4 keys to international expansion – TechCrunch

During my five Over the years with Global Founders Capital, Rocket Internet’s $ 1 billion VC arm, I saw more than a hundred internationalization efforts of Rocket’s incubated companies. to background, Rocket internet Has helped launch some very successful businesses internationally, including HelloFresh ($ 12.9 billion market cap), Lazada ($ 1 billion exit), Jumia ($ 3.2 billion market cap), Zalando ($ 21.2 billion market) Cap) and many others. Rocket often followed Blitzscaling Popular model by Reid Hoffman – earning him an appearance in his book of the same name.

After helping the initial success of the Groupon scale internationally through Rocket’s merger with incubation firm Citadel, Rocket’s team has grown aggressive business from Algeria to Zimbabwe – sometimes in weeks. No wonder there is also a cemetery of rocket failed companies that were victims of poor internationalization efforts.

Many companies make the costly mistake of launching abroad too soon.

My personal comments on Rocket’s successes and failures begin with this critical point: These learnings may not apply to your unique combination business model, market, and time. No matter how well you plan and plan your internationalization, in the end you need to be agile, cautious and smart with your first foreign market dipping your toes.

Fail fast and cheaply

Internationalization can be a major driver of growth and can result in enterprise value, which is why investors always push for it. But going abroad can destroy the value as soon as possible. As a founder, it is your job to manage financial and operational risks. Finding the right balance between keeping costs in check and not being low can mean doing things more slowly than your board. For example, you can launch new markets sequentially instead of rolling out 10 at the same time.

Adopt a “slow, fast-fire hire” mentality for your expansion strategy. Don’t be afraid to pull the plug if things don’t work.

But our team Hartcore capital Use the following framework and learning to guide internationalization strategies for our portfolio companies. A successful internationalization strategy needs to answer and address the “Four Ws”: When, Where on, Which which And With whom Internationalize. (About the fifth W from Journalism, you don’t need to ask the “why” question if you want to build a big business!)

1. When is the right time to start?

Many companies make the costly mistake of launching abroad too soon. They see internationalization as a separate task, cut off from the rest of the trade and then start their second market ahead of time. Follow this simple rule: Wait to internationalize until you fit the product / market.

How do you know when you have reached the product / market? according to this Mark Andreessen, “Product / market fit means being in a good market with a product that can satisfy that market.” he adds Experienced entrepreneurs can usually feel that they have reached this point.

Let’s take the man for his word and move on to the real argument: As long as you don’t have a product / market fit, you can use what you’ve learned from your business model and what you’ve learned from yourself. Will not be able to distinguish between. Country experience. Mistakes will be compound. Complications and costs will increase manifold. I argue that insufficient understanding of their business and operating models is the main reason that companies fail with their expansion strategies.

The founder should also consider the inherent costs of internationalization before deciding to expand (more about this in the “What” section below). Some companies are global by default – mobile gaming companies think – or simply require language localization. Others need to build new warehouses, hire local teams or manufacture completely new products. Premature expansion costs and associated risks greatly depend on the business model.

There are edge cases where companies need to move fast to internationalize for strategic reasons – despite uncertainty about its market fit. For instance, companies such as Groupon or those engaged in food delivery face the most market, where product differentiation opportunities are limited. “Blitzscaling” makes sense in cases like these.

However, you should tread carefully if your only reason to start scaling abroad is a huge amount of money or to match a competitor’s internationalization efforts. Scaling prematurely for the wrong reasons can cost you your company.

When Rocket Internet announced that it would launch the Homejoy model in European markets HelplingThe American “parent” company launched rapidly in Germany in an attempt to squash its new competitor. In the early days of “on-demand everything”, creating a managed marketplace for cleaning services seemed like the next unicorn.

In 2013, Homejoy had a fresh sum of $ 24 million Series a From Google Ventures And First round – Considered a big round at a time when Instacart raised Series A for only $ 8 million and Snapchat did a $ 13 million series in one round. It would have seemed like a good idea to squash the German competition early.

As it turned out, Homejoy’s product was not yet internationally ready. Just 13 months after its launch in Germany, Homejoy had to cease operations around the world, while Rocket’s Helpling Still alive and kicking. Products, focusing on automation and working their unit economics. A rush to crush an international contestant caused the demise of a will.

In 2014 Homejoy expanded internationally to squash a new German competitor, Helpling.  Their websites show different results in 2020.

In 2014 Homejoy expanded internationally to squash a new German competitor, Helpling. Their websites show different results in 2020. Image Credit: Homejoy / Helpling

2. Where should you internationalize?

When deciding which new international market it is, it is important to do your homework. Analyze the competitive environment, partner availability, infrastructure, culture, regulation and synergy with your home market.

In the early days of e-commerce, it was easy to analyze whether market expansion was the goal. In the absence of commercial competition, Rocket chose new countries based on GDP and Internet penetration.