FounderFuel: What they don’t tell you about taking your startup international

There is plenty of guidance out there for startups and scaleups on taking the international leap – but in practise it is much more tricky to actually do: How do you decide what is the best route for your business? What factors increase the likelihood of success? And what are the issues that trip up so many founders?

These sort of details are much less spoken about, leaving founders to find out the hard way – so we pulled together a panel to talk about how they’ve done it and share what they learned along the way (warts and all!). On our panel we had Bek from Riverlane who has led the expansion of their quantum-computing team to the US and Germany, Adam from Switchee who has embarked on expanding their social housing tech to Holland and France, and Terry from CattleEye who has expanded into farms across the US, Germany and Dubai. Here’s what we uncovered:

There’s less of a recipe for where to go than you might think

Dive into business school teachings, and you’ll find plenty of wisdom on how businesses should choose where to launch after the home-country. In fact, there have been many attempts to create criteria and assessment tools to support this critical business decision – but based on our discussions, it is perhaps far more intuitive that all this would have you believe. It boiled down to three key aspects:

Market opportunity – When considering the first big move away from HQ, it is most likely oriented around where your next big customer opportunity is. For Terry at CattleEye that was the USA. Their infamous North-Star metric is “paying cows” and whilst the average UK farm might have 300 cows, US farms have nearer 4000, making the US a prime opportunity. Not only that, the US farming model is also adopted in other countries with large farms, like the GCC – so getting the model right for the US also got them market-ready for these locations too.

Talent – In some industries, talent pools are found in certain locations. Cambridge in the UK is a great example of this for quantum computing, which is where Riverlane’s HQ is based, but the USA represented a second. So when international expansion was on the cards, the US came out on top due to a combination of market opportunity and talent.  

Ease of access – this is perhaps the one that is most contentious and yet when we consider it through the lens of startups and scaleups, it’s perhaps the most critical. International expansion needs to be achievable with the resources available – so a very viable assessment criteria is how easy testing a new market is. For you, this might be how similar the customer pain points are (and therefore how ‘standardised’ your product or service can remain across countries), it might be how similar the target market is (sales is a relationship game after all, so being able to find common ground makes a huge difference), or simply the lack of language barrier making a practical difference.

Overall, from the session it was clear that finding the magic mix of market opportunity and ease of access is key – because a massive market is no use if you have to bankrupt the business (or team) to try and reach it.

Or you could just take the Japanese approach and put all your car plants near the best golf courses in the UK (the data backs it up!)

Assess the different options available and decide on your playbook

The panel was in violent agreement that there is no one-size-fits-all approach to international expansion. In practise, it’s key to consider what your playbook should be based on the type of product you have, the type of market you’re going into and why you’re going there.

Your product is a strong indicator for what international routes will be available: With SaaS sales for example, it can be possible to expand into a region without any physical local presence. With products that can be standardised across countries, you might have the option of the easier reseller or distributor route to expansion. But if your product (or the market) requires a high degree of localisation, it’s likely that a local sales-team route is the only option for breaking into a new market.

The importance of why you’re going to a particular country is evident in Riverlane’s expansions and this has driven the approach they’ve taken in different places. For example, the USA was about talent and long-term customer development and influence, so this required a full country-based team. By contrast, Germany was about R&D so only has one local person in Germany, and Bek believes that their next steps into Australia and Japan will also look different to what they’ve done so far.

The first one is usually the hardest

It’s clear that once the international leap has been made with the first country, it is easier for the next. That’s not to say that the countries are the same (at all! See below), but the practical, and perhaps emotional, leap of being one team in one country, to two teams in two countries, presents the biggest chasm. Once that first international leap is made, further leaps are easier to navigate since you’re no longer doing everything for the first time and have systems and processes set up. This makes additional expansions less scary, as was demonstrated by Riverlane’s addition of Germany after the USA in order to capitalise on having an EU base for R&D.

Rinse and repeat is rarely 100% possible

Ultimately this is what any investors or stakeholders will want: pick up your product and drop it in a new market to demonstrate scale. In reality, this is rarely possible. Even if you’re lucky enough to have a product that can be standardised across countries (which many do not) customers and cultures will still require deep local knowledge.

Adam’s varied experiences bring this to life well: His current product Switchee requires extensive localisation. By contrast, his previous business (a medical device company) has the luxury of having a standardised product across markets – yet even this still requires an understanding of the market regulations and cultural adjustments for each market.

From the panel, it was incredibly clear you just can’t underestimate the cultural differences you need to navigate: In Holland, the perspective on business trips is very different to elsewhere and this has affected Switchee’s strategy unexpectedly; Bek nearly got caught out interviewing American individuals as a Brit and Terry has learned to find commonalities like sport and building relationships over dinner to suit the countries they’ve expanding into. These little cultural gems all cropped up and have been fundamental to progress in the new countries.

The distributor route might be easier but isn’t for everyone

You’ll find plenty of jargon around this particular sub-topic, so to get clear from the start – this route involves selling through a third party. In your industry, maybe they’re called a distributor, a reseller, perhaps it’s a ‘partner’ or third-party seller, but the essence is that a third-party company sells for you in the new country using their local knowledge and/or customer base.

In Terry’s case, this has been a significant stepping-stone in entering the US market. By working with distributors who sell complementary products they have made huge inroads into the big American farms. Similarly Adam’s medical-device business has utilised the distributor route extensively to expand internationally. However, when it comes to Switchee this doesn’t work because each new customer relationship requires a significant level of personalisation for them. It is undoubtedly a speedier (and often cost-effective) route to those that have the products that suit it – but it won’t work for everyone.

Distributors need a lot of love

Managing distributors became a huge topic in itself, with lots of tips on how to make it work. The overriding message is that they need a lot of effort but if you have the product for it, they’re worth it. To those starting out, our founders recommended seeking out distributors with a complementary product range and a range with similar price points. Terry recognised that with his previous SaaS business he tried the reseller route and it didn’t work because his product was not the right ticket price, so the sales team prioritised other products.

For anyone at the point of trying to select a distributor, our founders recommended spending a lot of time with the team – both at board level and at the sales team level. You need solid buy-in to your product at both levels for the relationship to work, so it is worth really getting to know them, what they think of your product, and how they think it would fit in their portfolio. At the end of the day, they will sell the products that represent the best bet – which is a combination of how easy it will be to sell in and how much money they’ll bring in. So understanding what their priorities are, and where you are in their hierarchy of products can really help you decide if you’re right for each other and if so, how to structure an agreement with targets and incentives to increase the rate of success.

Once you’ve decided on a distributor, think Influence, Enable and Facilitate – your job is to make their job easy. Investing time in onboarding can make all the difference: Give the sales team a lot of love, and all the sales and marketing materials they might need. Ideally have someone on the ground to support the distributor sales team – attending meetings and keeping the relationship strong – is a sound move too.

Sometimes, with distributors you might have to ‘kiss a few frogs’ – both Adam and Terry have worked with a few before finding the right relationship – but the more you focus on it as a relationship, rather than a transaction, the more likely it is to succeed. And as Terry pointed out, a distributor could also represent a credible exit route for a startup too.

Communicate, communicate then communicate some more

One of the hardest things that Bek recognised with a dispersed team across four different regions was communication. Much as we all learned with Covid, a huge amount of information and cultural norms spread through osmosis. With different teams in different countries this becomes even more challenging.

At Riverlane, they really doubled-down on async habits: Fortunately, given they already had a 100-strong team at HQ the heavy lifting on team policies and processes was already in place, but with the creation of the US team these processes expanded to communication. They now record and share meetings, always write down and share actions, and have proactively thought about the information flow through the team.

From a cultural point of view, it’s important to maintain contact and visibility across teams too – so every quarter both Riverlane and CatteEye get all team members together in a location for team days and collaboration. Similarly, the exec teams consciously invest in being present at all offices on a very regular basis. This helps spread a consistent set of cultural behaviours, but also makes sure that everyone feels part of the team and appreciated by the leadership team.  

Take it step by step to manage risk

When we think about taking the international leap, it is a big deal – it clearly requires a lot of planning, time investment and financial investment – but from our founder-panel it was evident that you can take it step by step. In Terry’s case with the US, they started building relations with a key person over there, then they hired their first US team member and grew into a distributor-led approach after they’d learned a lot themselves. This helped them manage the risk along the way, and ultimately that is critical, because you never know what will happen. Until your feet are on the ground and you’re trying to gain traction, all the planning and strategizing is merely a set of hypothesise that need proving or disproving. All your business decisions can be strategically sound and based on solid assumption, but you just won’t know how it lands in the country you’re trying to break until you try… just like when we all first launched. All you can do is follow the opportunities, make a plan to test it in the least risky way and learn along the way.

FounderCircle members can catch up on the full Scaleup Session recording here.