In Europe alone, there are over 70 tech startups valued at $1bn or more. A common thread? Most have an international footprint.
“Today, most companies have to think globally,” says Dileep Thazhmon, cofounder and chief executive of fintech Jeeves. “There’s a fundamental shift happening where if you’re trying to compete, your best bet is being able to operate across multiple countries.”
Not only will going global increase the market size of your company, but Thazhmon believes being in more than one place will also be an advantage for hiring.
But how do you expand successfully and ensure your finance team is ready?
There’s a fundamental shift happening where if you’re trying to compete, your best bet is being able to operate across multiple countries
1/ Focus on product-market fit first
While it’s good to have a global goal, Thazhmon says startups shouldn’t build with the intention of covering 40 different regions.
“It’s like an oxymoron because to go global, you have to cover multiple regions,” he tells Sifted. “But if you start with the idea that you need to build a team that has offices and covers multiple regions, you may not get there as quickly as you want.”
Instead of eagerly anticipating expansion, it’s important for finance teams to focus on product-market fit first and then look at how to get to the next stage, Thazhmon adds.
“If you don’t get that right, then it’s like putting water into a bucket with a large hole,” he says. “Most entrepreneurs look at it through the lens of ‘once I have a product and have proven there’s a demand, I’ll look at other markets and see how I scale there.’”
If you don’t get it right, it’s like putting water into a bucket with a large hole
According to Jeeves, most of its clients are single-geo entities, meaning they operate in just one country, but the number of companies expanding into more countries is rising: “What we’re seeing is the number of companies going global is rising, and that will continue because of Covid, globalisation and the large quantities of capital flowing around Europe,” Thazhmon says.
2/ Have a sound expansion strategy
Once your startup has decided to make global waves, startup consultancy firm weGrow says it’s important to have a financial plan instead of the default expansion strategy of an opportunistic approach — “basically throw all the spaghetti on the wall and hope some of it sticks,” says weGrow cofounder Gernot Schwendtner.
“Without a sound expansion strategy or financial plan for new markets, you land in the death zone of growth,” Schwendtner tells Sifted. “Your company might die — it’s a scary place to be.”
Your company might die — it’s a scary place to be
It’s also good to learn from your successes and mistakes. Test out a new market, see what works and what doesn’t, and then you’ll have a playbook that you can repeat — and show investors.
“Investors want to see proper research and proven points for new markets. This can double or triple your valuation,” says Schwendtner. “So prepare well and test markets early.”
3/ Pick the right software
Preparation can also take the form of picking financial software and systems that can scale, says Thazhmon.
“The right way to think about that is what kind of product is competitive and will work best in the single market,” he says. “But also if I scale, think about whether I can use that product in the next market I go to.”
Accounting is one example. Jeeves, for instance, operates in 11 countries and has a product that it can offer in 24, so it’s now moving to an accounting system that can handle that.
The right way to think about that is what kind of product is competitive and will work best in the single market
“We’re moving to Sage, which is a large-scale accounting product that can handle multiple countries,” says Thazhmon. “It makes sense for us now because we’re at a different scale and discipline than we were a year ago.”
When should you switch your software? “It’s a balancing act,” he says, but you want to start thinking about it as soon as possible to avoid unnecessary costs.
Other software that can aid expansion are components for payroll and payments systems such as Jeeves, which provides a corporate card tailored for global startups.
4/ Use local payment methods
Another tip is to “invest in a finance team that sits locally,” says Thazhmon, because they will be able to tackle the regulation — and quirks — of the country.
“Skew towards people that are specific for that region,” he says. “Meaning if you have two operations within the UK and Germany, you should ideally have finance that can handle both sides so you can move quickly.”
Taco Carlier, founder of Dutch electric bike company VanMoof, says startups with payments should also consider local payment methods.
“If your product is one that requires users to pay, I always advise founders and entrepreneurs to understand how people in your local market want to pay,” he says. “So, when launching from the Netherlands — where iDEAL and debit cards are popular — into France, you’ll need to consider credit cards or different local bank schemes and make sure they work with your payment provider.”
5/ Have a dedicated budget for expansion
Thazhmon says when you start a company it’s important to focus on one or two goals you want your finance team to accomplish in the next six months and execute accordingly. He says you need to go one step at a time and hire people who can scale with the startup.
“A big part of this is building out your financing and accounting game, you need people who can do multiple roles and help you scale faster,” he says. “When you hire in the beginning you want very strong utility players who can do more than one thing.”
Always work with buffers
Schwendtner adds that startups should always have a dedicated budget for expansion, so don’t get ahead of yourself and start too soon.
"Always work with buffers,” he says. “Rule of thumb: Plan for twice the time and twice the money you anticipate for global expansion.”
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