A European Perspective on Overseas Expansion

A European Perspective on Overseas Expansion

Launching a startup in the United States puts one at a tremendous advantage. Headquartering in San Francisco gives close proximity to hundreds of thousands of early adopters, thousands of potential customers and dozens of major venture capital firms.

 

However, it also puts the startup in a position of relative comfort, if there even is such a thing for startups. A large, wealthy market seems good enough to get your company off the ground.  In reality, the US comprises only 5% of the global population and having tunnel vision on this market sometimes puts even giants like Apple in tough situations.

 

Meanwhile, the rest of the startup world has to find investors, partners, and customers from far away – to give an example, we got started 1157 miles from Europe’s major tech hub, London. This inevitable disadvantage forces companies into a position where they have to think globally from the get-go and on a daily basis. Having an international mentality is something that even Silicon Valley startups can benefit from. Here are a few observations on going global that have worked for us.

 

Start travelling early: There is no better feedback for a product than going out into the real world and doing field-testing to get honest feedback. Attending US-based events is a given, but travelling to other countries gives you the opportunity to learn how to build a product that works outside of the US as well. For example, you might realize that your English-language product will have little potential in Brazil due to a language barrier. Getting customer feedback as early as possible is critical to save time on fixing mistakes later. Even if you are focused on the US market but see a lot of traffic coming in from foreign countries, it makes sense to fly over and figure out why people there like your product.

 

Industry events are the perfect opportunity for new insights – your target audience is concentrated in one spot and you get to meet not just potential customers, but also meet media and competitors. Prices for event tickets are much cheaper than in the States and round-trip plane tickets costs around 1000 USD to just about anywhere in the world.

 

Learn the local culture: From a European perspective, Americans are often viewed as overly polite and rather aggressive. This means sales tactics that might work in the States will most likely not be successful in regions such as Asia or Eastern Europe where people are much more reserved. Finding out how to tailor your behavior to local culture or learning that business cards are passed over using two hands in China is not something that can be done via e-mail or Skype calls – yet are critical to how potential customers view you and whether you can close the sale.

 

Find locations without competition: Most US companies start out in their home market and expand outside afterwards. For us, this has never been an option – Estonia has a market of 1.3 million people. So while we started out with mobile payments at more or less the same time as our competitors, we took a focus on rapid expansion into countries that they were not focusing on. Today, we have the largest coverage in India and are the only Western provider in China. The takeaway here is that a void on the market does not always indicate that there is no business to be made – it might indicate that nobody has simply thought of going after this market. While competitors are focusing most of their resources and time on gaining traction in the States, you have the perfect opportunity to do some market research and see which markets do not have a high-quality product yet available. Once the competitors get around to expansion, you have already captured the market.

 

Expansion might require pivoting: Getting your product to work for one market does not always indicate that it will be universally successful. The reason might be as simple as the language barrier mentioned earlier – or it might be that there is no use for your product in the country at all. If the problem that you are trying to solve does not exist in another country, perhaps it’s possible to find an alternative audience for whom it does work. One great example of taking an existing technology and pivoting it to the needs of the local market is M-Pesa – while text messages were created in Europe for communicating, they have a completely different use-case in Africa.

 

A lot of innovation comes out of the US, but entering new markets allows for taking advantage of great ideas generated in other parts of the world as well. In the app industry, one notable case is the emergence of the freemium business model – not created in the US, but in China. Chinese developers pioneered the freemium model in order to make money in an environment rampant with piracy. Now freemium generates over half of all revenue made by apps on both Android and iOS. Had Western developers taken note earlier of this trend in Asia, freemium might have emerged much earlier in the West. Therefore, getting boots on the ground as early as possible in other markets is beneficial for any startup.

Mattias Liivak

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