When should start up companies start planning their international expansion?
Right from Day One, of course — and that’s exactly what you’d expect me to say.
With another hat on, as an Angel investor, I see a lot of pitches from new startup companies — not only ones from the UK, but from many other countries. Most think of international expansion as a future ambition, several years down the line.
It’s understandable, but I think that’s short sighted.
A startup business concept or product may well be revolutionary in its own country. However, it’s quite probable — in fact, I think it’s almost certain — that someone else, another brilliant entrepreneur in another country, the other side of the planet, is setting up another company to do the same thing.
OK, it may not be an identical product or service, but something closely comparable. So much so that, at first sight, the person in the street would think they’re the same or variations of each other. And of course it could even be a foreign copycat that’s seen the pitch. Apps and software in particular are really open to plagiarism.
I’ve seen it with my own eyes, and it works both ways round. I’ve worked here in the UK with a digital health company that’s been developing an exciting and apparently unique new service. I then went to a conference in the USA, and found two startups there that are essentially developing the same thing.
Last year I visited startup incubators in Peru, Chile and Colombia. Since I got back to the UK, I’ve received pitches from British startups developing services that are similar to some of the ones being built over there.
Why does this matter? And what’s the relevance to international expansion?
Well, let me tell you a Tale of Two Startups
One startup was based here — I’ll call that Company 1 — and the other, Company 2, was in another country, far far away…. (don’t go to sleep on me yet!).
Both developed similar products. If they knew each other, they might not themselves have described them as similar. However, from a customer viewpoint, they solved the same problem.
Company 1’s entrepreneurs decided to postpone going international for two or three years, so their product would first get fully developed and established here
Company 2, the foreign company, didn’t wait so long.
Unlike Company 1, they realised their ambitions could only be met fully through global expansion, so they launched internationally after just one year
So Company 2 started to market their product in Company 1’s home country. Their product was technically inferior, but it solved the same customer problem, it was a little cheaper and they spent enough on marketing to make it look good. They were even able to say things like “thousands sold overseas, now available here”.
And they effectively swamped the market, destroying most of Company 1’s potential.
That’s called a Category Killer. And Company 1 didn’t live happily ever after.
The moral of that tale is that being first to market gives a huge advantage. It’s true that competition is healthy, and that it can be difficult to sell a product or service that has no competition (so has nothing to be compared with). However, in the case of startups, that have very limited funding, and especially those in the world of technology where cutting-edge becomes obsolescence so quickly, it’s different.
Apart from wanting to perfect their product or service, most startups believe that foreign expansion is expensive and diversionary. That’s not true. It’s much easier and cheaper to set up an international operation than most entrepreneurs think. If you don’t believe me, get in touch and I’ll explain.
It doesn’t need to disrupt your business plan or slow you down either.
In fact, planned right, there are other advantages that could make your home base business stronger.
International expansion is easier and more affordable than you may think.
Readers may also be interested in my series of 4 articles on my experiences as an Angel Investor that I published last year — the link to the first one is: