Go global strategies for startups
At the annual Forum of technology companies GoTech 2016, participants discussed various strategies for Russian start-ups to enter foreign markets, and also reviewed examples of foreign companies that are expanding their presence in the world. Basic quotes - in the material.
Dmitry Chikhachev, Managing Partner of Runa Capital
There are three opinions on strategies for entering international markets.
The first way is to get a good customer base in the home market, get back on your feet, get into profitability, and then regroup and attack foreign markets. Secondly, if you start to develop in the home market, then you get stuck and you will not go anywhere, the technology startup from the first day should be international. And finally, the third opinion is that one should not just go to foreign markets, but move closer to them as possible, since it is impossible to attack from Russia.
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Question 1. How to attack foreign markets?
Igor Matsanyuk, Founder of the IMI.VC Venture Fund
The key question for a startup and investor here is the following: what will we sell at point B?
The specifics of each project is different. When in 2005 we attracted investments from Yuri Milner, he set a goal - to sell the Russian market. And our focus was 100% on Russia. Then the market was big, it developed and liquidity was present in it. The strategy worked.
Another example is GameInsight. This is one of the leaders in the mobile market, which is horizontal and has no boundaries. You can cover 60% of the market and no matter where you are. Therefore, the approach here depends on liquidity.
Of course, there are other segments. E-commerce or the taxi market are local stories. Here, the strategy is different - first take a small local market, and then step by step, go to a larger one. If you have Prisma or MSQRD, then you definitely launch the whole world and you need to go to the Valley after the first successes - liquidity is there.
Stanislav Protasov, Co-Founder and Senior Vice President, Acronis Development Company
The choice between global and local may be due solely to the cost of entering the global market. If it is cheap, then not doing it is simply insane. Russia makes up only 1% of the global IT market, and you can only try to lock yourself up on the basis of some considerations. For example, if you produce not only software, but also hardware.
For example, there is such a startup “Dodo Pizza”. Its founder opened the first pizzeria in Syktyvkar, then in other cities of Russia and is now aiming at America. Of course, selling pizza in New York, baked in Syktyvkar, is hard. But he had the understanding that he had to start from the local and then sell everywhere if he wanted to become big.
As for software, you can only lock yourself to the local market in some very specific situations. For example, 1C is focused on the Russian market because none of their competitors can adapt as quickly to rapidly changing Russian legislation as they are.
But most startups need to think globally right away. There are good competencies in Russia - engineers, scientists, schools, etc., but marketers, vendors, business developers require socialization, which cannot be obtained for global distribution in Russia. If we are going to collect the best competence in our company, then in Russia there is engineering for this, and abroad there is a business that, of course, you can try to educate from here, but it’s much easier to take it where it already is.
Thierry Sellerin, Founder and CEO, BuzzFactory, President of the Association French Tech Moscow
If a company plans its international development badly, then it can destroy it. For example, a startup is in a hurry to enter other countries, which requires significant investment and, ultimately, it destroys it.
Successful startups create the necessary products. And when they see that their first market has already become small, they look at other countries. But here it is necessary to take into account the consumer inquiry from these new countries.
From my point of view, it is impossible to start access to foreign markets from America, as this is a special and difficult country, albeit a large market. If you start in Russia, then you need to choose the nearest European countries, then those that are a little further in Europe from Russia, and then go to America, China, India, etc., since they already require other efforts and resources.
Vera Shokina, Managing Director, Silicon Valley Bank
If an entrepreneur has invented a product for the global market, then it should be immediately launched on it. This can be done from Russia. This option will definitely not work: to come to the Valley and raise an investment round there. Even if a startup has a very interesting vision of the product and getting into the market, still no one gains the trust of investors just like that.
What can work? Companies, for example, raise money from Russian or European funds for teams that move to America. The purpose of the investment in this case is to find an American CEO or co-founder, and give several years to show progress, and then raise a round from American funds.
Question 2. What are the next steps a startup should take after the first sales in international markets have gone?
Igor Matsanyuk
It all depends on the product. I will give a few examples. GameInsight didn't need to hire any people anywhere. It was possible to enter the international markets from Russia, even without leaving the country. The only thing is that in such a situation a business developer is required, since the project has to communicate with Facebook or Google. When growth begins, the startup goes to the platform. And this part of the work in Russia does not perform in any way.
As another option, let's take the Lithuanian thing-sharing startup - Vinted. The company had a strategy that could be called "local-global". They launched a project in Lithuania, then began to expand in the Baltic States, then in Poland, the Czech Republic, Holland, Germany. And everywhere under different brands. The first investment raised three years ago. When at one of the development stages they already had 3 or 4 investors, it was decided to enter the UK market. If the launch here is successful, then the road to American investment is open.
I would recommend this strategy in the current situation, of course, to the projects that it suits. You can undoubtedly open up in New York, but it is better to first conquer Europe, starting with the Baltic states, then France, Great Britain, Germany, etc.
Stanislav Protasov
At one time, our company lost a lot of effort and time on getting the first venture capital investments and not starting to follow the advice of investors. Funds are often advised to go to an unusual market for a product or hire an American CEO. A professional American CEO is needed if your business is already offline or preparing for an IPO. If the business is just breathing, then this person will only kill him.
Thierry Sellerin
I have not seen a single startup that would open in America and manage without a local sales director and marketing team.
French startups choose countries depending on the industry. For example, the scope of advertising is exactly London. After that, the United States. In any industry there are hubs like London for advertising. In this case, if we talk about America, then there are four hubs that do not intersect at all. These are New York, Miami, San Francisco and Los Angeles.
Now about Asia. China is a very difficult market, and I would not advise a startup to go there before it has mastered other countries. Japan is the same; they are doing business here among themselves; it’s very difficult for a foreigner to open an office without hiring a local CEO. In addition, there is a common big question - whether these markets are open for the development of startups. From my point of view, Russia is open for this, and creating an office here is not difficult.
As for European startups, for them the number one market is Europe, and then America. For Russia, in my opinion, such a rule should also act.
Sergey Gribov, Flint Capital Partner
Most Israeli startups are coming to America. Also now they began to choose China as the first market due to the fact that active investments began from there.
As a rule, at an early stage, a startup raises money in Israel, creates a product, makes initial sales from here, and when the first customers appear on the American or European market, one of the founders moves there, creates an office, raises the next round and starts the expansion.
One of the mistakes of Russian startups is that when they are looking for a vice president for sales on the foreign market, knowledge of the Russian language is put among the requirements. This noticeably narrows the circle of candidates.
Another important point in the development of startups in foreign markets is the founder’s life experience in the market where he is going to operate.
Question 3. What advice will you give: what is important to do when it has already entered the foreign market, and what should not be done categorically?
Vera Shokina
No need to transport all core founders to the States. One or two is normal, but three or four people are already many. Useful for the project found in the States co-founder. Acceleration programs can be completed - they help to get used to the American market, they give prerequisites to raise money from Russian funds or from American business angels.
Thierry Sellerin
It is important to have localized technical support. You should also do a clear marketing research in the market where you are going to work.
Stanislav Protasov
We must remember that the main thing is the product. Do not defocus. Startups have a lot of distractions. First, he has been living in a situation for a very long time when it seems that everything is on the verge of collapse. And in this state, he believes that others are fine. It is not necessary to pay attention to this, you should not listen to those people who offer to change your strategy.
Igor Matsanyuk
Read articles. Knowledge is the most important thing. Need to study. If you have knowledge, then you are guaranteed to do everything right.
Sergey Gribov
Choose the market that you think is yours and go there. Create an office with the majority of local people, sending, however, there is one founder.
This publication is based on the video recording of speakers' speeches at the round table as part of the annual Forum of technological companies GoTech 2016, hosted in the official Gotech YouTube account.
Dmitry Chikhachev, Managing Partner of Runa Capital
There are three opinions on strategies for entering international markets.
The first way is to get a good customer base in the home market, get back on your feet, get into profitability, and then regroup and attack foreign markets. Secondly, if you start to develop in the home market, then you get stuck and you will not go anywhere, the technology startup from the first day should be international. And finally, the third opinion is that one should not just go to foreign markets, but move closer to them as possible, since it is impossible to attack from Russia.
')
Question 1. How to attack foreign markets?
Igor Matsanyuk, Founder of the IMI.VC Venture Fund
The key question for a startup and investor here is the following: what will we sell at point B?
The specifics of each project is different. When in 2005 we attracted investments from Yuri Milner, he set a goal - to sell the Russian market. And our focus was 100% on Russia. Then the market was big, it developed and liquidity was present in it. The strategy worked.
Another example is GameInsight. This is one of the leaders in the mobile market, which is horizontal and has no boundaries. You can cover 60% of the market and no matter where you are. Therefore, the approach here depends on liquidity.
Of course, there are other segments. E-commerce or the taxi market are local stories. Here, the strategy is different - first take a small local market, and then step by step, go to a larger one. If you have Prisma or MSQRD, then you definitely launch the whole world and you need to go to the Valley after the first successes - liquidity is there.
Stanislav Protasov, Co-Founder and Senior Vice President, Acronis Development Company
The choice between global and local may be due solely to the cost of entering the global market. If it is cheap, then not doing it is simply insane. Russia makes up only 1% of the global IT market, and you can only try to lock yourself up on the basis of some considerations. For example, if you produce not only software, but also hardware.
For example, there is such a startup “Dodo Pizza”. Its founder opened the first pizzeria in Syktyvkar, then in other cities of Russia and is now aiming at America. Of course, selling pizza in New York, baked in Syktyvkar, is hard. But he had the understanding that he had to start from the local and then sell everywhere if he wanted to become big.
As for software, you can only lock yourself to the local market in some very specific situations. For example, 1C is focused on the Russian market because none of their competitors can adapt as quickly to rapidly changing Russian legislation as they are.
But most startups need to think globally right away. There are good competencies in Russia - engineers, scientists, schools, etc., but marketers, vendors, business developers require socialization, which cannot be obtained for global distribution in Russia. If we are going to collect the best competence in our company, then in Russia there is engineering for this, and abroad there is a business that, of course, you can try to educate from here, but it’s much easier to take it where it already is.
Thierry Sellerin, Founder and CEO, BuzzFactory, President of the Association French Tech Moscow
If a company plans its international development badly, then it can destroy it. For example, a startup is in a hurry to enter other countries, which requires significant investment and, ultimately, it destroys it.
Successful startups create the necessary products. And when they see that their first market has already become small, they look at other countries. But here it is necessary to take into account the consumer inquiry from these new countries.
From my point of view, it is impossible to start access to foreign markets from America, as this is a special and difficult country, albeit a large market. If you start in Russia, then you need to choose the nearest European countries, then those that are a little further in Europe from Russia, and then go to America, China, India, etc., since they already require other efforts and resources.
Vera Shokina, Managing Director, Silicon Valley Bank
If an entrepreneur has invented a product for the global market, then it should be immediately launched on it. This can be done from Russia. This option will definitely not work: to come to the Valley and raise an investment round there. Even if a startup has a very interesting vision of the product and getting into the market, still no one gains the trust of investors just like that.
What can work? Companies, for example, raise money from Russian or European funds for teams that move to America. The purpose of the investment in this case is to find an American CEO or co-founder, and give several years to show progress, and then raise a round from American funds.
Question 2. What are the next steps a startup should take after the first sales in international markets have gone?
Igor Matsanyuk
It all depends on the product. I will give a few examples. GameInsight didn't need to hire any people anywhere. It was possible to enter the international markets from Russia, even without leaving the country. The only thing is that in such a situation a business developer is required, since the project has to communicate with Facebook or Google. When growth begins, the startup goes to the platform. And this part of the work in Russia does not perform in any way.
As another option, let's take the Lithuanian thing-sharing startup - Vinted. The company had a strategy that could be called "local-global". They launched a project in Lithuania, then began to expand in the Baltic States, then in Poland, the Czech Republic, Holland, Germany. And everywhere under different brands. The first investment raised three years ago. When at one of the development stages they already had 3 or 4 investors, it was decided to enter the UK market. If the launch here is successful, then the road to American investment is open.
I would recommend this strategy in the current situation, of course, to the projects that it suits. You can undoubtedly open up in New York, but it is better to first conquer Europe, starting with the Baltic states, then France, Great Britain, Germany, etc.
Stanislav Protasov
At one time, our company lost a lot of effort and time on getting the first venture capital investments and not starting to follow the advice of investors. Funds are often advised to go to an unusual market for a product or hire an American CEO. A professional American CEO is needed if your business is already offline or preparing for an IPO. If the business is just breathing, then this person will only kill him.
Thierry Sellerin
I have not seen a single startup that would open in America and manage without a local sales director and marketing team.
French startups choose countries depending on the industry. For example, the scope of advertising is exactly London. After that, the United States. In any industry there are hubs like London for advertising. In this case, if we talk about America, then there are four hubs that do not intersect at all. These are New York, Miami, San Francisco and Los Angeles.
Now about Asia. China is a very difficult market, and I would not advise a startup to go there before it has mastered other countries. Japan is the same; they are doing business here among themselves; it’s very difficult for a foreigner to open an office without hiring a local CEO. In addition, there is a common big question - whether these markets are open for the development of startups. From my point of view, Russia is open for this, and creating an office here is not difficult.
As for European startups, for them the number one market is Europe, and then America. For Russia, in my opinion, such a rule should also act.
Sergey Gribov, Flint Capital Partner
Most Israeli startups are coming to America. Also now they began to choose China as the first market due to the fact that active investments began from there.
As a rule, at an early stage, a startup raises money in Israel, creates a product, makes initial sales from here, and when the first customers appear on the American or European market, one of the founders moves there, creates an office, raises the next round and starts the expansion.
One of the mistakes of Russian startups is that when they are looking for a vice president for sales on the foreign market, knowledge of the Russian language is put among the requirements. This noticeably narrows the circle of candidates.
Another important point in the development of startups in foreign markets is the founder’s life experience in the market where he is going to operate.
Question 3. What advice will you give: what is important to do when it has already entered the foreign market, and what should not be done categorically?
Vera Shokina
No need to transport all core founders to the States. One or two is normal, but three or four people are already many. Useful for the project found in the States co-founder. Acceleration programs can be completed - they help to get used to the American market, they give prerequisites to raise money from Russian funds or from American business angels.
Thierry Sellerin
It is important to have localized technical support. You should also do a clear marketing research in the market where you are going to work.
Stanislav Protasov
We must remember that the main thing is the product. Do not defocus. Startups have a lot of distractions. First, he has been living in a situation for a very long time when it seems that everything is on the verge of collapse. And in this state, he believes that others are fine. It is not necessary to pay attention to this, you should not listen to those people who offer to change your strategy.
Igor Matsanyuk
Read articles. Knowledge is the most important thing. Need to study. If you have knowledge, then you are guaranteed to do everything right.
Sergey Gribov
Choose the market that you think is yours and go there. Create an office with the majority of local people, sending, however, there is one founder.
This publication is based on the video recording of speakers' speeches at the round table as part of the annual Forum of technological companies GoTech 2016, hosted in the official Gotech YouTube account.
Source: https://habr.com/ru/post/322200/
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