How to choose a country to enter the international market and test the demand

A series of materials on the basis of the Russian Startups Go Global conference we open with an article on how to choose a country to enter the international market. It makes no sense to give advice without knowing the specifics of a startup: its business model, industry, stage, team competencies. Therefore, under the cut you will not find any universal recommendations - only stories from the experience of the founders, whose IT companies are already working in the markets of other countries. In a conversation with them, we tried to find out by what criteria the founders choose a country for scaling, how they test demand, and whether the difference in mentality prevents them.

Dmitry Zaryuta, CEO and founder of Easy Ten:

Easy Ten at the moment - b2c, revenues of about $ 1.7 million per year, the mobile application number 3 on iOS in the category of language learning in the world. With the help of the service, more than 3 million users in 140 countries learn words in 7 languages, the application is localized in 12 languages ​​of the world. A graduate of the FRIA accelerators and 500 startups.

“Before entering the international market, we asked ourselves two questions: “ Why are we doing this? ” And “ How will we do it? ” . In my opinion, the first question has two adequate answers:
')

1. Earn money;
2. Raise investment.

We worked on both goals. If the company plans to attract investments in the US, it is necessary to show local investors that the team can work and grow in this market — it is desirable to have sales and traction on key metrics. But today I will tell more about item number 1.

To enter the market in order to earn money is to invest the amount of N and get a large amount over time. In essence, you need to reduce the unit-economy in the channels (to earn on the client more than the cost of its involvement).

The answers “we are entering the market of another country because there is a crisis in Russia” or “because the market is bigger there” are quite dangerous: it’s not clear what we will do to achieve the goal, and on the basis of what criteria we decide to enter the market of this country. To do this, you first need to check the demand for the product - using data analytics and customer development:

1. View competitors and their numbers;
2. Talk to people from the country and preferably experts from the market;
3. View organic plants in the country and calculate market potential.

In our case, in order to check the demand in the country, it was necessary to know the residents' main language, whether it was interesting for them to learn another language, and then to test the hypothesis that Easy Ten solves the problem of language learning for these people.

It is not enough to focus on the results of customer development (studying consumers through interviews) - it is important to have analytics data. Two years ago, in order to choose a country, we hid for a month: we did not spend money on marketing, but invested in ASO . With it, we received a sufficient amount of traffic for new installations and watched how users behave: they considered retention rates, average check, user lifetime, conversion. We already had a traction in Russia, data on the conversion to the first, second and third purchases, indicators on user retention. By comparing indicators in Russia with indicators of organic plants in different countries, we could look at and predict which market of the country is most interesting.

Based on these data, it was found that user activity is greatest in Brazil — even more than in Russia. Therefore, we started from Brazil - the Olympics were held in this country: people began to prepare for it for several years, including learning English. We localized our application to a number of languages, including Portuguese, and went on a soft-launch. Having invested in marketing in Brazil, in two months we were a plus in this market.

Now Brazil occupies 30% of our revenue, after it comes France, Spain, Portugal and Germany. There is no USA among these countries - it would seem that this is the largest market in the world in the mobile segment, but the audience is not ours: there is no pronounced interest in languages, there is no such problem and need. Learning a new language for Americans is a hobby that can impress friends. Knowledge of English Americans is enough.

As we enter new markets: we buy traffic for our application, for example, in France or Germany, and during the first three months we see how many people made the first purchase, how many of them made the second and third. Knowing your internal indicators in the main market by three points, you can approximate the user's care curve and understand its Lifetime Value with a sufficiently high accuracy. Thus, we understand how much time it takes to invest in traffic, and when the unit-economy we get a plus in this market. Next is a matter of technology: with these figures you can go to the investor, you can go to the bank. You know with great precision that on X invested money you get N * X after Y time. This is the basis for the safe entry of a b2c product into the market.

It is important to complement the analytics data interviews with users and market experts. When we hit 500 Startups, our initial plan was to go to Mexico. Our application was focused on iOS, we bought there the first traffic in the main channel to attract users - Facebook. This social network is very popular in Mexico, so it was possible to look cheaply on installations and conversions, whether Facebook would work for what worked in Brazil. When we saw that Mexico’s performance was different, we began to interview experts. After 500 Startups, we came to an expert in Mexico who was asked the question "how is it that you learn English from Mexicans?" It turned out that a large percentage of iPhone owners in Mexico already know English, they do not need to learn the language. And the Mexicans who need English cannot afford to pay for it: they do not have an iPhone, they use cheap Android smartphones, where our economy will not converge. After an hour of conversation, we realized that Mexico is not a priority for us, and reoriented to Europe. Therefore, it is important to find someone who can tell - it will save the founders time.

Our conclusion: there are two ways of confirming demand in the international market and scaling.

1. Product development for the audience and the market. It is quite long and expensive.
2. Make a product, localize it for most of the possible audiences and see which one will respond best.

We went the second way. It is much cheaper and in fact easier to develop a product under the imaginary founders of an ideal user. It is better to release the product as early as possible to the widest possible audience and see who is the very user for whom we have created value. ”

Daniel Brodovich, CEO of Cookstream and CPO Just:

We started with the b2c segment with TalkToChef, the company operates worldwide in English and Spanish. A graduate of Startup Next and Accelerators Founders Space and Start-Up Chile. Now focused on b2b - Cookstream operates in the US, UAE and Europe.

“We started in the USA, because together with other founders we studied at a business school in San Francisco. One of the ideas that arose during the training was stuck in our heads - they were video broadcasts on various topics, cooking was one of them. We decided to test the potential of the idea at the Startup weekend - and won. Unlike the hackathon, when you make a prototype for two days for a bare idea, the condition of victory at this event is the first clients and the results of interviews with them. In the process of this event, we have already begun to do customer development, and continued in the Startup Next program of Steve Blanc, the founding father of this methodology. Steve Blank considered our idea too niche and suggested that we look more broadly at the market.

In the process of communicating with potential clients for an interview, we found a huge number of problems related to distance consultations and training in cooking. Problems with the delivery of food, with queues in restaurants, the problem of finding professional chefs at cooking classes and restaurants. All this we began to collect in our product. Inspired by this layer of unsolved problems, we decided to make a revolution in cooking.

Our main mistake was that we swung in one fell swoop to solve all the problems. Only the development of a minimum product under our global idea took five months. During this time, part of the team has fallen off, potential investors. As a result, faced with two obstacles:

1. Lack of budget for the implementation of the global idea;
2. Defocus prevented our potential customers to understand why the product is needed and what problem it solves.

Beta versions were mediocre. Steve Blank did not have time to tell us that we need to focus on one problem and solve it better than anyone else on the market. But we understood this from our own experience - so we began to look for a competitive advantage of our product, which no one else has. They realized that the most requested feature is the hotline with video link experts, and the first segment was the chefs and cooking lovers. With a heavy heart, we threw out all our achievements and focused on this value. Having repacked the product for this problem, we attracted investments. But this is a separate story, which will be discussed in the next article.

Regarding the verification of demand on the basis of my own experience, I can say that the founders should study their clients themselves. I am against customer development outsourcing in any form to any employees. Yes, employees can act as an auxiliary force - it is impossible to do everything yourself. We had American employees who helped with the study of consumers for some time, but we did not get values ​​or insights that we could not understand ourselves.

When the founder starts from scratch, he has absolutely no preconceptions about the market (except those he read in the articles). This is both a minus and a plus for studying consumers. We understood that cooking shows are very popular (they are watched by 105 million American families every week), we saw statistics on people who want to learn how to cook. And we tried to understand exactly how they want to learn, whether our solution is convenient, and how relevant it is for them to communicate with a video conference expert. We could check these kinds of questions on our own - we had free English and a basic understanding of Californian culture, which differs from other states: Californians are open to innovation, have a good attitude towards immigrants, are willing to help and support in their endeavors.

However, the habits of consumption can not know, even after living for some time in the United States. We are faced with the problem of differences in consumer preferences: it is difficult to understand how Californians live and how interesting the product they are talking about is “super”. In California, in contrast to Moscow or New York, even to complete nonsense, people will say, “class, how interesting, I will definitely try or buy” - this is simple politeness, not real interest. Therefore, Steve recommended to immediately collect checks and consider buying only the moment of prepayment.

For customer development, our level of integration into the environment was sufficient. But for the marketing of a b2c product in the US market, in my opinion, it is better to involve local experts - in order to understand the mentality and increase speed. You can try it yourself, but mistakes will be inevitable. It is also possible to “pro-Americanize” fairly quickly, if you live in the USA for many years and communicate among non-immigrant Americans. For us, work through industrial partners — American companies with experience in the professional consulting markets (tutors, lawyers, doctors, etc.) and an understanding of their features — was a salvation.

Making people switch from existing behavior to new is very hard. To break the habitual pattern of behavior, we need: “strong” positioning, opinion leaders, the base of “early followers”, the right steps to enter the market. It will take a lot of time, money and effort to build all this independently in the new market. Local partners with market experience built an effective exit plan: they took the narrow niche of the deaf and dumb and their parents and, due to their successful experience, were able to offer the product to universities as a way to increase the academic performance of their students. We would not have reached such a model ourselves - it’s difficult for us to imagine an active and solvent association of deaf-mute and universities that are ready to pay for tutors for students. But in the US, the product is gradually gaining popularity and goes from the niche to the mass.

The specifics of the US market is very different from ours: there are a huge number of players who solve all sorts of problems for you. The American consumer must understand in seconds what the mission of the company and what value the product gives. Wild competition for the attention and wallet of people requires the founders to immediately feel what 5-7 words convey the meaning to the client as clearly as possible so that he wants to spend a minute studying the product. When a user's interest is attracted, it is necessary to tell who we are and why our product should inspire confidence.

Entering foreign markets may not be possible the first time. Our company, when launched in the USA, experienced four pivots from scratch before it came to a working business model. The main thing is to try until it is possible to solve a significant problem in the market. And remember that problems may differ in different countries: often a problem in one country may not exist in another - there is no such need at all or it has already been solved by other players. ”

Mike Melanin, co-founder of Statsbot:

Statsbot currently has 25,000 b2b users, 80% of whom are in the US, 500 startups graduate and Betaworks Bootcamp.

“We are doing an analytical bot for Slack, the first version of the product was launched in December 2015. The launch of the market began with the dissemination of information through the community - the first users were attracted from open thematic Slack channels, from Facebook groups. We immediately focused on the global market, so Statsbot was originally in English. Constantly corresponded with interested people by e-mail, asked questions.

Officially, we launched in January 2016, after launching the Slack application store and finalizing the product based on feedback from the first users and the Slack team. Then we went to Product Hunt, where we received fifteen hundred Statsbot installations two days after the official launch, and other open and free sites. In this way we recruited a user base in order to gain access to companies and have real numbers on them. Locally we were in Russia at that time. The US market chose us, and not we chose it - following the results of testing the first version of the product and analytics data collected after the official launch, it became clear that the majority of users are concentrated there.


The advantage of the US market - the audience there is much easier to contact than in Russia, ready to try new products and pay for them.

Having decided on the target market, we began to go on personal communication with users. Customer development as a demand-checking tool has already become a dirty word in Russia. Of course, we talked a lot with the first users, including meeting in person when we went to the USA. After almost a year, I can say that it is necessary to study my client, but it’s better to listen to him as if through fingers: people say one thing, do another, and pay for the third.

It’s better to show the client a working product and watch the analyst than listen to the hallucinations of people. ”

Konstantin Dubinin, CEO and founder of Countbox:

The countbox at the moment - b2b, offices in Moscow, Chicago and Dublin and representatives around the world, revenue of about 50 million rubles for 2015.

“I started selling abroad in 2014, I hired in Moscow a person with a good level of English, who sold abroad in b2b through resellers. Hiring a person from Russia and trying to sell through cold calls, letters, LinkedIn, exhibitions - in my opinion, the best strategy for monitoring the market and checking demand is cheap (a person with a good level of English can be hired for 50,000 rubles even in Moscow). There were some problems associated with entering a new market: poor English translation of the product, unprofessional vocabulary. We did not understand who made the decision in the companies of our clients, spent a lot of time on the wrong activity. For example, they tried to sell to customer segments that they buy from us in Russia. But abroad they had no need for our product. However, in my opinion, it was much cheaper to spend time studying these problems while being in Russia than to run an office abroad.

In 2015, having paid $ 1,500 per year, we became members of the ICSC (International Council of Shopping Centers) association and got access to a database of our potential customers. This helped us to understand that the US market is the largest for us, which means it’s promising: there are more than 4 million locations in the USA where we can install our product. At that time, we just started the first sale. In the b2b sector, sales often ask for a face-to-face meeting. When the critical mass of such requests accumulates - it's time to open an office. As a result, in early 2015 we opened an office in Chicago - my co-founder lived there.

In 2016, we opened an office in Dublin - this was a condition for attracting money from the second investor, the state fund of Ireland Enterprise Ireland. Before that, Europe was a dark spot for me, this market seemed to me small and uninteresting. The investor convinced me that this is a big market, where our products will be in demand. I listened to professionals who have worked in this market all my life. And he did not regret: it turned out that business in Europe is simpler to conduct than in the United States. In Europe, people are open to dialogue and to everything new, ready to listen to what you say to them. Only they do not know how to criticize - the British never say “no” at all, that’s their misfortune. And the trouble the entrepreneur, if he did not learn to recognize this hidden "no" at an early stage.

North America and Europe have very strong trade unions, they form associations. If the startup team plans to work in some industry in these regions, it is important to get acquainted with the associations in order to evaluate the market. We joined different groups, opened dialogues on a professional level with potential customers, partners and competitors, watched who was developing. It is very important to see if there are competitors in the market, even if they are indirect, because it means the opportunity to succeed in this market. And if a startup has obvious advantages over its competitors, which are easy to explain and demonstrate to potential buyers, then winning is much easier. It is much more difficult to create a market for a product from scratch than to enter a ready one. It's easier to find a market where someone is already doing this. For example, in Belarus, I do not work, because there is no my market, competitors. For example, if a company manufactures medical devices / equipment, it is much easier to go to countries where more hospitals and medicine are more expensive than those where medicine is low and there are no technologies.

I now have new products that I want to test in new markets. The UK will become the “sandbox” because it is close to Ireland, English is spoken there, and it’s convenient for me to work with the British. At the Russian Startups Go Global conference we learned about the opportunity to receive support from the British Embassy, ​​for this they are ready to do market research at their expense. It is convenient for me to take the market of a country close to me, test products on it, get feedback from first customers. It is better to make mistakes in a not very large and promising market in order to be able to correct them and to avoid mistakes when entering a more promising market. ”

Sergey Klimentyev, BizDev and Texel founder:

Texel is currently the b2b segment, the company's 3D-scanners are now sold in France, Germany, Austria, Greece, Spain, Saudi Arabia, and China. Revenue $ 320k for the second half of 2016.

“Having made the first sales in Russia, we switched to Europe. Now there are customers in Europe and in China (Hong Kong and Macao). We are also working on the countries of the Middle East and Latin America - with Qatar, Saudi Arabia, and Mexico. We started from Europe for a simple reason - this is close to Russia: we have an “iron” project, and logistics has a definite influence on the region of our presence.

We thought where to go after Europe - to the USA or to China. The second largest market in our segment - the United States, but eventually went to China. To some extent, our customers took this decision for us - they themselves came to us, watching a video about the product on YouTube.

We are trying to produce a high-tech product that speaks for itself, in this regard, we share the point of view of Ilona Mask: it is better to spend money on a product than on marketing. Technical characteristics of the product without marketing costs attract attention to it. Several journalists wrote about us in cited international publications on 3D printing and 3D scanning, we won the Seedstars competition in Russia. Forbes came to us himself, another journalist was represented by Seedstars. On Slush, the chief editor of TechCrunch asked him to send him a scanned 3D model. Our development in Europe began with these events, and we consolidated its exhibitions and the further development of the distribution network.

Thus, we try to organically communicate product information to new customers at the expense of online presence on almost all 3D printing and 3D scanning resources, as well as startups. Customers who do market research and find information about us understand that our decision on key indicators (scanning speed, processing speed, cost, availability of additional functions - 3D photo, animation) is much better than competitors, and decide to purchase it .

To sum up, we select the countries for further promotion of the product, relying on the clients' requests. We receive these requests on the basis of publications in the media and participation in international exhibitions such as Formnext Frankfurt, Siggraph, CES. Not so long ago, clients from Qatar, Saudi Arabia, and Mexico learned about us - so now we are working on building a distribution network in these countries. ”

Brief summary

To test the demand in foreign markets, the founders use:

1. Figures for competitors and market (including those received from professional associations and trade unions, official reports);
2. Online sites where you can post product information for free (such as Product Hunt) and feedback from users from these sites;
3. Analytics data on organic product installations: retention rates, average bill, user lifetime, purchase conversion;
4. International exhibitions and publications in the media, the results of which the founders collect requests from potential customers;
5. Results of customer development - interviews with potential clients and market experts;
6. Cold calls and letters to potential customers in another country.

Factors that influenced the choice of the founders of the country to go abroad:

1. More requests from potential customers come from the country than from other countries;
2. There are competitors in the country - the market is ready for product promotion;
3. The founder or investor has expertise in entering the country’s market;
4. The founder or investor has an understanding of the mentality and consumer culture in the country;
5. The country is convenient to exit in terms of logistics;
6. Large (= promising) market.

Well, following the results of communication with the founders, we were once again convinced that in order to enter the international market, first of all, the same two things are needed as to launch a startup in Russia:

1. Potential customers in the country have a problem that the product solves;
2. The product has clear competitive advantages over alternative solutions to the problem in the country's market.

In the following materials, the founders will share their experience in attracting investments from foreign investors, hiring a team to enter the international market, and testing channels to attract customers in other countries. If there are other aspects of the entry of a startup to the markets of other countries, which we can highlight in the articles - suggest in the comments.