We live in a global marketplace.
The conventional idea of starting a tech company in Silicon Valley, and waiting several years to expand overseas, is quickly becoming antiquated.
Thanks to modern technological advances, it is now almost as easy to sell your products and services internationally as from your home country. We may not all use the same currency, but that doesn't stop us from easily exchanging money over the internet.
For this reason, many startups are now targeting international markets early-on in the journey to exit.
As Michael Fertik, founder of Reputation Defender, told the Harvard Business Review:
"I think it’s critical for companies — including and especially young businesses — to go international earlier, rather than waiting five, seven or 10 years. That was a decision we made for our company, Reputation.com, and it was the right move. It opened some good revenue streams for us and, almost more importantly, helped surface rich cultural intel about our products and what offerings would appeal the most in which markets. As a result, we were able to intelligently redirect resources to capitalize on the countries with the most initial promise for us."
Technology startups have a particular advantage when it comes to reaching international markets, since SaaS products often have a universal practicality.
For example, if you have a piece of software that increases the effectiveness of CMOs in your home country tenfold, it's likely that same software will be just as useful to CMOs in China, Australia, or Norway.
Unlock the full potential of Silicon Valley's tech startup community with The Silicon Valley Startup Guide.
The Best Way to Expand Your Tech Startup Internationally
An increasing number of entrepreneurs and founders are asking themselves questions like:
- How early should we target international markets?
- Which international markets should we target first?
- Do we need to file for international trademark protection?
- What KPIs should we dig into to determine if we should expand internationally?
Questions like these should be answered as soon as you begin to scale. Translation: When your customer acquisition growth rate is increasing, and your acquisition costs are decreasing, it's time to think about expanding into international waters (assuming that is part of your long-term plan).
According to Tech Crunch contributor Steven Carpenter, the best time to begin scaling outside of your home country is when 25 percent or more of your business is coming from international markets.
The key to successful international expansion is making strategic decisions based on the metrics that matter most. While the process is unique for everyone, there are some common steps that must be taken.
In this article, we'll summarize five actions every tech startup — from Silicon Valley to London — must take before going international. Let's get started:
5 Tips for Expanding Your Tech Startup Internationally
1. Conduct Initial Research
Much like when you first started your company, expanding overseas requires taking a comprehensive assessment of the marketplace and your desired place within it.
This means evaluating factors like:
- Your business's strengths and weaknesses within the desired international region.
- The strengths and weaknesses of your competitors within the region.
- Product modifications that must be made to accommodate international users.
- The total available market vs. the serviceable available market.
Basically, you want to obtain an accurate picture of how much demand is really there for what you are offering. That means thoroughly utilizing every available avenue to research the crap out of your target market and the competition. Skimp on research now, and you will probably regret it later.
There are several ways to go about conducting global market research:
While you may want to conduct specialized, paid research, a variety of comprehensive databases are available to you online, free of cost:
- UN Data
- The World Trade Organization
- International Trade Centre
- World Bank (open data page)
- Central Intelligence Agency (The World Factbook)
- International Monetary Fund
During this stage, there is no such thing as "too much information." Your goal is to scour all available public information to gain a thorough understanding of what your competitors are doing, how they are doing it, and what they plan to do in the near future.
If you are seeking more personalized research, consider conducting a Google AdWords campaign that drives traffic to a targeted landing page. Since you can set your own budget and geographic parameters, this is a great way to test your assumptions about international markets.
Are prospects clicking on your ads? Which ads are they responding to? How well is your offer converting? You may also want to set up a landing page, offering some sort of incentive in exchange for contact information. This way, you can follow up with interested parties when you expand.
There is no substitute for on-the-ground research. Meeting face-to-face with the individuals you want to market to can provide invaluable feedback as to how you might modify your international approach. Cultural values, social protocol, and innate preferences can vary dramatically from country to country. Without a deep understanding of your international target market, you leave a large margin for costly mistakes.
Once you have determined market fit, begin communicating your ultimate international vision with all founders, board members, and team members.
2. Choose Your First International Expansion Market
Once you have narrowed down your options, it's time to settle on the first international market you would like to infiltrate. Often, tech startups start with a country that has a high enough market demand to justify the move. The most popular countries that fit this criteria are the United Kingdom, the United States, Canada, Australia, France, Germany, and Japan.
With that said, don't be afraid to look outside of the box. According to a Hickey & Associates report, Copenhagen is the number one destination for international business expansion, followed by a few other surprises.
At the end of the day, you want to prioritize countries that have:
- High broadband and mobile penetration
- Stable political environments
- Accessible payment infrastructures
- Favorable regulatory and tax requirements
Countries that have a reputation for being more challenging include China, India, Brazil, and sometimes Germany. Interestingly, both Australia and New Zealand are popular test market choices for companies because they seldom make up more than 10 percent of revenue scale. As such, both countries are somewhat accustomed to having unusual ideas sprung on them.
3. Delve Into Specifics
Most international expansion errors happen because of unfortunate oversights during the planning phase. Each country has its own peculiarities when it comes to investment, legal, marketing, and so on. Look no further than video-streaming giant Netflix for a recent cautionary tale.
In 2016, the company branched out into more than 130 new countries. As reported by Tech World, it quickly faced an array of roadblocks, including a "lack of local content, language barriers, and underdeveloped payment processing" issues. Additionally, the company failed to accurately adjust the pricing of its services to match several of its regional economies.
Netflix may have had enough capital to weather the storm, but a less robust startup would not! Thus, it's important to leave no stone unturned when planning for international expansion:
- What will your supply chain logistics look like?
- Are you targeting a region within a country, a particular country itself, or multiple countries?
- How much capital do you need for marketing, translation, redesign, legal, etc.?
Ultimately, we recommend consulting with experienced international startup advisors who can guide you through the planning process from start to finish.
4. Secure Legal Protection
Another key player you will need supporting your international initiative is a good attorney. Local legal representation in your target country can guide you through the paperwork and help lay the groundwork for a seamless launch.
In addition to general representation, you will also need an experienced trademark attorney who can guide you through the process of protecting your brand names abroad. Despite the fact that all countries follow the same Nice Classification System, applying for trademarks internationally can be a bit cumbersome.
For startups considering a move to Silicon Valley, check out The Silicon Valley Startup Guide for key resources like tech startup-focused attorneys, VCs, and more.
5. Assess Team Strategy
Finally, determine how many team members you will need for international expansion and in what capacity. Obviously, if your tech startup sells physical goods, you will need significantly more team members to handle manufacturing, distribution, and warehousing.
"Trying to juggle an overseas operation while maintaining your current domestic customer base with a small staff is incredibly difficult, and you likely won’t be able to sustain your growth. Before you decide to expand, make sure you have the financial and structural stability to add staff members who can handle the new influx of work that comes with such growth."
It's imperative that the individuals you hire to communicate with overseas partners and customers be fully immersed in the local culture. This is another reason why it's so important to travel to the actual country and spend time making face-to-face connections.
Additionally, you may decide some of your all-stars from the home office should venture abroad to run things. In which case, securing office space will be a top priority.
With locations in the heart of both San Francisco and London, RocketSpace is a great option for startups seeking to become part of an international tech ecosystem. By tapping into existing startup networks, you can conveniently gain insight into important cultural distinctions, network with key industry players, and obtain access to top local talent for growing your team.
Join a Global Tech Ecosystem
The unlimited geographical access provided by online platforms has made international expansion easier than ever before. However, it would be a mistake to think easy translates to fast (in this case).
Scaling overseas requires significant market research, legal preparation, and long-term stratagem. One of the most important aspects of making sure everything goes smoothly is thoroughly understanding the particulars of the country you want to expand to:
- How does this market differ culturally from that of your home country?
- What adjustments will need to be made in terms of marketing, functionality and user experience?
- What are this country's regulatory and legal requirements to do business?
International expansion won't happen overnight. But it can happen a lot faster when you surround yourself with the right people. RocketSpace provides Seed to Series C-funded tech startups with flexible coworking arrangements, warm introductions, and a global ecosystem of resources designed to accelerate success.