Powerful points towards International Business Expansion

Posted on Thursday, July 9, 2009 by Facundo Villaveiran

Hi there,

Last Friday I attended an informal talk by technology consultant Mark Zawacki at the Radisson SAS in Dublin. It was good to see motivated Irish entrepreneurs in the room like Alan O’Rourke, Campbell Scott, Anton Mannering and Ian Cleary (Special thanks to Ian for inviting me to this talk).

The subject was “The 20 Stress Points of International Expansion”. This is a framework he developed that covers what the traditional challenges are as technology start-ups expand and grow out of their home base.

As Mark described it, this was more a conversation rather than a presentation. I made my own mind around it, and have to say that the talk was really worth it.
I didn’t retain the 20 points (it that wasn’t a lecture but a conversation!), so here come a few ideas I would like to share:

On funding and VCs:

Certain Web start-ups, especially SAS (Software as a service), or those whose model is around freemium or “cheap subscriptions” are not necessarily very attractive to VC’s. . How come? With so many web start-ups out there?
Well, the answer is the following: The majority are likely to fail, but most importantly, even if they succeed, the VCs do not get their money back quickly.

So if you are lucky enough to get the funding you want/need, Mark suggests that you under-promise and over-deliver regarding the timing of the ROI. Since the average time-frame to deploy your product abroad successfully is around 2 years, there WILL always be unexpected problems. And yes, problems may be sorted with money, so hold on to it.

There was a joint reflection of Anton Mannering and Mark: “VCs cannot handle small investments here and there”. It’s very time consuming and has no leverage for them. It’s easier to handle a portfolio of 10 investments of 200 million each, rather than 200 investments of 10 million each.
So if you are looking for money, make sure that you ask for a big chunk.

Abandon modesty and concentrate on conceiving your great idea as a multimillion dollar idea, think big, but ask big, otherwise you are not attractive at all to them.

On Partners:

So you might be the prince at home, but in the new country/s you may start as a pauper (hopefully a pauper with some funding).
Most of the sales need a human element to be closed, and if that element is local, then great. We are talking, for example, about the need for channel partners.

Important: Don’t fool yourself by thinking that channel partners build demand. Channel partners can only respond to demand.

So let us say that you start- off with some sort of partners and you are so committed to your venture that you manage to evolve pretty quickly. What’s next? These partners may become obsolete, so try to spot allies that can grow with you, or master the ability to bring new ones along. Or maybe both?
Remember that core clients could initially come through your partners. Understand the value of creating a relationship with those clients from the very beginning (if partner goes, client should stay).

A different place IS a different world:

You can research, plan, test, evaluate, but another country will always be another world. So assume it. It is going to be more complex that what you thought, but it might as well be worth it
And, by the way, make sure that you understand who you clients are in the new place, that’s vital.
Also, when clients know that you are a start up they will agree to give you an opportunity but they’ll probably only pay when they are happy with the results. So make sure you watch you cash flow to meet next month’s payroll, as clients will not hesitate to retain payment.

Get ready for staff turnover but also to sustain momentum around your business:

Let’s face it, your idea and company may start as being unique, but new players can come in, or new mind-blowing concepts all together.
Along with this, the initial great people that went on board with you may go.

Great products or companies are all about great people who nurture them.
Understand the value of people and have a plan in place to continuously surround your venture with the right minds, hearts, or both?

Did you enjoy the post? don’t be shy, make a comment below and share it!

Later,
Facundo

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http://www.codegaconsulting.com una coleman

Thanks Facundo for putting notes together. Even though we hate powerpoint and much prefer conversation presentations, pp has its value, particularly after the event, in helping to recall all the points.

I’m on the recently formed IIA International Strategy Working group – putting a survey together to go to the members – so very interested in hearing what you thought were the key points from Mark’s presentation. Channle Partners are key for many industries and companies to penetrate new markets. But, what one has to watch out for is that they do not use your service or product to give them an other opportunity to get in front of their clients and prospects to sell more consultancy days.
The other issue small companies face is managing the cost base of developing a new territory before there’s a revenue stream to sustain it.

As Ireland is such a small market many Irish software providers have to look to penetrating international markets to achieve their growth objectives.
http://www.channelship.ie facundo

Hi Una, Thanks for the comment. Indeed, many companies in Ireland have to look abroad to make it happen (with all the associated challenges). Great point on the Channel partners, Mark stressed that too Gotta watch out!
http://udoogoo.com Anton Mannering

Hi Facundo. Just a quick one on the figures. VC’s don’t want to invest 100s of millions more like 20million over the life of a company with follow on investments. But they certainly need to invest in companies that are aiming for exits/valuations of the 100million+ variety. The message is that if you’re not looking to be that big that’s fine but it’s very hard for a VC to invest in you. Angel/EI funding is more realistic.
Nice summary though it was a very useful morning and a shame more people didn’t come to take advantage of it.
http://www.channelship.ie facundo

Thanks for commenting Anton. Good clarification, especially for those who couldn’t attend.
http://www.rottentomatoes.com/vine/showthread.php?p=15763729#post15763729 derekpm

Rather interesting. Has few times re-read for this purpose to remember. Thanks for interesting article. Waiting for trackback
http://www.denobi.com Sean Kirwan

Great summary Facundo From businesses we’ve dealt with, the successful secure VC funding once they have established broad IP rights to something – a process alone that requires lots of cash. With most VC funding going to bio tech or phara companies http://www.ivca.ie/documents/VenturePulse1q09270409_001.doc, I think it’s more sensible for SAS companies to look at the angel investment (in particular the BES model) for the first round. Something that is achievable without direct Enterprise Ireland assistance.
http://www.channelship.ie facundo

Hi Sean,
Thanks for your comment and the ivca info. What you say is very in line with Anton’s comment above (angel investment is more realisitic in many cases). Interesting figures in the report you shared too. Incredible how “nano technology” keeps on coming up in things I read.
http://startsmallbusiness.co.uk/?p=5 Clarify Legalities Before Expansion | Start Small Business

[...] Powerful points towards International Business Expansion … [...]
http://udoogoo.com/ Anton Mannering

Hi Facundo. Just a quick one on the figures. VC's don't want to invest 100s of millions more like 20million over the life of a company with follow on investments. But they certainly need to invest in companies that are aiming for exits/valuations of the 100million+ variety. The message is that if you're not looking to be that big that's fine but it's very hard for a VC to invest in you. Angel/EI funding is more realistic.
Nice summary though it was a very useful morning and a shame more people didn't come to take advantage of it.

Category: Events, Internet marketing, Tips to develop your business.

Tags: , funding, international expansion, monetizing, product development, value proposition, VCs, venture capital, web start-ups

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