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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.

Entrepreneurship

Women on Top in Tech – Daphne Ng, CEO of JEDTrade

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(Women on Top in Tech is a series about Women Founders, CEOs, and Leaders in technology. It aims to amplify and bring to the fore diversity in leadership in technology.)

Daphne Ng is the CEO of JEDTrade, a blockchain technology company focused on trade, supply chain, and financial inclusion projects in ASEAN. She is also the Scretary-General at ACCESS and Exco. of Singapore Fintech Association

What makes you do what you do?
I was introduced to blockchain technology in 2016 after I left my corporate banking career after 10 years. It was my mentor who first got me interested in this technology, which I then went on to delve further into, on its potential applications in the lending and trade finance space – domains where I came from.

How did you rise in the industry you are in?
Being in the space for 2 years and actively involved in the ecosystem, I was able to bring on the projects, network and a good degree of thought leadership in this vertical. Early on in the startup journey, our team faced many challenges. And to me, the key to rising above failures are two essential factors – resilience and support. While resilience is innate, I received a lot of help be it in terms of connections or advice. ‘Nobody succeeds without help’ rings very true for me.

Why did you take on this role/start this startup especially since this is perhaps a stretch or challenge for you (or viewed as one since you are not the usual leadership demographics)?
From the start, I focused on my domain expertise in trade finance and the application construct of how blockchain and DLT can be applied to these use cases. Also, my strategy from the start was to build a technology company made up of 80% tech and engineers, which is also our key competitive advantage today. At the end of the day, deliverables are about strategy and execution, which includes building and leading an ‘A’ team.

Do you have a mentor that you look up to in your industries or did you look for one or how did that work?
I have many mentors, which includes our company advisors (all of whom are well-known in this industry) and mostly informal mentors I meet via my connections, and on various occasions and circumstances. Creating opportunities also means putting myself in the right place, at the right time. And in my case, these were mostly organic and genuine friendships formed from the initial connection.

How did you make a match if you and how did you end up being mentored by him?
To me, a match in values is very important. It also takes humility to ask for help and be willing to listen to advice, which is important in order for mentorships to be successful – be it formal or informal.

Now as a leader how do you spot, develop, keep, grow and support your talent?
I love this question! I am passionate about building strong teams and helping my people grow. I abide by the 3Rs when identifying talents: resourcefulness, resilience and right values. And then I invest in the ‘potential’ and this means giving them room to lead, make decisions and take risks.

Do you consciously or unconsciously support diversity and why?
My support of diverse talents, skillsets and characters can be seen in the make-up of our core team – all helming specific roles and each bringing their own value to the table. We need the sum of all parts to build a great company.

What is your take on what it takes to be a great leader in your industry and as a general rule of thumb?
Great leaders emerge in times of failures and challenges, never abandoning the team, and always putting the team’s interests before her own. And I consciously live by these mottos every day.

Advice for others?
My advice to other entrepreneurs: be resolute and dare to be different. If you are going to follow others, then you will end up on the same path as them. No right or wrong; but I would rather chart my own path. This June, we are officially launching our blockchain project, Jupiter Chain (www.jupiterchain.tech), which have garnered much interest in the industry, even before we made it public. We believe this project is the epitome of marrying innovation with practical implementation, and we want to be the first to truly operationalize blockchain for our ecosystem projects in this region.


If you’d like to get in touch with Daphne Ng, please feel free to reach out to her on LinkedIn: https://www.linkedin.com/in/daphne-ng-%E9%BB%84%E7%91%9E%E7%8E%B2/

To learn more about JEDTrade, please click here.

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Callum Connects

Jace Koh, Founder of U Ventures

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Jace Koh believes cash flow is the lifeblood of your business. Understanding it will enhance your ability to run and manage your business.

What’s your story?
My name is Jace Koh and I am the Founder of U Ventures. I’ve always been inclined towards investment and entrepreneurship. I’ve played a hand in starting businesses across these industries – professional services, cloud integration, software and music. I believe that succeeding in business is tough, but that’s what makes the rewards even sweeter.

What excites you most about your industry?
Everything excites me. These are my beliefs:

  • Why is accounting important?
    The accounting department is the heart. Cash flow is like blood stream, it pumps blood to various parts of the body like cash flow is pumped to various departments and/or functions in a business. It is vital to the life and death of the business.
  • Is accounting boring?
    Accountants are artists too. They paint the numbers the way they want them to be.
  • What makes a good accountant?
    A good accountant can tell you a story about the business by looking at the numbers.
  • Why is budgeting and projection important?
    Accountants are like fortune tellers, they can predict the numbers and if you wish to understand your business and make informed decisions, feel free to speak to our friendly consultants to secure a meeting.

What’s your connection to Asia?
I was born and raised in Singapore, and here’s where I want to be.

Favourite city in Asia for business and why?
Singapore is my favourite city. We have great legal systems in place, good security and people with integrity. Most importantly, we have a government that fosters a good environment for doing business. I recently went for a cultural exchange programme in Hong Kong to learn more about their startups. I found out that the Hong Kong government generally only supports local business owners in terms of grants. They’ve recently been more lenient and changed the eligibility to include all businesses that have at least 50% local shareholding. But comparing that to Singapore, the government only requires a 30% local shareholding to obtain government support. In the early days of starting a business, all the support you can get is precious. It’s great that we have a government that understands that.

What’s the best piece of advice you ever received?
The best time ever to plant a tree was 10 years ago as the tree would have grown so big to provide you with shelter and all. When is the next best time to plant a tree? It is today. Because in 10 years time, the tree would have grown big enough to provide you shelter and all.

Who inspires you?
Jack Ma. His journey to success is one of the most inspiring as it proves that with determination and great foresight, even the poorest can turn their lives around. I personally relate to his story a lot, and this is my favourite quote from him, “If you don’t give up, you still have a chance. Giving up is the greatest failure.”

What have you just learnt recently that blew you away?
I’ve faced multiple rejections throughout my business journey, and recently came across a fact on Jack Ma about how he was once rejected for 32 different jobs. It resonated very deeply and taught me the importance of tenacity, especially during tough times.

If you had your time again, what would you do differently?
Nothing. I live a life with no regrets. Everything I do, regardless of whether it is right or wrong, happy or sad, and regardless of outcome, it’s a lesson with something to take away.

How do you unwind?
I love to pamper myself through retail therapy and going for spas. I also make a conscious effort to take time off work to have a break outside to unwind as well as to uncloud my mind. This moment of reflection from time to time helps me see more clearly on how I can improve myself.

Favourite Asian destination for relaxation? Why?
Taiwan! Good food with no language barriers and the people are great!

Everyone in business should read this book:
I don’t really read books. Mostly, I learn from my daily life and interactions with hundreds of other business owners. To me, people tell the most interesting stories.

Shameless plug for your business:
We’re not just corporate secretaries, we’re “business doctors.”
U Ventures is a Xero certified advisory firm that goes beyond traditional accounting services to provide solutions for your business. You can reach us on our website: http://uventures.com.sg/

How can people connect with you?
Converse to connect. You can reach me via email at [email protected] or alternatively, on LinkedIn here: https://www.linkedin.com/in/jacekoh/

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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