Author: Rob Moffat / Source: VentureBeat
If you’re considering expanding your startup to new, international markets, you’ll need to juggle a lot of decisions, including timing, market choices, and budgeting. Here’s a look at some key mistakes you’ll want to avoid.
Going international too late
Going international too late is perhaps the most common mistake companies make.
To be fair, it’s not always a mistake: Some companies never want to be international and prefer being a local success, even if that means lower long-term growth. For example, Dutch ecommerce business Coolblue generates over €1 billion ($1.14 billion) of revenues 20 years after launching and has never expanded further than Belgium.
However, in many cases, companies do have ambitions for international growth and leave it too late. There are two dangers here. The obvious one is that competitors have emerged and reached stronger positions in other markets. The less obvious is how the culture of the business can harden around one country. Technology, product, and marketing can all become optimized for the home market, making it increasingly hard to rebuild them into international platforms and teams. In these cases, international operations can remain unprofitable and dwarfed by the home market for years to come. It is easy for these small unprofitable international operations to then get shut down in the next management change or reorg.
Examples of this problem are the British finance/insurance price comparison websites Confused and Moneysupermarket. These were pioneers in online insurance comparison and have reached $billion+ valuations in the UK, but they took many years to look internationally.
Moneysupermarket still has not managed to develop any significant international operations, and its share price has struggled as the UK market has become more mature.
Confused’s parent Admiral has belatedly invested in growth in the US, France, and Spain. It has faced some criticism for this, particularly its US operations, Compare.com, which are still loss-making but seem to be making some headway:
Traditionally, US tech companies were slow to come to Europe, leading to “copycats” popping up, often backed by Rocket Internet, which the US players would have to acquire (e.g. Groupon-Citydeal). We see less of this these days, with Zalando, for example, far outperforming its inspiration, Zappos, and with US companies coming to Europe faster.
Going international too early
With venture funding more plentiful, we now see more of a challenge with companies trying to go international too early.
Often this is a company that is still refining its value proposition but has had some strong early growth in its home market. It decides to expand rapid internationally but then realizes there are issues in the core product. These are much harder to fix when the company is already spread across multiple countries.
One high profile example here is bike-sharing company Ofo, which expanded rapidly from China but more recently contracted international operations after facing strong competition and huge cash flow pressure at home. What really matters to Ofo and its competitors is being a winner in China, and this is far from done, requiring significant further investment — particularly with the rapid rise in escooters and ebikes. In this context, investing further in European growth does not make sense.
A homegrown example would be Housetrip, the vacation rental marketplace out of Europe. It grew very fast early on, backed by more than $50 million from Balderton, Index, and Accel. It is in a fairly international market of travelers and so grew rapidly across Europe and with US travelers. However, what really counted in the end was brand loyalty (repeats and word of mouth) in specific countries. When competition from…
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