“The greatest thing in this world is not so much where we are, but in which direction we are moving.” Johann Wolfgang Goethe once wisely said.
Well, many startups are moving from their home market towards foreign countries, seeking new opportunities to grow and succeed.
While the path of internationalization is certainly exciting, it is often a bumpy one. In the Startup Monitor of 2021 from the German Startups Association, startups were asked about the biggest hurdles to expansion. Interestingly, according to the founders, the biggest challenge was finding a suitable partner in the new market (54%). This was followed equally by financial hurdles (38%) and regulatory, legal and administrative barriers (38%). The fifth point cited was adapting one’s own product to the target market. For other European startups, it’s surely a familiar story.
Here, we take a look at how you can supercharge your internationalisation strategy to a destination of success.
1. Set goals
There is no ‘one size fits all’ concept for expanding into a new market. Should you choose a trade or distribution partnership, acqui-hire, spin-off, joint venture, or “from the scratch” start a new company abroad?
It is important to find out which way going abroad makes the most sense for you. Having a clear objective is the best place to start. Together with your team, define your expectations for the expansion: What do you want to achieve? In what time frame? What form of expansion suits you?
A good example is the Turkish startup Getir, which just made a name for itself by taking over the German delivery startup Gorillas. What many don’t know: because it had no funding for years, it chose a franchise model for its ‘cautious’ expansion that was adapted to its own situation, giving local Getir partners a share of sales in the respective market and charging no royalty.
2. Research, research, research
The chances of success abroad increase with the quality and quantity of research you invest in opening up new markets.
Get an exact picture of possible target countries and break them down to those that best meet your criteria and requirements (important: define them beforehand!). Here you can use a simple competitive matrix to weigh up the different advantages and disadvantages of the markets. In any case, it is important to do intensive research on the following questions:
General: What are the legal and financial conditions in the target country? What options are there for establishing a presence in the target country? What are the regulations that affect you? What about IP? Tax regulations? What are the government/regional incentives for investing/expanding into the target country? How can you insur yourselves?
Market: What problem are you solving in the country? Who are your competitors? How do target groups and customer preferences differ? How do you reach your customers? What are the current market dynamics and trends? How does the pricing structure differ locally?
Network: What kind of local partners would be helpful? Who exactly would be potential partners and how can you find them?
Important: Research here should not be understood as purely search engine-driven knowledge discovery. Talk to experts, to startups that have already taken the step into the market, to companies in your sector, to customers in your sector. Spend some time on site yourself, or send team members.
3. Time and resource planning
Whether it’s time or money, as is so often the case in startup life, you will most likely need more than you initially think.
Therefore, take time for meticulous financial planning (including a conservative buffer). Services like translations, lawyers, tax advisors or a communication agency: the physical setup and insurance often cost more than you think. Secondly, design a realistic timeline that also absorbs setbacks. Again: the better the research work at the beginning, the easier it is to estimate how long the whole setup will take in the target location.
4. Team
As in every stage of a startup’s growth, internationalization stands and falls with a good team.
Jonathan Kurfess, CEO of Appinio, learned in his experience with internationalization that it is especially important to find a founder type when it comes to the country lead. Not a “manager type” (sorry for the cliché), but someone who will go all out and make the venture his/her own.
It is then important to consider how much you will set up abroad and what should be managed from your headquarters. Can finances be managed from home? What about sales? Do you need a local communications professional? Should communications be handled in-house or by an agency? All of these options need to be explored in advance.
5. Never walk alone
Even when it comes to finding a partner, take your time. Follow recommendations, involve your investors and networks, do sufficient background checks on potential partners.
Local investment promotion agencies are a very good place to start in order to identify suitable partners. Investors you already have on board can also help pave the way to good foreign collaborations. Soft-landing, matchmaking or mentoring programs also ease the way into the market. Local startup ecosystems organizations like Startup Portugal, La French Tech or Startup Estonia or even city initiatives like Startup Montreal are also happy to help.
Lastly, when it comes to issues like your office space, it might be worth joining local coworking spaces or innovation hubs to tap into the (tech) communities directly.
6. Testing and adapting the offering
“All failure is failure to adapt, all success is successful adaptation.” (Max McKeown, author of Adaptability – The Art of Winning in an Age of Uncertainty).
The better you know your target market, whether through partners, the local team, surveys, interviews and focus groups, the better you can adapt your offering to local conditions. And this goes far beyond the technical translation of the website! Images, locally adapted examples and best practices, language, pricing and services should be harmonized for each location. It is advisable to do this in small cycles and in between to get feedback if the concept you have developed, your adapted product, your marketing messages fit or are well received.
7. Go-To-Market Strategy
After so much research and strategic decision-making, it’s time to formulate a comprehensive Go-To-Market Strategy.
Typically, a GTM strategy is a plan that details how you will engage and connect with customers and clients, convince them to use your product or service and to gain a competitive advantage.
Going international, you’ll need to consider market intelligence, market segmentation, and product messaging – all within your market’s unique context.
8. Proactive risk management
Lastly, a topic that might feel messy or a bit pessimistic, but incredibly worthwhile is proactive risk management. Ask yourself what are the worst-case scenarios and how will you respond to them. What happens if you’re forced to reduce the team because the product isn’t catching on? What would you do if your most important local trading partner backed out?
Similar to crisis communications, it pays to assume the worst once and then establish processes and measures for how you plan to handle each situation.
As you can see, there is no magic formula for internationalization and there are many aspects to consider. However, with the right preparation, good timing, an adapted product and a sensitive market approach, you will succeed!
