Startups and larger companies alike are in the planning phase of their cycle; for many companies that may include assessing international expansion plans. Startups going global are probably considering it for a multitude of reasons; access to a less competitive consumer market, cheaper labor or less capitalized talent pool, access to a younger B2B landscape, etc. There are some things that startups should consider while choosing a country considering their limited access to resources:
Speed and Cost
Many startups don't take into consideration the amount of time it takes to set up international business operations. The amount of time to set up a foreign subsidiary in a country can vary from one to six months, with a cost of roughly $10-40K. Many startups for this reason will choose to just hire contractors in country. But, that can have major unforeseen IP risks, labor law issues, and general accountability issues depending on the country. For more information see one of our previous posts about International Hiring Compliance Traps.
If the compliance risk is too high but the idea of waiting six months to get operating in a country is way too long (don't forget the cost and time to exit if that operation fails) then your best bet will be an International PEO. Theis model leverages the idea of a sharing economy to allow compliant hiring in country with minimal risk and time investment.
Startup Culture Fit
Culture fit is real, especially when it applies to startups. Many countries, culturally, will not have the same sense of time management and prioritized execution that the USA startup scene thrives on. It is worth looking into and calculating the expected difference between the country you are operating in today and the ones you are targeting. Let us know if you need an inside scoop on a country you are looking at.
Time Zone
This one seems obvious but the implications are huge when it comes to employee and managerial burnout. Many startup founders, co-founders, and employees will be eager to state that it does not matter to them that "I don't sleep anyways" but that will only last for so long. If you can avoid 3AM and 11PM calls on a daily basis, do it. Or, consider placing a trusted resource within 2-4 time zones to manage properly.
IP Protection
There is nothing that can kill a successful startup's progress faster than an IP dispute. As previously stated above, the idea of IP protection is one that comes up many times for our clients. A lot of our clients in the software space want to make sure that the developers they hire in other countries have the correct legal boundaries in place in their contracts to make sure their code is safe. Sometimes that is not even possible in a contractor relationship depending on the country. For more information about IP and the process once you have chosen a country see International Expansion for Startups.
Difficulty of Localizing Business Model
Do not assume that what works here in the U.S. will work in every country. For each country make sure you evaluate the cost/effort of localizing your business model for that country.
Legal Implications
One of our friends at Polaris Law Group put together a great post that can help you go through all the legal implications associated with international business. It's worth the time to go through their checklist Understanding the Legal Aspects of Doing Business Overseas.
Access to Money
Does one country you are considering have grant money or low-interest capital behind it that you might be qualified for? A company we work with very often, Konektid, helps companies figure this out. "Don't leave free money on the table," Mike Shanley - CEO of Konektid says in a post he wrote for us called New Model for Entering Emerging Markets. It is definitely worth looking into for every country you are looking at.
Acess to Strong Local Partners
You don't have to do this alone. With a little help from a partner who understands local laws, customs, and resources can make or break your international strategy. Check out one of our last articles Picking the Right Global Expansion Partner for more information.
If you take all these points into your planning session you should have a far clearer picture of what your best course will be moving into the future. If you have any questions on how this applies to a specific country, please call or reach out to us!
