Going global - tips for internet startups

In a recent guest piece on TechCrunch, French internet entrepreneur Loic Le Meur provided some advice to internet startups: you need to be global. While I agree with this piece of advice, I believe Loic's argument that addressing local markets is a dead-end actually misses the point - every company serves a "local" market in some form or another. Global companies simply serve multiple "local" markets in different locations around the world. That aside, there are a number of compelling reasons why startups should think globally from the outset, including:
  • Chances are that the total number of prospective customers for your product or service overseas exceeds the total number of prospective customers in your home country. This means that for many startups, the international markets represent a logical growth opportunity.
  • Startups whose products and services have the potential to fulfill needs in foreign markets risk losing those markets to local competitors if they don't move fast enough.
  • Many startups can take advantage of currency exchange rates by being global. Startups in the United States, for instance, may be able to help the bottom line by generating revenues in stronger currencies. And those that have to pay overseas vendors with a weakened US dollar can use revenues derived in stronger foreign currencies to offset their increased costs.
I've personally been involved in business dealings in Europe (both Western and Eastern), South America, Asia and the Middle East. I've learned a lot from my experiences and think that the basic steps involved in "going global" apply regardless of the industry you're in. While entire books have been written about this subject (and for specific countries and regions no less), I submit the following common sense advice that I've learned isn't always so common: 1. Understand the Market and the Opportunity Do not assume that a foreign market is ripe for your product or service. Before deciding that your startup needs to expand to a specific country or region, it's wise to perform a thorough analysis of the market there so that you truly understand if an opportunity exists and where it lies if it does. You may be surprised to learn that the real opportunity is different than the one you imagined. Once you've determined that a viable opportunity exists, coming up with a comprehensive market entrance strategy that contemplates issues ranging from local laws to business structure is important. Those who don't develop a sensible plan for entering a foreign market are essentially flying blind. Not surprisingly, flying blind usually doesn't result in a positive outcome. 2. Understand the Culture I'm always amazed by the number of people that seem ignorant to the fact that culture has an incredible impact on all facets of business. Culture impacts everything - from the way negotiations are paced to the way final decisions are communicated.There's nothing more embarrassing than watching somebody violate well-known local etiquette or listening to a person who does not know how to interpret the discussions he's involved with because he cannot place those discussions in the proper cultural context. Not knowing the culture can kill a deal faster than toxic derivatives can kill an investment bank. Startups looking to expand overseas will save themselves a lot of time, money, hassle and possibly face by taking the time to learn the cultures of the partners and customers they want to do business with. 3. Look to Partner with the Right People Even for startups that have enough cash to set up their own subsidiaries overseas, finding a local partner in some form or another is often desirable. A good local partner has the knowledge, resources and trusted relationships that can't simply be obtained overnight with money. But finding the right partner is crucial. Unlike Loic, I advise startups not to assume that they should seek "key partnerships with large local players." Many companies expanding internationally make the mistake of coming up with a list of target partners before they understand the market and the culture. This can easily lead to failure. What the right partner looks like will only become apparent once you've evaluated the market and have a good understanding of the culture. Do not under any circumstances let assumptions generate your target partner list. Regardless of who you look to partner with, make sure that:
  • The interests and expectations of both parties are aligned. If you're thinking short-term, for instance, and your partner is thinking long-term, problems will surface. It sounds obvious, but making sure that everybody is on the same page is something that often gets overlooked by companies in a rush to go global.
  • You and your partner know what each party needs and that each party is capable of meeting those respective needs. It may, for example, be appealing to partner with a company that has significant valuable relationships in the local market, but if you also need the partner to fulfill obligations related to technology and operations and the partner is less-than-qualified to do so, the relationship is not likely to deliver the desired results for either party.
4. Time It Right Are you ready to expand overseas? Do you have the resources required? Are you committed to making the necessary investments? Will you reasonably have enough credibility to attract the right partner? Thinking global is easy; going global and doing it the right way is often challenging. The old adage "timing is everything" applies to expanding internationally. Showing up to the party too early can be just as costly as showing up too late, not showing up at all or leaving prematurely. 5. Localisation is More than Translation I've seen quite a few internet companies that seem to equate localization with translation. Translation is just one part of localization. Cultural nuances may dictate that a website interface, for instance, be completely redesigned to meet the needs of the local market. Startups that assume there is no work involved beyond translation risk taking a product or service that would have otherwise succeeded and dooming it to failure because it wasn't packaged properly. Furthermore, I would suggest that startups think twice about following Loic's advice that they "create an application that lets your community translate the site by themselves." Facebook did this and it wasn't perfect. For obvious reasons, this could be very problematic and it's inexcusable for any company that is committed to serving a foreign market successfully (especially one that has raised over $300m in funding). If you're serious about entering a foreign market, your partner or a qualified local entity should be relied upon to ensure that you get your localization right the first time. You will typically get what you "pay" for. 6. Being Global is a Process, Not an Outcome Once you've "gone global," your work is not done. Making sure that you're continuing to invest as necessary to support your global presence is key, as is maintaining the relationships with your partners and customers, especially when they are in regions where relationships are considered the most valuable asset. Running a global company is not for the faint of heart either. Changing economic, political and cultural situations can have a tangible impact on global businesses and the ones that survive and thrive are those that have the wherewithal to withstand them because they're committed to the process. Conclusion Going global is rarely easy and it's often risky. But it can be extremely rewarding for those companies that do it right. Doing it right is the key.

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