Going Global — Founders Share Tips on International Expansion
We gather insights from tech scale-up founders who are currently expanding overseas.Insights + resources
Lessons shared = challenge halved
Entering a new market is undoubtedly challenging, you need look no further than the failed attempt from industry leader and retail giant, Walmart, who spent $1bn trying to enter the German market, only to discover that German’s don’t like to be greeted at the door and would rather pack their own bags. However, while large companies appear to have the ability to absorb these mistakes, the stakes are higher for resource poor scale ups.
Access to new markets is the second most important hurdle to growth for scale-up founders (SUI Report), despite policy changes and dedicated programmes whose aim is to make foreign markets more accessible for businesses.
We have drawn insights from founders who spoke about the challenges of entering new markets in our Real Voices of Scale-up podcast. They share the lessons they’ve learnt from taking their businesses global to help other scaling teams.
Scale-ups (particularly those from countries without an established tech scene) tend to gravitate to tech hubs to access scarce resources (capital and talent) that are critical to scaling a business. For example, London is achieving the highest level of tech investment in Europe, or Berlin is home to Europe’s largest talent pool. With offices in London, Berlin and Amsterdam, Jeff Lynn, Co-Founder of Seedrs, found that they are able to attract investment from across Europe.
“We saw a very significant amount of activity come from Europe last year. About 30% of our investors were based in Europe (2017) and that number continues to grow.“
Jeff asserts that it is easier to attract investment in Europe due to there being a number of connected tech hubs which are spread throughout the region, “unlike in the US where there is such concentration in Silicon Valley”. Although Silicon Valley is the leading global hub for investment, with local businesses having amassed $140 billion of funding since 2012, Jeff finds that due to the level of concentration, there is more competition for investment between scale-ups in the area.
In Europe, however, there are more tech hubs, which means a lower concentration of scale-ups and less competition between them for the resources. As well as making it easier to attain these resources, lower concentration can also mean cheaper rental costs and greater talent pools. This is why it is not only important to assess which resources you need and where those resources are, but also the level of competition in that area.
To help fully understand a new market, many teams choose to partner up before setting up a physical office overseas. Julian Childs, Managing Director of Business Insider Europe, said partnerships have enabled them to gain insights into new markets and create connections which help build a presence overseas, all without physically being there.
“Our approach to a new market will depend on many things — culture, legalities, business opportunities. Those factors will determine whether we’re heavily involved or partner up.”
Whether a company is looking to grow their customer base, grow their team, gain market insight, find investment or capitalise on any other benefits in a foreign market, partners can play a vital role in achieving those goals effectively and affordably.
Accounting for Culture
Connecting with your target market is made even more challenging when there are cultural clashes between your key constituents. From the get-go Zego, an innovative flexible insurance provider, built their tech platform with international scalability in mind and hired a diverse team.
“We’ve got 16 nationalities here and a team that can deliver (our product) in multiple-locations very quickly.”
A diverse internal culture translates to a more international brand as thoughts and ideas are contributed from a team with a wider variety of views, beliefs and backgrounds. Zego can draw upon team insights to assess which locations are best suited to their offering, and to determine whether there needs to be any changes to their messaging. Essentially, having a culturally diverse, international team reduces the work that needs to be done in accounting for the differentiating cultures of the international market.
Rate of Adoption
Not only is it critical for scale-ups to consider the method in which they enter the market, but also how quickly their product or service will be adopted. Silverfin founder, Joris Van Der Gucht, found that their financial software was adopted more quickly in the Nordics than in the UK,
“In the UK we take more of a ‘land and expand approach’ whereas in other markets you can choose Silverfin and go all-in from day one. You have to find your sweet spot in the market and that takes some time.”
Silverfin accredits this to the UK market being “slightly risk-averse” when it comes to businesses implementing new technologies, due to factors like upfront cost and retraining a team. While these concerns may be relevant for b2b tech companies, there are a number of other factors which all scale-ups must account for.
Factors such as the economic climate, strength of competition and brand localisation will all contribute to the rate of adoption. The rate of adoption was an oversight which made Starbucks failure in Australia far more costly as they opened too many locations, only to find that Aussies found the coffee too sweet and too expensive. This resulted in the closing of 61 Starbucks locations and a $105m loss.
International Team Management
Team culture is highly influenced by a company’s location and is also an important factor to keep consistent across international offices. Holvi, who operate in Helsinki, Berlin and Madrid, aims to maintain a relaxed and friendly culture across their offices. Their VP of Marketing, Elina Räsänen, asserts that this is achieved through a close and communicative team.
“We try to keep the relationship close and make sure that everyone knows each other and is comfortable with approaching anyone. I think that also comes from our Nordic routes, we truly adhere for very low hierarchy.”
For Holvi, transparency and regular contact ensures that there is a sense of unity in achieving the overall goals of the business, “We are all in this together and working towards the same goal”, said Elina. To make sure the team are all staying connected, they also arrange meetups in Helsinki for the whole team.
Before entering a foreign market it is essential to assess what your company’s objectives are, whether it’s finding a larger customer base, sourcing talent or attracting investment. As addressed by Seedrs, it’s worth remembering that just because an area has a resource in abundance, it may not be the easiest place to attain it.
This is where Business Insider has found partners to be a useful source of insight, a method you will want to use where possible. Once you have found your desired market, you must consider marketability, accounting for the cultural differences of a foreign market. Zego found an international team can be especially effective in building an international brand. Although they point out that assessing the demand takes time.
The rate at which the foreign market will adopt your solution is a critical consideration when deciding how much should be invested initially and what rate of growth to expect moving forward. For Silverfin, being a fintech platform, the key takeaway is to consider the market’s attitude to new technology and be patient in assessing markets.
Finally, once you have set up shop overseas, you’ll want to keep your foreign office connected with your home office, prioritising communication and cooperation. Holvi advises maintaining clear objectives, constant communication and the odd team meetup.
Expanding overseas has countless benefits; a larger customer base, diversification of risk, partnerships, investment opportunities, talent pools and more. Unfortunately, it’s also a significant challenge and potentially a costly mistake. While large corporates can afford to take a trial and error approach, scale-ups will have to endure a meticulous process of research in order to get it right the first time around.