When expanding into a new business market, several factors are needed for success. Knowledge of the market, good resource management, access to a network, and awareness of business etiquette are among them. Having someone help navigate these areas can speed up the process of establishing a foothold in the new market. Here you can find valuable information and advice from all markets German Accelerator helps facilitate access to.
Product market fit, sales strategies, and market research are all aspects that need attention prior to going on a journey to internationalize one’s business. In addition, other more nuanced factors are worth being considered, such as cultural differences in a business setting, as having had success in the home market in Germany or Europe does not automatically translate into a clear strategy for a new market abroad. All of these factors take time to analyze and execute, so having a local partner and network can speed up the process of internationalization and help avoid some of the typical pitfalls that can slow down great expansion plans. This is echoed by Christian Jorg, Operating Partner and mentor at German Accelerator, who thinks that “at a minimum, we are saving the companies lots of time and effort and they eventually would figure it out on their own through trial and error (and in the startup world speed counts for a lot), at a maximum we are saving them from failure.”
It is vital for startups and any other company to be aware of cultural nuances in order to be successful with their business expansion. This is true for building relationships with partners and customers and also for hiring local personnel. Questions like how decisions are made within companies – hierarchical structure or low barriers – need to be answered and understood. In order to be resource-efficient and speed up the process, it can help to have access to a network of more than 300 international experienced mentors with local and specialized knowledge such as German Accelerator offers. “I loved the strong focus on mentoring hours. The mentors are very experienced and understand the cultural background I’m coming from really well, says Daniel Heitz, Founder & CEO at Backhub.
“How Germans approach people, how they initiate conversations, certain gestures when it comes to presentation style and language,” and it is thus, something to be aware of when pitching your idea in the U.S. says German Accelerator mentor Jens Weitzel. He has been living in the U.S. for the past 20 years and knows that language can be one of the factors that may lead to misunderstandings or miscommunication. Clear communication is vital, even more so at the start of business expansion, and remains important after successfully establishing a U.S. presence, according to Dirk Schart, CMO and President U.S. of RE’FLEKT and German Accelerator mentor, who participated in our program in 2016. “You need a translator between the teams to make sure the teams understand each other” Schart explained in a previous interview that having access to the German Accelerator network of mentors helped him in learning about the different business principles and values in the U.S.
Southeast Asia is a very diverse region and the cultures and values differ from country to country. Theresa Evanoff, Southeast Asia Program Director, states that “it is common or even almost expected in relationship building that you invite potential business partners or investors out for drinks in Singapore or the Philippines. Conversely, doing so in Indonesia or Malaysia, which is made up of a largely Muslim population, could come across as being religiously or culturally inappropriate.”
Until very recently, Japan has had a very homogenous society partially due to its closed economy and low percentage of foreigners in the country. As such, Japanese culture is also distinctly different from many countries including those in Asia. “In a hierarchical culture, you would imagine that decisions will be made in a top-down approach. In Japan, even though the culture is highly hierarchical, decisions are made bottom-up and in consensus, because wrong decisions are more strongly criticized than right decisions are celebrated. Doing business in Japan requires a lot of patience largely due to the long decision-making process.” says Mabel Fu, Program Director of Next Step.
To enter the Indian market “you are likely to pull out your Business Model Canvas over and over again while rolling out into different regions of the country with their diversities in language, culture, and religion,” says Juliane Frömmter, Program Director, Next Step in India. That is due to India having a very complex market structure with a level of diversity that requires startups to continuously research, test, and adapt to successfully operate there.
Relationships play a big role in doing business in South Korea and oftentimes, business relationships extend to the personal life. As the South Korean business culture is highly competitive, building a strong relationship with your business partner(s) is especially important as it helps to establish trust and loyalty for continued business partnership. “Do not be surprised if your South Korean counterpart asks you questions that may seem irrelevant to you, such as questions about your family and even your age (age is often linked to status and superiority in South Korea). They want to build rapport and a trusted relationship with you and make sure that you’re someone that they can trust to do business with,” says Fu.
Communication and Language Aspects
Pitching your startup and talking about your product is one of the most important skills to have as a founder. Even though most Germans are fluent in English, they still might need help in understanding the subtleties when communicating with English speakers in a market like the U.S. When entering a new market, paying attention to certain details and adapting to the local style of speaking and presenting can be the decisive factor for success. Especially when first touching ground, exploring the market, finding customers, or talking to investors, it then becomes even more paramount to understand what is said to you and what it actually means.
Managing Partner at German Accelerator U.S. Christian Busch thinks of it the following way: “Americans are a lot less direct and don’t like to say “no” – that can be frustrating for Germans who are used to directness and straight answers.” In those instances, it can be really helpful to have experienced mentors on your side that have been there themselves as Busch explains “our mentors have dealt with this for a long time and are used to it. A lot of them have international backgrounds themselves and can relate.”
Jens Weitzel has some recommendations on how to bridge the gap for startups when coming to the U.S.:
And take it with humor:
Credit: Molly Clare Wilson (original post here)
The communication preferences in Singapore and the wider Southeast Asian region are pretty similar to the American way of communication in that they are less direct. Whereas Germans say what they think, and think what they say, people in Southeast Asia may not be so straightforward; a “yes” is not always a “yes”, and “no” is not always a “no”. Claus Karthe, Managing Partner at German Accelerator Asia, recommends to “expect a diverse range of topics for small talk, and do not be alarmed at personal questions being asked even between strangers. Avoid discussing local politics though. Praise for the excellent infrastructure and local cuisine is a good way to start any conversation.”
As such, Southeast Asians often do not give an outright ‘no’ to a proposal primarily out of politeness. Instead, they’ll either say ‘It’s good’, which could mean ‘We will consider’ or ‘It doesn’t work but we won’t tell you directly’. In countries like Thailand or Vietnam, where English is not the primary language, discussions in English can be met with ‘Yes’ and ‘OK’, or even just a smile and nod, simply because it’s easier to say that than to struggle to express themselves in English.
In Southeast Asia, you have to be careful about how you get your point across. “One of our startups was planning to pitch to key opinion leaders in their industry in Singapore. In their presentation, they showed that too many existing solutions in the market resulted in ‘confused’ stakeholders – the very people they would be pitching to,” tells Theresa Evanoff. “We helped them adjust it to reflect that having too many solutions may be confusing for the users of the devices, and let the opinion leaders infer from there, so as not to come across as insulting the capabilities of the key opinion leaders.”
Honne and Tatemae are Japanese expressions that describe the contrast between a person’s true feelings – Honne refers to a person’s actual feelings while the behavior and opinion that is displayed in public is Tatemae. It is seen as rude and impolite to reveal one’s true feelings especially if it’s a negative one. As German startups are not able to differentiate between the two, they often mistake the Japanese counterpart’s positive responses as their true feelings. “In all the company meetings that we have had, where startups meet with Japanese corporates, I have never heard one startup telling me that their meeting did not go well – which is likely too good to be true. To know,” says Fu.
In terms of language, most Japanese do not speak English. “If you have a pitch deck in English, it will take time for the person in touch with you to translate the materials to Japanese before submitting them to his manager. This will extend the time required to get your pitch to the next level in their organization,” explains Fu. “An option that worked well is to have a pre-recorded pitch video with Japanese subtitles. It will make a lot of difference in their tendency to work with a startup – provided the Japanese translation is accurate,” says Fu.
While English is the main business language used in India “you will quickly realize that it’s not as straightforward as you would imagine,” says Juliane Frömmter, as “it is important to understand what is being communicated to you while you do business in India.” She recommends working with an interpreter in order to avoid potential misunderstandings and to be able to build and nurture relationships. Growing a network and establishing strong business relationships are essential for success in this diverse market.
Building relationships takes time and is very important in doing business in South Korea, despite South Koreans being highly competitive which is often accompanied by a sense of urgency. Negotiations in business are usually very fast-paced and responses and decisions are often made within a day from the time a proposal is made. By the same token, South Korean companies also expect prompt responses from German startups. “If you’re interested to engage with South Korean companies, it’s important to reply to their queries promptly. At the same time, if you submit a proposal and do not hear back from the South Korean companies in two weeks, they are most likely not interested in the proposal,” says Fu.
Many German startup founders and executive teams struggle with the same things that U.S. startup founders and executive teams struggle with, according to Marc Filerman, Managing Partner at German Accelerator Life Sciences. That said, there are some aspects that are specific to German startups entering different markets.
German founders seem to have a few things in common when expanding internationally such as thinking ‘too small’ in terms of company growth, according to Filerman. Their humble definitions of success for revenue (particularly from distributors) and for their company, in general, are oftentimes corrected after engaging with German Accelerator mentors. Another facet is startups’ desire to translate business models directly from Germany to the U.S., even when it might not be totally appropriate. “German startup founders and exec teams need to learn that there is the same scientific rigor in the process of commercialization as there is in product development and in scientific discovery/development,” Filerman explains. Speed and acceleration of growth can happen in new markets but certain things need to be in place for that to happen. Fundraising works differently in the U.S. We noticed that startups feel empowered by successful fundraising activities in Germany (grant awards or VC/Angel rounds) “which sometimes gives them too much confidence, and an irrational idea of fundraising requirements in the U.S.” says Filerman.
“We had a German founder who came back from a first meeting with a global company in Singapore, who was really pleased because there were at least five senior members of the management team that turned up for that meeting. What seemed like a positive indicator eventually resulted in emails getting ignored and calls going unanswered,” shared Evanoff. Given that Germany itself carries a strong reputation in Asia, most German startups can secure initial meetings fairly easily with corporate representatives in Southeast Asia, especially through warm introductions through German Accelerator’s local network. However, getting a meeting with the senior management of a company does not always signal a strong interest in your business, which at times could be misinterpreted if you take the cues based on German practices. “This is why we place emphasis on including an ‘Asian Business Culture’ session for all our startups within the first week of joining our program,” says Evanoff.
Richard Lewis, a linguist and author of “When Cultures Collide”, illustrates different negotiation styles across cultures. For Germans, he also observes that they are quite straightforward and follow an agenda. In Singapore, by contrast, there are various phases within the negotiation process, from warming up and building trust, to trying multiple tactics in order to end up at a final goal.
Source: When Cultures Collide, Richard Lewis.
Many German startups expect to do pilot projects and sign contracts with potential Japanese customers within a short period of time. “Usually, to get your first Japanese client is the toughest and most time-consuming. Due to their risk-averse nature, Japanese companies do not tend to be first-movers,” tells Fu. If startups do not already have a Japanese customer in their portfolio, they will need to rely on introductions and recommendations from people that these companies have trusted relationships with. “Therefore, being warmly introduced and recommended by mentors and industry experts in our network becomes very important to gain initial traction in the Japanese market,” says Fu.
As mentioned, establishing a good personal rapport is very important when entering the South Korean market. “In a business meeting, identify a person in your South Korean customer team whom you think you could make a personal connection with. This person may not be the decision-maker but would be able to influence the decisions,” recommends Fu. If you take time to build rapport and personal relationships with ‘your champion’, which would include taking them out for dinner and drinks, they will be able to give you honest feedback from the customer side. Something which is harder to obtain from a business meeting and this person may then also support you during their internal evaluation process.
Personal relationships are of utmost importance in India. Frömmter recommends spending some time reading about Indian etiquette in business settings, as you would any other new market. It may also make sense for startups to look for a partner who can support them with legal and administrative questions and also make introductions to potential clients.
These are, of course, just a small fraction of the things that startups will experience and have access to in the German Accelerator programs whether it is about market immersion or international expansion of their business.