The International Thing
I've been spending my time with a few companies in the nascent blog space lately: as I mentioned last month I'm moving away from the venture capital world and back into the land of early stage companies. It's been almost six years since I left my last start-up -- Wired -- and I'm enjoying learning about how things have changed in the intervening period. This isn't to say that my most recent experience as a VC didn't give me a comparable insight to the world of start-ups. But the lessons you learn by actually diving into a company are worth so much more than those of sitting on the side advising.
Of recent interest to me is the change in the perception of "the international thing." How quickly should a Silicon Valley start-up move from only focusing on the domestic U.S. market to thinking about a move abroad? I'm not talking about outsourcing semiconductor manufacture (local fabs are so 1980's) or more recently call centers and some software development. I'm interested in European/Asian subsidiaries and management, globally distributed sales offices, localization on language and commerce and the whole shebang.
Much of my personal experience was colored by Wired's attempts at international expansion in the mid 1990's, pretty much all of which were failures. Global expansion was cool and very much a part of our view of the Internet world. Unfortunately, the rest of the world was as interested in Wired for its American-ness as for its ideas. There was little desire to purchase a localized product as everyone wanted to have the American edition. We lost a lot of money and management time trying to go abroad.
And through the late 90's when I was a director of various start-ups, there was a sense of "leave the rest of the world to the rest of the world." Everyone knew there were a series of companies that would be started in Europe and Asia that would copy anything that was interesting in Silicon Valley. But the feeling was generally that later on you'd either buy them or kill them. International visitors were maybe 20-30% of website traffic and a nice plus to worry about later but not to focus on today.
From all appearences, this is drastically changing. As start-up dollars cease to go into marketing they are increasingly moving to international expansion. Some of this has been driven by the customer base: the early 2000's wave of start-ups focused on wireless apps, location-based technologies and other telecom functionality had to pursue Europe and Asian carriers and built out international presence as a result. And of course, all of the outsourcing going on is making everyone more comfortable (if not always happy) with the idea of the global company.
But more recently, the earlier stage web companies I'm speaking with are thinking of a global footprint as a must-have, not a nice-to-have. Or maybe more appropriately, not even thinking of the international thing as anything particularly special. The Internet has so lowered the barriers to info-trade that Europe and Asia are just a few more hops away. IT has always been standard enough that a European corporation has the same issues as an American or Asian. Seemingly the same is to be said of the global consumer. Localize for language and localize for purchasing (not everyone uses Mastercard and Visa). But globalize for product development from the very beginning.
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My vantage point is from Scandinavia where I've been for six years. I am a Silicon Valley vet (eight years at Apple's ATG followed by consulting). I can only really speak for northern Europe.
In this part of the world engineering capabilities are first rate, but the vast majority of companies are absolutely terrible marketers. They simply cannot tell a compelling story about their technology. This is a fundamental cultural handicap that I don't see going away anytime soon.
So yes, the Internet enables a global base of technical talent that can compete with the US from every corner of the world. However marketing all this global technology is still *very* much a uniquely American skill.
Glad to see that the startups of Silicon Valley are finally waking up to GILT (Globalization, Internationalization, Localization, Translation).
Here's an upcoming event in the bay area, focusing on the issues faced from ground up to execution globally from the design and operation perspectives.
http://www.lisa.org/events/2004usa/
The US market is just a subset of the global market. You can do products for the US market and you can do products for the gobal market. However, as you encountered with WIRED, some products tailored for the US market are also interesting for a particular customer group outside the US. You can also take a more proactive view and look at products that facilitate issues caused by cross-language and cross-cultural environments.
Getting the international aspects right is quite challenging. There is no simple recipe: Infrastructure technology needs a different approach than applications and content is a different beast altogether. Horizontal applications are again different than vertical applications. Only once you've figured out the big picture and the requirements and the challenges you will be able to find the right strategy. In the earlier days of the industry local distributors acted as vendor representation, building the markets, providing sales, marketing, customer support and sometimes localization. This is how companies such as Microsoft, Symantec, Macromedia, Sun, etc became global players. This model does however not work as well anymore (plenty of reasons).
The challenges and risks of bringing a product to market differ from product to product, from country to country and from continent to continent. The only way you learn the different aspects to look at is by experience and that can be quite hard sometimes.
The advantages of US start-ups are the amount of funding available and the risk-taking culture of VCs. The disadvantage is the lack of understanding of the international markets.
If you have questions do not hestitate to contact me. I've seen most set-ups and strategies possible and experienced how they worked (or didn't).
From my vantage point in Israel, there is no local market here so you build, from the night you dream up the thingie, for customers living in another world. Or rather, the world, since it is we who are living in another world. I cannot explain how, but mostly these exotic thingies manage to sell their wares and importantly, to collect the money.
From my vantage point in Israel, there is no local market here so you build, from the very midnight you dream up the thingie, for customers living in another world. Or rather, the world, since it is we who are living in another world. I cannot explain how, but these improbable things manage to make foreign people to buy and importantly, to pay for their wares.
I have worked for a UK software company setting up offices all over Europe and the US.
I found the hardest part is deciding what part of the business to localise. Marketing does not translate wel, nor do sales techniques but the infrastructure and processes underpinning them should be portable.
After making many mistakes and learning the hard way I ended up documenting our customer lifecycle, our internal processes and USPs. Then, when setting up a local office we used these as a framework around witch to build the local organisation. The first step was to make personas for your ideal customer in the specific market, then we developped a local plan of attack using the experience from existing offices and the local market knowledge. The local team was reinforced with people who had already been through these steps in their country. At the end we were getting rather succesful at this and then, off course, the investors pulled the plug on the international operation. Big mistake? Well the week after closing our French office 4 orders came in. Only one tried to work with the UK office and that didn't work out.
So my experience has thought me:
1. Distill the universal aspects from your business for reuse.
2. Work with locals using the experience/knowledge in your organisation in combination with their knowledge of local markets/habits.
3. Set realistic goals, 6 months at least.
4. Invest in local references and PR.
A remarks on the side.
The English understand the rest of Europe almost as well as Americans do, try starting from one of the smaller countries Belgium, Holland, ... (in the same way as doing business in San Francisco is not representative of the rest of the US)
I hope this can be of use to someone, if you have more questions ...
Filip
Companies expanding internationally typically face one of two critical mistakes. They either (a) do it too early, or (b) they do it too late.
Any company considering an international launch should think carefully if they know where 'magnetic North' is in their home market first. In other words, are they expanding into new markets with the benefit of having some notion of success in their home market, or are they simply 'doubling down' and now have to figure out how to sell in both their home, and now international, markets?
Too early and you squander precious resources (capital, people); too late and you have to play catch up with competitors.
The vast majority of companies we see expand into international markets too early. That said, many great technologies come out of countries with small domestic markets (Australia, Israel) and these companies need to expand sooner rather than later as their home markets are typically not large enough to sustain a growing tech company.
Feel free to contact me if you have any questions or comments.