July 8, 2021

The 3 Big Questions On Internationalization

Written by German Accelerator

Expanding a business overseas is almost like going for a long holiday. You pick your destination, decide how to get there (business strategy), and plan your itinerary (operations plan). The stakes, of course, are much higher for foreign ventures. A lousy holiday is an unpleasant memory, but a failed overseas business could have a long-lasting impact on your bottom line and aspirations. While mistakes are inevitable in every internationalization journey, there are stepping stones that startups should put in place to smoothen the way.

#1: Where Do I Go?

Startups ought to think global from day one, especially if the domestic market is too small for your product. What should you consider when selecting a new foreign market for expansion?

Assess Your Needs

  • Is there a need for local operations or logistics?
  • Does your product have to be localized?
  • Do you have to acquire customers via offline channels?
  • Is having an established local network crucial for your business?

If the answer is no for all, then you can make the move abroad almost immediately, said Claus Karthe, Managing Partner for Asia at German Accelerator. This is usually the case for gaming or consumer application companies.

A checklist on whether you can scale your buisness remotely from text

Choice Locations

Go for markets with high broadband and mobile penetration, favorable socioeconomics, stable political environments, accessible payment infrastructure, and relatively easy regulatory and tax requirements, recommended Claus. Often, this means English-speaking markets in Asia, such as Singapore.

U.S., the Land of Opportunities

Most German startups first head to Austria, then France. But they should go straight to the U.S. if they have the potential to make it there, especially if the local competition is weak, said Christian Busch, Managing Partner for the U.S. at German Accelerator.

Startups could also get a heads up in the U.S. due to its conducive environment. For instance, therapeutics companies should venture there in the pre-clinical phase to take advantage of the life sciences ecosystem, as well as corporate venture capital and funding opportunities.

A big plus point is that you will only have to go through one regulatory approval for the entire market, shared Marc Filerman, Managing Partner for Life Sciences at German Accelerator.

Pro Tip: Prioritize countries with a large number of target customers and high levels of disposable income.

#2: How Do I Get There?

After deciding on a market, the next step is planning a successful entry. What are the dos and don’ts?

Avoid “Helicopter Expansion”

It is important that founders move to the new market and build up the business personally. If that is impossible, a good alternative is hiring a country manager with relevant industry experience and local connections.

“Avoid sending junior hires to helm the new location, or managing remotely with quarterly travels to the foreign market to check on things,” cautioned Christian.

Quote about internationalization from the text

“Nail It Before You Scale It”

Startups are often too optimistic, thinking your product can be applied to anybody, observed Marc. His advice: focus on your ‘beachhead’, the customers who are most receptive. “They (startups) need to prove that they can do the end-to-end process: acquire customers, sell to them, service them, get a repeat buy and new customers,” he noted.

Quote about focus by Marc Filerman from the text

Another huge misconception is that it is possible to extrapolate your existing business model to a new market. According to Claus, this never works and is the biggest potential for failure. “Startups need to be open to learning the ropes in a new market,” he said.

Do Your Research

There are many administrative and regulatory steps to be taken. The first step into the U.S., for instance, usually involves setting up a C corporation or an LLC (limited liability company).

For drone solutions provider and #GAalumni Wingcopter, being in a highly regulated industry meant local operating partners with U.S. regulatory credentials were virtually mandatory.

“These partners must be large, financially strong, and highly effective in their respective regulatory environments,” said Bill Wimberley, Head of Business Development at Wingcopter, whose prime markets outside of Europe are the U.S., Japan, various countries in Africa, and soon Southeast Asia, Australia, Latin America, and the Gulf states. “The entry speed into these geographies is highly dependent on the partners and their operational capabilities, at least initially.”

Wingcopter participated in multiple German Accelerator programs within Asia and in the U.S. Bill’s key takeaway for the U.S. market: Do not underestimate the regulatory requirements for success in the aviation / aerospace industry.

“These factors have required a lot of coordination with regulators in our strategy, finances, and hiring, which has paced our progress. Otherwise, we could have moved quickly during the German Accelerator program,” he said. “However, we were well aware of this from the beginning, and it was something we carefully planned for in concert with the German Accelerator team in the U.S.”

Pro Tip: Each location is different and the legal, financial, and regulatory requirements need to be thoroughly investigated.

#3: I’m There, How Do I Thrive?

Successfully establishing operations in a new market is just the beginning. How do firms lay the foundations for continued success?

Listen to Your Customers

Customers define the adoption barriers for startups. In the case of life sciences companies, do not brush off requests for more clinical information, said Marc, adding: “It’s going to cost more and take longer than you may have thought, but it will be worth it.”

Also, anticipate the stamina of legacy solutions in large corporations, said Claus, noting that “it always takes longer than you think to convince a customer to try a new product.” It is also vital to be in touch with the market, and to watch your competition.

Be Sensitive to the Local Business Culture

The way business is done in each market can be very different. Just take the U.S. and Japan as examples.

  • In the U.S.: Very liberal, direct, and relationships are business-oriented
  • In Japan: Highly contextual, personal, and takes a hierarchical approach

Additive manufacturing firm and #GAalumni 3YOURMIND realized that more preparation was needed in the marketing materials for Asia. This included local language translations, more descriptive slides rather than images, and pre-empting potential questions, said Business Development Manager, Kamelia Duczmal.

Beyond translations, Kamelia shared her experience of working with third parties (an interpreter, translator, or reseller) in non-English speaking markets within Southeast Asia. “It makes the conversation multi-level, indirect, and more difficult to develop an individual relationship,” she said.

In their approach to the Japanese market, she credited German Accelerator’s program for helping them better understand the culture, rules, and business environment by arranging meetings with knowledgeable and experienced mentors.
Her key advice: “Do not ignore cultural differences and be aware of them. Learn, listen, and collect feedback from ‘the locals’.”

3YOURMIND also learned that lead generation can be very costly in the U.S. “You have to be out there and meet people in person often to get business done. And when you have your business running, you need to constantly innovate and adapt to keep it,” said Managing Director Alexandre Donnadieu-Deray.

Pro Tip: Acquire locally respected partners who will introduce you to the community and increase your credibility.

The Takeaway

Planning and executing an internationalization initiative is daunting, but you can drastically increase your chances of success with the right tools and assistance. With a strong global mentor bench of over 350 founders, innovators, and industry experts, German Accelerator offers a deep vertical understanding of any market.

Three Questions (or Tips) On Internationalisation

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