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Filtering by Tag: internationalization

Expansion part 2: As you move.

Carl Fritjofsson

This is a continuation of a 3 blog series about international expansion of startups. Something we spend a lot of time assiting our entpreneurs with at Creandum. The first post focused on what you can do to prepare before you go. In this second post I'm highlighting what to consider in the internal turbulent phase during the actual expansion. Most of the content relates to expanding from Europe to the US, but parts of it should still be applicable regardless of geographies. 

As mentioned in the first post, expanding operations into a new market is a lot of hard work. It will put tremendous efforts on the organizational structure and your team and business needs to be mature and ready enough for it. Again I want to repeat, don't expand too soon. But once you decide the timing is right and you flip the switch realize it will be a chaotic couple of months ahead and minimize friction by thinking through the following points. 

⛑ Fill in the holes. Before you started the actual expansion, you must have thought through what functions to build at the new location and what people from the management team are required to do so. Ideally this means one or more of the founders, and in case you're heading to the Bay Area it's hopefully non-technical functions (due to heavy competition for tech talent). But don't just leave. Keep in mind that leaving the home office will leave an empty whole in the organization. Things will not be the same in this office from now on. Therefore make sure to review all responsibilities that currently sits with the people who are moving, understand what of those things will have to remain locally vs being managed from the new location, and decide who in the home office to take over such tasks. Try to transfer these responsibilities during a phase before the move has happened. Be wary, as a strong leaders you may experience a hard time giving up certain responsibilities which are to remain at local, but it's critical to trust and enable to local team to take on and own the new tasks. Don't make a rookie leadership mistake and bulldoze over responsibility allocation.

💬 Over-communicate. The distance between your offices means a barrier for information to flow freely. This means much higher requirements on structured communications. And you will have to communicate a lot. And when you think you're communicating too much, you probably need to communicate a little more. It's never too much. To do this you first of all have to set up the organization to operate significantly more in writing. Things that aren't written down will by effect not transfer fluidly between the offices. The local water cooler fountain conversations should still be encouraged, but any discussions or decisions being made there have to be documented in writing and shared with the broader team. And, as mentioned in the previous post, this also goes for status updates and meeting minutes. The second component of this is making this information available and transparent regardless of office location. Using Slack or similar communications products as the primary destination can make wonders, and also adds an interactive layer to it. Thirdly you will also start relying a lot on online conferencing between the offices. Use video conferencing, not audio only, as much as possible because it not only forces everyone to focus on the meeting (you're being "watched") but seeing a person often also helps strengthen team spirit and the human bond between colleagues. And to further encourage team spirit and to lower the mental barriers between the offices it's also great to install a permanent Dropcam link between the offices where you can see each other and reinforce that you're in it together! And lastly you have to accept that asynchronous communications is slightly slower than what you were used to when everyone was in the same room. But remember to respect it, and do what you can to work around it by maximizing the work day overlap. Time zone differences between CET and PST means people in California will have to get up early and their colleagues in Europe have to stay a little later in the office. 

🍖 Beef up the team. For those who spearhead the expansion it can be a lonely endeavor in the beginning as they just moved to a foreign country leaving beloved colleagues behind. And you rarely have full capacity in the new location meaning you will start hiring quickly. When hiring in a new location there's a common tendency to over-hire in the beginning to quickly build scale. It's typically not a bad thing (clearly depends on organizational needs more than anything), although you have to have extremely high hiring demands on the first people you bring on. The biggest job you have as the team member leading the expansion at the new location will be to transfer culture from the original office. Hence hiring for culture fit becomes a core task meaning you have to truly ensure culture fit on your first hires. To help you do this, use the people in your first office to assist in the recruiting and interviewing. Even if it involves expenses flying people across the world. Using your original team not only helps identify the right candidate, but also effectively bridges the two offices together. And be sure that the people you’re hiring are filling an immediate need, e.g. don’t hire someone to do sales unless your product is ready for the market. 

📝 Lawyer up. Don't try to put someone internally to do the paper works. Things that may seem standard and easy in your home market can still be surprisingly complex, time consuming and bureaucratic especially in the US. You cannot do this yourself, and you don't have the time to learn. Most of it simply requires you to have good legal representation. Some of these things include setting up a Delaware company, drafting employment agreements and updating your Terms of Service. If you believe the US is your most strategic market and you are long-term committed to it, you may want to consider flipping the company to a US parent and creating a local employee incentive program (not recommended until post-expansion when you have validated the market with actual results). All these things require paperwork and solid lawyer assistance. And don't be cheap about it. Choose top tier legal firms who are well known in the startup ecosystem. They are expensive, but it's worth it. Try to negotiate fixed fees per project to avoid hourly charges adding up. And try to use standard legal frameworks. Anything custom you require will increase costs exponentially. And remember that in the US you have specialist lawyers across many different fields. The person to draft your employment agreements is probably not the same who sets up your Delaware company. Also make sure to get your employment visa stuff sorted before you settle in too much. E2, H1b, L1, O1 and so on. It's a jungle and it takes time but it's doable with the right legal assistance. Simply accept working close with lawyers as one of the pains and realities of operating a business in the US. 

🏃 Get ready to sweat. Get going instantly when you hit the ground. It's important to show you're making progress to the team members at home. If you haven't already get to know all potentials partners, recruiters, lawyers, etc. you may need. Stir up dust everywhere you can. If you come from Europe to the Bay Area you will also notice that you get access to some of the absolute cutting edge talent who live and breathe tech. By networking within that community you get healthy perspectives on your company and what it takes to make it in a world often many degrees more competitive than what you find in the safe arms of Europe. Also, keep in mind that in the US it's often rather easy to get first meeting as people are open and helpful. But now when you're here being relevant enough to build a long-term relationship and secure 2nd and 3rd meetings over time requires you to bring something to the equation. The equation requires you to be relevant and give back. Start planning that early and offer a helping hand as often as you can. Furthermore, if there's only a couple of you start working from a co-working space and give yourself time. Don't rush into the first office you can get. Real estate is a slow moving industry and getting an office in the Bay Area often means signing a 3-5 year lease. You don't want to mess that up. And if you're in the Bay Area you have to be ready to pay up. Commercial and private real estate is crazy expensive and salaries for top tier talent is many dimensions higher than you are used to. Get used to it. Finally, recognize the expansion is a huge personal experience for those who more over. It's critical to find a context and purpose to enjoy beyond the business. Don't neglect making friends, pursuing hobbies, working out, etc. Enjoy your new home! 

Again, the content of this post isn't purely based on my thinking and experiences. For some of the best startup inspiration make sure to follow these friends who all contributed to this article series: Patric of HansoftHeini of VivinoCaroline of Toca BocaChristian of FitbayOskar of NarrativeEmil of Neo TechnologyLouise of VintAlex of Omniata, and Jonatan of Lookback. I’m always available to connect and discuss on Twitter at @fritjofsson. 💪👊

Expansion part 1: Before you go.

Carl Fritjofsson

Starting a company in Europe comes with its particularities. Many of the domestic markets are not large enough for big ideas, and European entrepreneurs generally quickly think about expansion and internationalization. This is especially true in the Nordics. And when it comes to expanding your tech startup, the most important market for many of us is still 🇺🇸 . Partly because of the commercial appeal of a large (and reasonably) homogeneous market with high purchasing power, but more importantly because it's the home of most major tech platforms and dependencies. At Creandum, we have seen many times that in order to become the world-leader in your domain, you need a US presence in one shape or form. This is why parts of our team, including myself, are based in the San Francisco Bay Area where we can support our portfolio on the grounds and tactically help you grow your business into this market. 

Having scaled Wrapp into 18 markets across the globe myself, as well as getting inputs and leveraging insights from our awesome portfolio founders and friends, we have been fortunate enough to have learned a couple of things along the way. And since we invest a lot of time on this topic, in a 3 blog series during the following couple of weeks, I’m going to share some of the learnings and best practices to think about when expanding your company and setting up operations abroad. The structure follows a timeline and things to consider before, during and after you set foot into another market. The outlook is expanding from Europe and setting up operations in the US, although I believe most of these learnings may work just as well when entering into any foreign market.

This post is probably the most important one - 5 things to think through and do BEFORE you make a decision and start your expansion.

Understand why. First of all understand that splitting up a company across multiple locations adds A LOT of complexity. Therefore it’s not something to take lightly. Don’t be vain, and just expand for the sake of expansion. Instead try to figure out what part of your business goals you cannot accomplish from your local market. What can you achieve from home? Why do you even need to expand? Are you truly a company who needs local operations or can it be managed centrally? Why do you want to go to US and not China? With global distribution channels available from anywhere, many startups can come a long way and establish a large international customer/user footprint from their domestic market.

📆 Decide when. But many of us have international ambitions from the get-go with a business requiring local operations. In such cases you instead have to start considering the timing. Don’t expand too soon. Many companies who are successful in early fundraising fall into this. I did it with Wrapp. Finding the perfect timing of your expansion is a combination of product-market-fit, organizational maturity and financing. Until you have truly proven product-market-fit with sales or user growth, there’s no reason to start thinking expansion. The reason is simply because you don’t know your business and its requirements well enough yet. With traction the benefit is that you will have data and fundamental understanding about your business, but it also help guide your prioritizations. Huge customer interest from Germany, none in the US. Where do you go? Data is reliable, and can help your decision making. Furthermore, make sure your home market’s organization is ready for expansion. Any expansion should be spearheaded by senior leadership (more on that below), which means you have to ensure that your domestic organization is able to run day-to-day ops when such leadership go elsewhere. Organizational empowerment and a fair amount of processes and structure is key. And finally, setting up international operations costs a lot of money (especially in the US). Make sure to have the financing needed. Don’t expand with a slim wallet expecting to raise money in your new geography. Make sure you have enough runway to take a real stab at it, and prepare minimum 6 months before seeing any business impact. Create a budget, and multiply it with pi to get a rough estimate.

👉👈“Feel it out”. There’s a lot you can do before you actually move over to a new market. You start by going there…not once but many times. We see this a lot in Silicon Valley where people from all over the world frequently and regularly come here to network, learn and even grow their business before they have set up any local operations. The great thing about the Bay Area is that people are very helpful, and truly wants to help you if they can. And the unique thing about the Bay Area is that you have people who have done and seen it all. Also being an immigrant is part of America’s DNA, meaning it feels really natural to connect with people here. So get on a plane and start building your network and business before expanding. Go to your target market at least every quarter. Meet with your potential partners, investors, customers and even competitors. Start to understand the market in depth. Find out how it is different from your home market, because it will be. Understand what the major challenges in your new market are. The ambition is to learn and to gain momentum locally, so you can hit the ground running once you set up shop. Pro tip in case you’re visiting the Bay Area on a budget, is to get a motel close to the airport (right in between San Francisco and Silicon Valley) and rent a car. And when you do hit me up and let’s connect!

🙋 Decide what and who. As soon as you set up a new location, you will have two teams and they will from day one start growing apart. To manage this you will require strong leadership in the new location, ideally one of the co-founders. By moving one or several people from the management team you also help bridge the cultural gap that will exist, and it signals importance of the expansion to the domestic team as well as builds trust between the offices. Don’t feel like you should optimize to move people over to the new location because of their domain expertise about the market. It is much more important to have someone leading on site that knows the company, than someone that knows the market. And don’t simply consider seniority of the person(s) to move over but also functions. It’s really challenging to split the same function across two different locations, hence, move the co-founder who is destine to build and manage the function you expect to build in your new market. Keep everything else in your home market, and make a clear distinction between what belongs where and how the overall teams will operate. Because of the tremendous competitive market in the Bay Area for talented developers, I strongly believe in keeping engineering (and probably product) outside of this region and rather focus on building your sales and marketing in this part of the world.

💬 Communicate early. Communication is the holy grail of any organization spread across multiple locations. In fact it’s the most important aspect of any company. Be prepare to communicate more than you expect. Much more. Before you expand and when you start considering these plans, be very transparent to the entire team about what lies ahead and how it’s progressing. Make sure the whole founder/management team is 100% aligned in this story. Also start preparing the organization for more asynchronous communications than previously. Different offices, different time zones and different people means there will be very different and more disciplined requirements to the company’s communications. Start to document decisions, meeting minutes, status updates, and push communications into the open and in writing. Slack and the likes are kings to facilitate this. As founders, take the lead and set an example. Get ready for the ride!!!

Best practices during the actual expansion phase follows soon. Mad shout-out to these impressive founders, entrepreneurs and friends who contributed with input to this article series: Patric Palm of HansoftHeini Zachariassen of Vivino, Caroline Ingeborn of Toca Boca, Christian Wylonis of Fitbay, Oskar Kalmaru of Narrative, Emil Eifrem of Neo Technology, Louise Fritjofsson of Vint, Alex Arias of Omniata, and Jonatan Littke of Lookback. I’m always available to connect and discuss on Twitter at @fritjofsson. 👊 💪