Founders are considered innovative, but are they also internationally successful? Startups should check the following ten requirements, before expanding into other countries. Silicon Valley, Singapore, or Shanghai: Most founders dream of going international. However, there are a few things to remember so that the journey abroad does not end up on your stomach.
Accelerator names the critical factors for successful expansion into foreign markets. Not every innovative product is suitable for the mass market. And the more specific the target group, the more limited the growth potential in the domestic market. This is one of the reasons why startups are forced to go abroad at an early stage. But this step needs to be very well prepared.
Professor Matthias Notz, Managing Director of Accelerator, a funding program for startups financed by the Federal Ministry of Economics and Climate Protection, knows the challenges and pitfalls. “Many entrepreneurs find it difficult to assess whether they are well prepared for internationalisation correctly”.
Before you can even start, the field at home must be well-tilled. In other words, the company must already have established a repeatable, scalable business model in its home market. Young startups are often not ready yet but can benefit from an international mindset in their home market even before internationalisation.
In principle, expansion into a new market must not impede growth in the home market. Therefore, sales must already function effectively without significant support from the founder. Because as soon as the focus is on new sales markets, the bosses have little or no time left for acquisitions in the home country.
Offering the same product or service in another country can work. However, this should be checked carefully beforehand. Very often, the offer requires adjustments to the target market. Sometimes a translation is enough. Sometimes far-reaching changes are necessary. Sometimes it may even be that a completely new product has to be developed. The product should fit the given market before the company decides to expand.
The sales conditions are almost as important as the product. With a purely online business, entering the market is less complicated. It looks completely different when shops or dealers have to be found. But even with a pure e-business, logistics and support requirements need to be clarified – even before things really get going.
The way abroad is paved with blunders: If you don’t understand the local culture and don’t know the unspoken rules of the local business world, you’ll have a hard time in the new terrain. Maintaining personal relationships is the be-all and end-all in specific industries and markets. Regional market trends are just as important as the cultural aspects, which should be monitored continuously, as well as the most important competitors and the potential customer landscape.
A large number of laws and regulations define entrepreneurial freedom. In other countries, too, there are plenty of industry-specific hygiene, security, accounting, data protection, and tax regulations. And these often differ significantly from regulations.
Just because you win X new customers every quarter doesn’t mean the same applies abroad. The time between the first business contact, the initiation of a sale, and the conclusion can differ significantly from the sales cycle. Sometimes it takes longer, but it can also go faster if, for example, a business culture with higher error tolerance promotes experimentation with new technologies, particularly concerning security.
The HR team must be able to handle payroll, taxation, and labour laws in the target market, as the management team should prioritize another market in the next 12 months.
In addition to the strategy, a business plan for entering the market should not be missing. Above all, this includes a solid financial plan and a sufficient buffer to bear the costs of the expansion.
Before getting started, all founders and the management team should clarify whether everyone is convinced that the company is ready for internationalisation. Because if no consensus resources from the headquarters should be used for a new market, conflicts are inevitable.
Matthias Notz, an expert on international ecosystems, comments: “The amount of effort required to prepare for internationalisation can be quickly assessed using four questions. Are operational and logistical units required on-site? Do you need offline channels such as shops or dealers for customer acquisition? Does the product have to be redeveloped or adapted for the new market? And last but not least, is a functioning local network crucial for success? If you can answer no to all four questions, the effort for the expansion is rather low.”
The Accelerator, funded by the federal government and managed by Entrepreneurship, has been around for 10 years. Since then, more than 500 startups have completed funding programs to explore suitable foreign markets and to accompany an expansion to Asia and the USA. The Accelerator offers the free Kickstart International program for startups considering internationalisation but still unsure whether they are well prepared for this step.
Startups focusing on artificial intelligence encounter additional hurdles, such as data protection regulations or social acceptance of the technology when internationalising. In contrast to other competitions, the “AI Beyond Borders Awards” not only focus on the use of artificial intelligence but also the potential for internationalisation. The award, which will be repeated annually from 2022, is an initiative of Entrepreneurship GmbH as part of the AI Competence Centre. The AI Competence Centre, which opened in June 2022, aims to promote the acceptance, dissemination, and internationalisation of technologies and products with artificial intelligence that are being developed.
The AI Competence Centre and the AI Beyond Borders Awards are funded by the Federal Ministry of Economics and Climate Protection and operated by Entrepreneurship GmbH. The deadline for entries for the 2022 award is October 3. The winners will be presented on October 27, 2022, at the European AI Summit in Munich.
The three best startups receive cash prizes totaling 50,000 euros. Add a package of benefits that increase visibility in the AI ecosystems and the global investor community. The three finalists will receive up to six months of professional support for their expansion into Singapore, Southeast Asia, or North America from Accelerator’s internationalisation experts and mentors. In addition, the award winners benefit from a one-year membership. In addition, there are computer credits worth up to 150,000 euros each. Other supporters of the new award include AI + Munich, Berlin Partner, Intel Ignite, Startup Network Europe, and Transatlantic AI eXchange.
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