In many parts of the world technology start-ups are expected to become global companies from their inception. Companies like Skype launched into international markets right from the start. The reason why these “Born Global” companies are a worthy topic in start-up technology circles is that they…
- Grow faster than domestic-only companies
- Hire more local staff in their home markets
- Succeed in greater rates than their domestic counterparts.
But is Born Global a realistic expectation for most tech companies?
As is the standard answer for most international business strategy questions – it depends.
Here are circumstances that make Born Global a more likely choice:
- Small Domestic Market. If your company is located in a country like Uruguay (3.3m), Finland (5.4m), or Israel (8.2m), everyone expects you to plan for international expansion right from the start. It is no surprise to see small country tech companies competing effectively in world markets. Entrepreneurs have already cultivated their international market connections. Government and industry resources support this Born Global expectation as well.
- Small Global Niche Market. It is much easier to globalize when your market is small. With fewer potential buyers there is pressure to find the customers no matter where they are located. For instance, if your company develops some measurement device specific to copper mining then you’ll quickly want to expand to places like Peru and Zambia.
- Differentiated Product. If your product is valuable enough compared with the available in-country alternatives, local customers can overlook your product and company’s “foreignness”. They also are more likely to pay a premium, which helps defray any exporting-related costs.
- Internationally-Minded Company Leaders. This is probably the biggest factor for Born Global companies. I’m not talking about the leader who likes to take his or her spouse occasionally to Paris for a holiday. These are professionals with deep connections in another country. Often they are either immigrants or former exchange students or both. IT outsourcing started with Indian, Pilipino and other immigrants connecting developers in lower-cost markets with software development needs in high-cost markets. An international orientation brings a completely different set of solutions to a start-up.
Going Global Criteria
To be effective in global markets a company needs to have a competitive product, financial stability, and infrastructure that support a global reach. I’ve spent the past decade in and around start-up companies and it’s a rare company that has even two out of these three criteria in its earliest stages. So rarely will there be a company that can start its business ready to be completely global.
On the other hand, all young technology companies should be planning for how they will enter and compete globally. This focus should influence hiring decisions, building capacity and potential partnerships. The timing on when the company actually enters international markets will depend on when international opportunities are worth spending the time and energy to make the final adjustments internally for global launch. At that point, the company can finally take advantage of the vast opportunities in the global marketplace.
Advice for Big-Country Tech Start-Ups (U.S., Brazil, Japan & China)
I often hear particularly in the U.S. that international markets come later in the company’s plans. I rarely hear one of our technology industry gurus touting the benefits of early international market preparations. Instead of having the domestic market act as a benefit to growing the company, it can actually slow down long-term growth. For tech markets, often 80-95% of total markets are outside of the home market. To delay preparing for the whole potential market will slow growth. Even if you delay international market entry, start preparing by making connections and researching your market.
(“Born Global or No?” is a play on Walter Kuemmerle’s famous Harvard business case published in 2001: “Go Global or No?”)