I originally posted the below text regarding internationalisation of startups on my old blog, pawel.ch, in March of 2014. Having just come across this story about how Uber is losing vs. local competitors in some countries reminded me about the characteristics of multi-local marketplaces and how tricky their internationalisation can be. If you are interested in this topic, I hope you will enjoy this blog post or maybe even find it useful, especially if you did not read it back when I posted it.
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At Point Nine, we spend a lot of time thinking about how startups internationalise. As we are mostly active in Europe and given it is hard to build a really large company only addressing one of the European countries, most of our portfolio companies face the challenges of internationalisation at some point in their lives.
My current thinking is that as far as internationalisation is concerned, there are two types of startups: global and local/multi-local startups. It is very important for founders to understand which category their company is in, as it will have significant consequences for how the internationalisation process will evolve and how it will impact the development of the company.
Global startups
Global startups address an international audience from day one. They will typically launch their product in English and might add additional localised versions later. Many of our SaaS startups, even those based in Europe, are global startups. For example, Contentful, infogr.am or Algolia all fit this definition of a global startup. Being a global startup has following consequences:
- It is “easy” to go international. You sell to international audience from day one.
- Sooner or later you will have strong direct competitors, so better get funded and move fast. If the opportunity is significant and it is global, someone else out there will notice and try to exploit it.
- Especially in software, if you are global, you have to be strong in the US market, the biggest software market in the world. If you lose the US, it can be hard for you outside of it.
- First you need to master the English / US version of your product and sales and marketing. Local language versions or localised sales might be necessary at later stages of the company to scale it really big, but not to get to the first significant scale.
- The financial outcome of your startup journey will probably be binary - either you will create a very significant company or you will be crushed by competition or die of other problems.
Local and multi-local startups
(Multi-)local startups are different. They typically start with a product offering tailored to one country and after gaining some experience in the initial market go to another market and another, in a country by country fashion. Examples from our portfolio would include Delivery Hero, Kreditech or Docplanner.
- (Multi-)local startups are “hard” to internationalise. Every new market is a new logistical challenge. This can be especially hard in ecommerce, but marketplaces are not easy either. Figuring out a fast and efficient way to rollout new markets is key.
- Competition in the local markets will vary between zero and moderate, rarely will it be very sophisticated, aggressive or well funded.
- As you gain experience in a multitude of markets, it will be hard to compete with you.
- US is not a must. More importantly, US competitors will typically not be a threat. US competitors who start with a local business model in the US, frequently do not internationalize at all or go only into a few countries, do it late or are not good at it (see GrubHub Seamless, Zocdoc or Amazon).
- It is hard to get to a really big scale as it will typically require winning a large number of countries or winning in the biggest, most competitive countries (like Germany, UK or France).
- The outcome does not have to be binary. You can make it in one or a few small and mid-sized countries, fail in bigger markets and you can still have a decent exit.
Of course, the world is not as black-and-white as painted above. One can imagine that a company launches a global product offering following some success locally. Or that a company is not easy to categorise, like in the case of Spotify which goes country by country, but is building a global brand.
While certainly not perfect, I like this way of looking at the internationalisation of startups. If you have any thoughts or experiences that support, contradict or simply add to the above, I would be thankful to read about them in the comments below.