Eager To Expand Your Startup Internationally? Make Sure You Meet These 7 conditions.

20th May 2020

For many startups Flanders is a great testing ground to further scale globally. With the presence of many international companies nearby and located at the heart of Europe, Belgium’s active and international community offers many opportunities to grow your business.

Belgium offers a quick route to The Netherlands, Germany and France, as well as the United Kingdom with London only a few hours away. Many startups focus first on the neighboring countries with the Netherlands as one of the first, for cultural and language reasons, to further grow their business.

But how easy is it to take your startup abroad, grow to new markets (or look for new horizons) and expand internationally?

You can’t just set out your internationalization strategy by following your gut feeling - well, you actually can, but that might not be your smartest move.

A more recommended approach would be to consider to validate your assumptions in a lean way. Building a strong startup is like a game of chess, rather than a game of poker.

There are a few essential factors to consider before expanding your business internationally.

At imec.istart, internationalization expert Lies Boghaert guides startups in their journey towards international expansion. By supporting and coaching the startups and scale-ups part of imec’s acceleration program, she sees a clear set of conditions that have to be met in order to successfully expand to other markets.

  1. Does your product offer a solution to a relevant, real problem for your customers in other markets than your home market?
  2. Does that new market have a need or demand for your startup’s product or service?
  3. Can you back up the business potential you claim, by showing commercial traction in your home market?
  4. Is your MVP completely up and running?
  5. Does your team have the capacity to take on the demands from that new market?
  6. Do you have the financial resources to enter a new market?
  7. Can you rely on market experts and knowledgeable partners?

Condition 1: Does your product offer a solution to a relevant, real problem for your customers in the foreign market?

In today’s globally connected world, it would seem that every product or service can be marketed and sold anywhere in the world. Nevertheless, make sure you’re not too narrow focused on your local market. Get some evidence that there are actually other markets that could benefit from your solution, and identify these markets.

Lies Boghaert: “At imec.istart, one of the most important criteria we hold startups against during the selection process is the level of scalability of their product or service. Their solution has to be scalable.”

Condition 2: Does that new market have a need or demand for your startup’s product or service?

After identifying which markets are potentially interesting , you’ll need to decide which one to approach first. How? By doing desk research, talking to international experts in that market, other companies that approached that marekt etc. with one goal to hunt down you rproduct market fit. It's important to gain insights in the market by for instance setting up a pilot case and learn from that process and customer. Based on these insights you'll better understand the need of the market and be able to adapt your sales strategy in that market.

Condition 3: Can you back up the business potential you claim, by showing commercial traction in your home market?

With the confirmation that your new market is in need of your startup’s solution, the next thing to check is the business potential. Meaning: will anybody in that new market pay for your product or service?

Don’t fool yourself into blindly believing those potential customers will pay to solve their problem. At least, back up those claims. How? By showing you have commercial traction in your home market, or have some pilot cases up and running in the foreign market.

Having commercial traction in your home market means having a client portfolio consisting of paying customers, that proves that what you've developed offers a solution to the customer's problem.

When entering a market it's important to identify a first reference client that you can lever in your further sales and communication strategy. Finding and closing a deal with the first client in a new market is often the most challenging one. That's why being able to run a first (pilot) case is important for young companies. Running pilot cases in your new target market also dismisses the need for full-out commercialization. Before setting up big marketing and sales campaigns, pilot cases offer you the opportunity to learn how you should approach the market best, who your ideal clients are and who the decision makers are. Besides that, it offers you the possibility to check your price setting and business model.

Condition 4: Is your product up and running?

Startups that grow internationally often do this with a product that already has been tested and proved value in the home market. In some cases startups have a product or service that by default has to go internationally from day one.

Be aware of the fact that when you enter a new market, there will be some adaptations needed in orde to enter and be compliant with the rules and regulations in that new market. Such as language, regulations, technical approval, user experience, integrations with other (local systems) etc...

It's also important to clearly identify who your competitors are and what they offer. What's the difference in value proposition, pricing, sales strategy, onboarding etc.

Condition 5: Does your team have the capacity to take on the demands from that new market?

Growth and internationalization requires time and effort. Your team should have the capacity to enter a new market, because part of the team will have to change focus to that new market. Not only regarding sales and business development, but also on product development and resolving potential bugs and problems.As mentioned before, a new market entry potentially comes with product modifications and testing to adapt to the new market: legal, language, technological implications and also important: cultural differences.

In many cases, it'sone of the founders who takes up the responsibility of entering on a new market, based on the outlined strategy by the founding team (and board of investors if applicable).. Time and commitment by all parties, is an absolute prerequisite.

In that first step of internationalization, immediate growth of the team rarely occurs. That’s because expanding your team demands financial resources that aren’t always present. You either have to raise capital, or have enough commercial traction in your home market to finance the growth of the company.

Condition 6: Do you have the financial resources to enter a new market?

Financial needs do not solely depend on having the resources to buy time for you as a founder. It also means having the resources to e.g. travel to the market before even having sold anything. To prospect, research and talk to potential clients, to visit trade fairs and conferences. But as well to be able to invest in your product itself: development, logistics, and even recruiting employees to service the local market.

When you decide to enter a new market and scale the company, it’s important to have your board of directors, advisors and/or external investors on board and back your strategy. They're an important 'sounding board' to discuss which markets have the most potential , how to approach those markets, which one to approach first, and of course the impact on the company. Part of your internationalization strategy it's important to discuss wether it's necessary to raise capital. When raising capital with the goal to internationalize, it's important that you already have a first strategy in place that shows that you've done your market research and supports the need for a financial injection. Investors want a clear view on the targets and how their investment will be used.

This can present a chicken and egg situation. New investors want to know up front what the startup’s vision is towards international expansion, and startups need the financial means to further explore the foreign markets that're narrowed down to make a final decision on strategy and market entry.

Condition 7: Can you rely on market experts and knowledgeable partners?

Lastly, it’s important to be surrounded by experts and partners who can support you in your internationalization plans. These can be within a board of directors/advisors (consisting of people with relevant experience and expertise), programs such as SportUp Start and imec.istart (who have a wide international network), ecosystem partners (Agoria, Sirris, startups.be...) or tradeorganizations (FIT, AWEX? hub.brussels) ). These organizations can support you in gaining relevant market information and getting connected with the right people in your target market.

Having access to foreign market experts within the market you want to grow or scale, shows to be the most important key to international success for startups. All of the organizations named above are ready to help your startup with that. So use them wisely.

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