International expansion of a startup
As in almost all cases in management, the answer to this question depends a lot on the specific circumstances of each company.
There are companies in which, due to their circumstances, international expansion is more obvious than in others. For example, the most logical thing is that a eCommerce founded in Spain, it expands in Europe starting with France (due to its proximity) and Italy (due to lower competitive intensity). On the other hand, for websites focused on content creation, the answer is different. AND the idea that they should begin their international expansion in Latin America, considering it a natural market due to the language, is not so valid. If we do a deeper analysis and evaluate both the degree of difficulty in translating these contents and for which audiences those contents are relevant, the answer can be very different. To illustrate this we will use the case of Minube, one of the startups participated by Intelectium. Minube is a social travel network with a large amount of relevant and high-quality content about the Iberian Peninsula. When Intelectium analyzed the difficulty of translating the contents, we concluded that it was easy and inexpensive. Then, we began to analyze what audiences these contents were relevant to, and we found a large number of English and German users who were looking for information about Spain to come on vacation and visited Minube even if it wasn't translated. In this case, monetizing in the United Kingdom and Germany could be more profitable than monetizing in Latin America. Therefore, we concluded that it might be more attractive to expand first to these countries, and later to Latin America. But, for example, if a content website hosts educational courses, the translation of the materials (many of them on video) is expensive. A strategy that initially prioritizes expansion into Latin America may be more logical in the latter case. What should be avoided is to do a superficial analysis and, above all, the consideration that there are “natural” markets, such as Latin America in the case of Spain. In the same way, I am very scared of an entrepreneur who has launched a startup in Spain and that he has realized that the demand for his product is in the United States and that, therefore, he needs investment. While it is true that the United States is a huge market and more willing to rapidly adopt new technologies, it is also true that it is an extremely competitive market, where salaries are much higher than those currently paid in Spain.If an analysis of international expansion leads us to think that the United States is the most appropriate market to launch our product, then we must forget about Spain for a moment. It is advisable to move to the United States, create a matrix and seek funding there. You can think of keeping the R&D team in Spain to take advantage of the excellent resources we have and the reduced costs, but the right thing to do would have been to open the company directly in the United States. In this sense, I particularly — and from an investment point of view — am much more attracted to businesses that can be founded in Spain and expanded to Europe quickly. These businesses have two important advantages: - The European market, although more complex to develop, is even larger than the North American one. We must lose our fear of Europe, a large market full of opportunities, and where the main capitals are less than two hours away by plane from Madrid and Barcelona.- Developing a company capable of penetrating the five main European markets allows, later, to think in terms of exit and the possibility of a North American or Asian company interested in quickly positioning itself in Europe. To conclude, I would like to recommend reading an article by Pankaj Ghemawat, published by Harvard Business Review, in which some noteworthy facts stand out. Some of them are: - For every 1% that the distance between countries increases, commercial transactions decrease by 1.1%. This means that two countries separated by 5000 miles have only 20% of commercial transactions than they would have if they were separated by 1000 miles.- When one country borders another, trade increases by 80% .- When there is a common trading block, trade increases 330% - When there is a common currency, trade increases 340%. Those who consider Latin America as a natural market for Spain are supported by the fact that the existence of colonizer-colonized relations generates an increase of 900% in business transactions, but this does not necessarily imply Brazil, where despite its cultural closeness, there is neither a common language nor colonizer-colonized relations. In any case, to develop the Brazilian market, I recommend expanding to Portugal first, and taking the leap to Brazil later. More: The 5 best countries to internationalize your startupThe premature expansion of startups as the main cause of failureExpanding a B2B Startup: Own Sales or Distributors?
