When should your start-up ‘go global’?

Expanding beyond your home market may seem like a given for an ambitious tech start-up – no matter where you are based in the world. And the reality is that for a company to achieve real scale and show strong growth over time, it needs to expand into multiple markets. But how and when to go global is not always so clear. It is certainly not an obvious choice when your home market is large like the US and China – so the question really isn’t if, but when and how to go global.
Mika Going Global

When depends on the company, the type of product and what the kind of customers it has. Even so, the choice of when to go global may not follow hard rules. For example, one French company at our dinner was building customer service software. It is less than a year old and is in the process of raising its round. This company already has plans to expand into the US through a New York outpost after the seed round has closed. This may seem too early to some, but the chief executive/founder was confident that the immediate opportunity he saw in the US market was too great to wait until his business was more mature.

On the other hand, the founders of two much more mature companies – Eventbrite of the US and BlaBlaCar of France – said they hadn’t formally expanded outside their home markets until a few years after their founding when they had received their Series A financing. Due to the nature of its platform as an event-management and ticketing website, Eventbrite already had users from over 100 countries within a couple of years of launching. But it waited to launch in other markets with a dedicated team until it had a clear strategy and solid plan.

BlaBlaCar is a shared transport company that has created a long-distance car-pooling platform, and would have seemed an obvious choice to operate across borders from day one. But it waited longer because it not only wanted to have its strategy clear but also to have raised a certain level of financing before expanding.

Indeed, expanding too soon can be a big problem for a young company. Not only will you stretch your resources (people and capital), but understanding your customers is critical when building your product. If the business is too spread-out with a diversity of customers, the data and knowledge you receive may be diluted, and you won’t be able to build a product that customers love.

Lakestar’s perspective is clear: we invest in founders and companies which have outsize ambitions

Here are a few reasons to go global at a specific time:

  1. An existing customer request – you have a customer that operates across borders and wants to use your product in another market.
  2. Demand-driven – you are getting requests from numerous potential customers in another market.
  3. Competition – a competitor is aggressively pursuing a market that you cannot afford to lose.
  4. Revenue/scale/growth – your home market growth is slowing and you are looking for further revenue growth.
  5. Opportunism – you are presented with a unique opportunity that you can’t pass up.

So what about the how to go global, and what process is needed?

The first is to create the right internal culture. This comes down to language, types of employees and the stated goals of the company.

Language is the most important factor. You will struggle to go global if your company’s language and the majority of its communications are not in English. Why? Because at some point, especially as you scale up, you will need to hire people from other countries and the common business language across countries is English. If a senior hire or, for that matter, any hire joins you and they don’t speak your internal language, they will feel alienated and won’t perform to their highest potential. They may even leave. 

So it is best to establish English as your company’s internal language from the beginning. This doesn’t mean your employees can’t converse in their native tongues, but official communications such as email, group chats and documents should be in English.

While there are many ways to go global, here are the most common methods:

  1. Go native – set up a local office/subsidiary and hire local employees, with oversight from the home office.
  2. Do it all remotely – start selling in a market, but do it from your home market. You may even hire people who speak the language of the new market but work from afar.
  3. M&A – buy a local company and integrate it into your business.
  4. A joint venture – create a partnership with a local company.

Each of these has pros and cons, and your approach should reflect the type of product you have. Peter Zemsky, Deputy Dean of INSEAD, attended our dinner and summarised the conversation as boiling down to three factors: scale, talent and expectations.

Scaling up a company beyond its home market can be hard if it has a substantial population as France does, and the company feels no need to go beyond its borders. However, at some point the business may experience slowing growth so that entering a new market becomes necessary. If it has enjoyed good growth at home in the past it may not be prepared to make that step, but if it becomes trapped in its home market it can become susceptible to the intervention of large international competitors.

Talent is critical because the only way to grow and win on a global scale is to have the best talent. This may be available in your local market but often it is necessary to hire people from elsewhere. This is especially true if the business wants to scale rapidly: there are not many individuals with experience of rapid scaling who can understand how to operate a business as it expands from 100 to 1,000 employees and from USD10 million to USD100 million in revenue. You will need to look at the global talent pool in order to find these types of people, who should also able to use English as the company’s language.

The stated goals of the company will reflect the expectations of its founders, its investors and maybe even its home market. Do they want to create a global player, and will they support it? The answer, surprisingly, is not always yes.

Lakestar’s perspective is clear: we invest in founders and companies which have outsize ambitions. While the timing and approach may vary, this usually means expanding beyond their home markets. In other words, we want all of our companies to go global.