Early-stage startups face a myriad of challenges: organizing funding, developing their products, finding product-market fit, hiring and managing staff… all while trying to grow a client base. If you’re a European business, these issues are exponentially magnified by the very ground underneath your feet.
It is advisable, therefore, for early-stage European startups to think internationally sooner rather than later. If you’re reading this and are in this position, here are the six steps we recommend you consider when building your international startup launch strategy*.
1. Consider your industry in a local vs global context.
This will inform the timing, location and everything which flows from each. Most of the advice you’ll read around internationalization comes from VCs and part of a VC’s job is to maximize return… while minimizing risk. Their advice, therefore, is often to be as international as possible from day one. Generally that is a sound approach, as it future-proofs European businesses in the medium to long term. But let’s consider some real world examples.
Imagine a German startup working on improving the metal manufacturing process (exciting, we know). Germany has a large, technically diverse and well-developed industrial manufacturing and export culture. This means that such a business can operate only in Germany, with German clients and communicate only in German for many, many years with little need to look outside the country for new customers.
Conversely, a French company offering access to computer chips for electronics supply-chain like Precogs should probably be thinking of potential customers outside of France from day one, as their market of local manufacturers is quite small on a global scale. There is also the example of Qonto, the French neobank targeted at SME’s. Fintech businesses tend to move slowly and deliberately from market to market, adapting their product and communications as they go. However, with one eye on their future and taking into account the advantages of a single currency zone, Qonto launched in France in 2018 with end-to-end English-language communications. This made their growth in other areas of Europe (including Germany) easier and more seamless.
2. Decide when to launch your startup internationally.
When deciding to launch your startup internationally, timing is everything. Many things can go wrong with an international launch. You may enter a new market too late and find a faster local competitor has already established market leadership. Two classic examples are Google attempting to move into Russia after Yandex had become locally entrenched, and LinkedIn still being 2nd (2nd still!) in DACH markets behind Rocket Internet’s Xing after more than 15 years of direct competition.
Of course, as in the previous examples, you may decide that your industry dictates you make an international leap early, before proving yourself in local markets. Your industry and your place within that industry will directly inform any decision on the timing of the international launch of your business.
3. Decide where and why to launch internationally.
Many European founders are heavily fixated on succeeding in the USA. The decision to enter the US is often driven by investors, with advisors looking to prove (or disprove) business efficacy in the US as soon as possible, viewing it as the ultimate ‘litmus test’. For B2B SaaS businesses, that makes logical sense and most European headquartered businesses begin in New York or Boston to maintain easier ties back to HQ, before relocating to San Francisco at a later date.
Yet again, the industry in question is crucial in your decision about international launch locations, as the US or UK may not necessarily be the next best market, especially in heavily regulated industries such as finance or accounting. French startup Expensya, which uses a character recognition app and cloud-based platform to manage business expenses and payments, found success within France before expanding to Spain and then to Germany. Why these countries? Business accounting regulations differ so much from country to country - even within the EU - that the localization and adaptation of their product was a potential barrier alongside language and communication. As currency wasn’t a factor in each of these new markets, the team could tackle the most difficult issues of regulation and language to gradually manage growth in a way that would later scale more efficiently. Later expansion into larger markets, with variable currencies and languages as well as regulations could therefore be handled because of these earlier, incremental learnings. Their industry informed the decisions about where to launch and when.
4. Set goals and monitor performance metrics
Just like the very early days of any business, it is more difficult to succeed without a plan. Sure, you may have launched all ‘lean’ and ‘agile’, and you may lionize the idea of moving fast… but even so, you need an idea of your market size and potential customers. In many ways, understanding this is even more important when taking the international leap. Following through on the three previous points here by taking into account your industry, potential locations and the timing will help properly gauge your potential and therefore quantify any success. It should also make it easier to set a definable launch strategy and the steps required.
Having definable goals and performance metrics lets you determine when to take each incremental step. Depending on how you intend to grow in a new territory, the first actions will probably be about staffing, resources and investment.
5. Choose the right people and resources
There are arguments to be made (especially when launching into the US) about opening a local office, hiring local staff and relocating some members of the founding team. It does make some logical sense, but the question is whether this should come before or after you’ve proven that a particular international market exists?
That depends on how you define success.
In his 9 steps to Repeatable, Scalable, Profitable growth, David Skok of Matrix Partners lists Step 5 as “prove non-founders can sell”. It could be said that this step should come prior to international expansion, and in fact, we’d take that one step further and suggest that before moving to the next step of his plan, doing so from your original location is the way to go before moving anyone or creating new office locations. It may be more difficult at first, and perhaps it will involve late-night calls, long flights and multiple on-boarding discussions. Maybe you’ll pull your hair out, or lose some along the way. But once delivery is achieved, a new client in a new location can act as a bridgehead, verification of your concept, and social proof for competitors as well as an example to your other prospects.
This is also the most cost and time-efficient way to launch into a new market. The only question you should be asking yourself is: what do you need to do to achieve this ‘bridgehead’, without actually moving your HQ?
All that being said, most startup founders realize fairly quickly that getting hiring right is a superpower. Get it wrong and it's more like… kryptonite. Dave Kellogg of Balderton Capital lists his five mistakes of hiring when expanding to the US as: hiring on the cheap, hiring posers, believing in magic and failing on diversity. All good points but the fifth - sending too many European imports - fits well here. By doing so, you’re failing to take in local knowledge. Part of the advantage of being in a new country is access to new talent. You don’t even need to open a local entity at first. Through products like Deel, hiring in almost any country is now possible while you beef up local operations and prove that there is a sustainable local market for your business.
6. Localization not Translation
The final step in considering your internationalization, lies in your execution. The difference between localization and translation is a discussion we have quite often among our teams: with a variety of native French, Spanish, German and English speaking marketers… we all know that a translation of an offer from one market to another isn’t always enough. Essentially, the question becomes: if you’ve conquered your local market in your local language, why not begin by taking all the existing communication, product messaging and the product itself, and translating it for a new location and language?
Firstly, there may be aspects of your product that make no sense or are unnecessary in a new market. Do you know what these useless or unnecessary elements are? Does your team know? Do you know anyone who knows the local market in that industry and can advise you on this so you can avoid silly mistakes or even unfortunate ones?
Second, take the example of moving from another language into English. You may think all Anglophone markets are the same, but this is far from the case. With a finance product, launching from Europe into the UK before the US makes the most sense. It is a smaller and more manageable market, with a different currency and vastly different regulations. Likewise, communicating with a British audience differs greatly from a North American one and that isn’t restricted to spelling. British consumers tend to be more skeptical, don’t like to be ‘sold’ to overtly and gravitate towards humor and irreverence, often even within ‘serious’ topics such as finance. Consider such UK-centric examples as Comparethemarket, Wise and even how controversial payday loan business Wonga was promoted from the very beginning.
So there you are, six steps to consider on your way to international launch. No matter which stage your business is at, there are always risks and uncertainty. What is certain is that this process is made easier with experience. Therefore, if you’re in the position to launch internationally and want some advice, give us a shout (not a shout-out, that comes later).
*A market outside your own, obviously. Did we really need a footnote for this?!