

Everyone in business should read this book:
For business in China, Tim Clissold’s, Mr. China.

Shameless plug for your business:
Grata does WeChat contact centers for many top-tier brands in luxury retail, travel, financial services and hospitality. We started developing on WeChat before they even had an open platform. Grata provides the most value for large enterprises with complex routing and content demands for their contact centers.

How can people connect with you?
Check out www.grata.co or email me: [email protected]

Twitter handle?
My personal handle is @andrew_schorr and we tweet about messaging from the company handle @grata_co.

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started, built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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