Amidst an increasingly connected world, globalization is the order of the day. The concept poses both great benefits and significant challenges to entrepreneurs. However, while the benefits are many (including more efficient communication and greater potential for collaboration), today’s digital age can put increased pressure on young businesses to expand globally -- and to do so quickly.
There is something to allowing your business to grow organically and not to push expansion too rapidly. On the other hand, it’s important to consider the realities of today’s business environment. If you’re a startup entrepreneur, you risk facing a competitive disadvantage if you wait too long to expand your operations.
The first step in the process of expansion is identifying which markets are of the most strategic significance to your business. Once you’ve targeted a market, however, things can quickly become convoluted and overwhelming.
With that in mind, here are four tips for entrepreneurs looking to expand globally.
1. Clearly Define Your Business Model
While this may sound like a trivial task, young startups often have an exciting and innovative product, but no real plan for monetizing it. If you’re working with an open source project, for example, it’s important that you have a definitive business model to drive revenue -- though not at the cost of alienating your community of core contributors.
To that end, companies will offer enterprise-ready software that comes with additional features, services and support. They may also contribute code to the community that comprises the backbone of their technology.
While the aforementioned example may not fit every startup, regardless, you need to have an actionable, scalable business model with measurable metrics (downloads, customers, etc.) in place before you expand. It’s critical to establish this component of your business before thinking seriously about growth.
2. Build and Foster Your Community
It’s also important to identify and engage with your community from the beginning. In today’s connected world, your community can be one of the most effective methods of spreading awareness, whether it be your company’s value proposition or evangelizing your product and/or services. Building and engaging a community through online forums and email lists is often a common first step. Now more than ever, social media channels are increasingly the norm, so further investing in community activities like meet-ups and workshops can add a face-to-face element -- one that is extremely valuable.
3. Relocate to Your New Market
If you’re the CEO of a young startup looking to establish a footprint in a new market, you should consider relocating to help grow the new office and engage directly with new customers. Managing employees and tasks remotely can be a recipe for disaster when you’re building a nascent operation. It’s best that you personally oversee operations to ensure that they’re in line with your broader business vision.
You’ll also likely be hiring local staff for your new office. Since these early individuals will be critical to the success of your business, being present and managing them firsthand will effectively establish a precedent, not to mention, align them with the overall culture and vision of your company.
Also consider an area for its potential business partners (software integrators, resellers, etc.) as well as key influencers for your community (well-read bloggers and analysts).
4. Understand the Investor Community
It’s important to understand investor tendencies and trends of the market you’re targeting. For example, angel funding is more prevalent in the United States than in Europe. Also make sure to research which type of investors fit your business. In other words, angel investors and early stage venture capital (VC) firms will have different expectations than late stage VC firms.
In addition, investors typically like to target a specific set of market segments in which they envision high growth. For example, some investors embrace consumer applications but shun enterprise applications, and vice-versa. Generally speaking, the European venture capital community is more likely to commit larger investments in more mature companies. While the same can be said of the American VC community, there’s also a sizable community of angel investors willing to invest smaller funding rounds in promising, albeit fledgling, startups. This trend is evidenced by the rise of firms like YCombinator, which focus on seed rounds for nascent startups.
While I would hesitate to advise companies to expand internationally before closing their first funding round, the move is not unprecedented. Perhaps the best example of this phenomenon is witnessed in DotCloud, which closed a $10 million funding round from Benchmark Capital after relocating to the U.S. from France.
Consider these steps a necessary deep breath before taking the dive into startup globalization. The better you plan, the better your business has a chance at survival.