Expanding a startup internationally opens up a whole new pool of potential customers, partnerships and opportunities for growth — but when's the right time to go after world domination as a founder, and how can you get it right?
Sifted spoke to three founders who have nailed international expansion about the lessons they learnt, covering everything from how to hire new employees to how to steer clear of mistakes.
The benefits of expansion
4Trans — a service that speeds up invoicing processes for haulier companies — expanded from its HQ in Czech Republic to Slovakia and Poland in early 2023 because, its founder and CEO Jaroslav Ton says, “the problem that we're solving is global, and the market that we started in was just the beginning. Slovakia and especially Poland offer a new pool of customers and untapped opportunities compared to our home market”.
E-bike and e-scooter scaleup Lime’s expansion, which started in 2018 when it entered Barcelona, was also driven by opportunities for growth: the company began in the US, but is now available in more than 230 cities, around 150 of which are in Europe.
Its expansion to Europe was motivated by the infrastructure of cities across the continent, says its senior director Alan Clarke, which were designed before the creation of motor vehicles and so have the space — and the culture — for consumers to use alternative modes of transport. For this industry in particular, there was also a competitive advantage in being the first service to set up in an unserved location.
There are also practical reasons for expansion aside from growth, Ton says. Expanding meant that 4Trans “diversified our operations and reduced the risk of relying solely on one market”.
How to pick a new market
There are a range of factors to consider when deciding on a new location, says Ton, including:
- Market size
- Growth potential
- The regulatory environment
- Availability of data
- For B2B companies, the presence of underserved SMEs — or the customer demand for other models
Before choosing a new market, the companies Sifted spoke to prepared by considering the following.
Build relationships with the locals
When planning to expand to a new location, Lime will seek to build relationships with governments and councils in the area beforehand, says Clarke, to make sure that "the service and accompanying regulations are designed in a responsible and user friendly way." Factors under consideration include:
- Parking location density
- Vehicle speed
- City fees
- GPS zoning requirements
- Overall fleet size
Doing this preparation "ensures services work for users and non-users and are operationally and financially viable for providers, helping to deliver long term sustainability benefits for the area.”
Test new markets
As an experience booking site for solo travellers in their 30s and 40s to find groups to travel with, Flash Pack always had a “global appeal”, says cofounder Radha Vyas. But despite the international appeal, the UK-based team still took its time before it put its expansion plans into place in 2022.
Flash Pack was bootstrapped at the time, and didn’t have the luxury of extra funds to take a chance on risky expansion plans. To reduce the risk of committing to a new location, Vyas says that the startup set up a testing period of between six and eight months in two of its highest-potential markets, the US and Germany, to offer the product and trial how receptive local consumers would be before committing to either location.
Though Germany was both closer to Flash Pack’s UK headquarters and would be the cheaper expansion option, cultural differences between the UK and Germany around how people choose to travel were “too much to overcome” without appointing a German launch team, says Vyas, even with German-speaking employees in the UK leading the test.
The US offered an environment that was both more aligned with the company’s existing UK audience and gained “more traction” during the trial. The team settled on the US as the location of choice.
Doing your research
When choosing a new location, “extensive market research and analysis were conducted to identify the countries that aligned closely with our business objectives and where our solutions could make a substantial impact,” says Ton, with a focus on both “short-term and long-term market potential”.
Part of that process was using the research to consider the startup’s “competitiveness in the respective markets” and “adapting our offering” to tailor it to the needs of both markets.
When should you expand?
Flash Pack’s expansion only came after the team felt it extensively understood its home market, says Vyas, and had built and developed a product with an established audience before taking it to new demographics.
Crucially, both Lime and Flash Pack emphasised that rushing an expansion plan can be one of the biggest mistakes a startup can make. While being the first competitor to set up in a new location can be a “quick win” in some industries, founders must “put down foundations for longer term success”, says Clarke; it’s “important to be the company that lasts, not the company that’s first,” he adds.
Vyas echoes this, adding that the difficulty of expanding a startup shouldn’t be underestimated. Founders have to balance the process with “battling competitors and wooing customers, plus managing teams with a time difference” — and expansion “rarely leads to success” unless a business and its team are “absolutely ready”. The worst thing a team can do is rush, she adds, because “rushing means you can later have to pull out of the market”, leading to potential layoffs and a hit to the company’s public image.
Hiring in new locations
Expanding to new locations requires people to run the show there. But that doesn’t always translate to hiring an entirely new team there. 4Trans relied on its existing team members and the advice of its investor network to expand into new markets, rather than give the responsibility to new employees. It's kept the core operations of the company centralised in its Czech HQ, though some senior executives were temporarily based in new locations to “better understand how local customers may differ”. They returned to the HQ once the foundations were established.
Some new hires were made in the new countries, however. The team “understood well ahead the need to hire sales and ops within the individual markets” they were expanding to, says Ton, and so hired these functions in Slovakia and Poland. The company particularly focused on tapping into the talent pool of developers in Poland.
For Flash Pack, the biggest challenge of the transition was hiring in the US, a location where there was “little brand recognition” among candidates. Another struggle was knowing where jobseekers would look for new roles, and Vyas says that the team often leaned on their networks and consulted people who had expanded to the US before for that insight. To make the admin process simpler, it uses Deel — a global payroll and automated compliance startup — to hire internationally.
Do employees have to move?
You don’t have to relocate a whole team of existing employees when you expand. The 4Trans C-suite remains in the HQ and each senior member of the team dedicates a certain percentage of their time to the newly opened markets. That allocation can range from 30% of the week to 80%, says Ton, “depending on the individual's expertise and the needs of the new markets”. While the whole team doesn’t have to move, it can be helpful to have a senior member based in new locations: 4Trans’s CEO will be relocating to Poland by the last quarter of 2023.
Lime relocates some existing employees to new locations to get a feel for the market and to get a perspective on a new audience from employees who already know the company. Those people are also responsible for setting up the business there, and for helping onboard new employees. There’s also often an employee based in the region with a comprehensive knowledge of the area to aid the transition. This was Lime’s strategy even before the team grew. In the company’s early days, senior management based in the US would head over to the new European locations to be present for the transition. Now, the C-suite is spread across the US office and European hubs.
Similarly, though the Flash Pack team is fully remote, Vyas says she will soon be relocating to the US — which will eventually become a joint HQ with London — to manage the new market from the ground.