GUEST ENTRY: New markets and boots on the ground are key to CPHFTW member Gaest.com’s new global expansion plans. But why this strategy and what has the team learned so far?
By CEO & Co-founder Anders Boelskifte Mogensen, and COO, Thomas Yde Frederiksen
Since launching in Copenhagen back in January 2017, we’ve grown to become northern Europe’s largest online marketplace for discovering, listing, and booking unique meeting spaces. This unique position was cemented after acquiring the Swedish market leading competitor Bokarum in the summer of 2017 (you can read more about that here) and launching our presence in Oslo towards the end of the year. Today, roughly 50% of bookings are made outside Denmark.
As an organization, it’s taken longer than anticipated to evolve from viewing ourselves as a Danish company to a Scandinavian one. Not only have we had to reorganize things at HQ in Aarhus and rethink internal roles within the company, but we’ve also had to deal with practical challenges such as multilanguage customer support, VAT rules, multicurrency and payouts.
We’ve also had to address different meeting cultures; yes even within the Nordic countries these things do vary. For instance, meetings in Stockholm are booked at shorter notice than in Copenhagen and often last 1-2 hours, whereas an average meeting in Denmark is 3.5 hours. We’re uncovering these insights on a daily basis.
Move fast, but not too fast
Testing and validating your product 100% in one market before moving on to the next is one approach. But not for Gaest.com. At a pitching event in 2017 serial entrepreneur Morten Strunge was clear in his judgement of Gaest: “scale or die” We listened and decided open the doors to all of Scandinavia almost at once.
At the same time, we were running tests in other markets (though they’re not officially launched on the platform yet). This gave us the ability to run several experiments at the same time while providing a steady flow of knowledge and experience to apply across the board.
Clearly, we want to plan the route to global expansion as quickly as possible, and failing to test new markets now might leave the door wide open for our competitors, who are most certainly waiting in the wings.
Part of the growth journey is to move fast and learn as we go. But as we mature as an organization and gain experience from new markets, we’re also gaining insight into what hurdles and pitfalls we need to avoid moving forward.
So now as we move into our second year of operations, we believe a more conscious, planned approach is required when launching Gaest.com in new markets. This was one of the main focus areas for Thomas when he joined Gaest.com earlier this year as COO.
When we started, we had more of an easy going approach to our new market launches. But it soon became clear that if we didn’t formalize how we worked with our partners and created a more structured collaboration, then our HQ team would be overwhelmed with questions making it difficult for partners to succeed.
So we created a very different partnership model, which we believe is key to taking control over the expansion journey. Partners are our local agents in new markets, and each are given specific performance targets. Contingent on their performance, they may obtain the rights to launch the Gaest.com concept in their market using a revenue share model.
We’ve handpicked partners who not only know the local ecosystem and understand the needs we are looking to cover, but who are entrepreneurs or consultants and who wholeheartedly believe in our concept and have experience with setting up new businesses.
Behind the scenes of Gaest.com’s partnership model
The partnership model is designed to safeguard us and would-be partners against high financial risk while testing new markets (a market is a city, often the capital of a country). Testing a potential new partner and market involves three key phases:
- The partner must prove he/she can onboard a certain number of venues on Gaest.com, within a certain timeframe. Both parties are free to abandon the process at the end of phase 1 at no cost.
- The partner receives a baseline fee, supporting tools and a marketing budget to manage independently. Remuneration is commission-based and hinges on the number of bookings achieved in the specific market. That way, success equals income. We want to see them react positively to the incentive — attitude is key to all partner assessments.
- The partner will now be considered a market owner, and a revenue sharing model that gradually develops over time based on annual targets is presented. The market owner pays a service fee to Gaest.com for using the platform and receives support from HQ. It’s important to note that the partner model only involves buying “access” to the Gaest.com concept and organisation, and does not cover actual IPR. This way, partners cannot sell their involvement with Gaest.com to a third party. And if we decide to reclaim a market, we reserve the right to the partner, in which the price is calculated based on the value generated by the partner.
Conditions must be crystal clear
One major lesson we’ve learned since launching the parter model is that we must define exactly what we’re offering partners. Conditions need to be crystal clear; otherwise we will be inundated with questions about all sorts of things. Frankly, we don’t expect to succeed with all the markets we test. Likewise, we expect some partners to drop out during phase one, others during phase two. Nevertheless, we must make sure to learn from these tests and be prepared to find new partners or take on the market ourselves if the business opportunity is clear.
There’s no place like home
Creating the partnership model has been a success so far. It shows we’re able to think outside the box and begin expanding without putting too much strain on our resources. However, we’ve also realized that we must strike a balance between international growth and home markets. As a startup, it’s important to always show and strive for growth, so thinking both short and long term is extremely important. The partnership model is focused on the long term, while profitable growth at home provides stability to the organisation. An important part of this is to ensure the team, the management, the board and the investors agree on which metrics are most relevant to each market (as well as the level of market maturity). For instance, is it the number of customers, acquisition costs, burn rates, growth rates, lifetime value, etc. that matter? How do you know if you’re moving the needle?, At the end of the day though, all of these questions are crucial when planning your growth journey from little Denmark to a global market
