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Looking to expand overseas Learn from a leading venture capitalist

on October 04, 2011 Source: Kauffman Foundation

We’re catching up to some of the best entrepreneurship blogs on the web, and today’s entry is John O’Farrell’s blog  – specifically the first of a four-part series the author’s been working on since this summer on starting  a global business.

If the name sounds familiar, it’s because the Dublin, Ireland native is a general partner at the Menlo Park, Calif.-based Andreessen Horowitz. He was involved in a series of high-profile startups, including @Home Network and the software firm Opsware.

But it’s the global startup blueprint that merits a closer look.

As O’Farrell notes, expanding overseas is a tricky, even dangerous proposition.

“I was struck, but not surprised, by how many people sought advice on how to expand a startup internationally,” he says. “Not surprised, because for many young companies international expansion ranks with M&A as something that’s easy in concept, but difficult to execute well.”

Of course, a bite of the overseas market apple is hard for entrepreneurs to resist. With the U.S. economy in decay, burgeoning middle classes in countries like China (population of 6,965,900,000), India (pop. 1,210,193,422) and Brazil (pop. 192,734,694) are increasingly appealing to U.S. startup owners.

So what does O’Farrell recommend for entrepreneurs looking to hang their shingle internationally?

For starters, O’Farrell advises making these key issues a priority:

  • Lay the groundwork from the moment you start your company.
  • Launch internationally with an owner, a strategy and a plan.
  • Apply some key principles and best practices once you’ve launched.

O’Farrell says that U.S. entrepreneurs looking to open up shop overseas actually have a built-in advantage:

I grew up in Ireland.  With a population of only 4.5 million, it’s a tiny market—so Irish entrepreneurs have to think outside their borders from the beginning.  Relative to his Irish counterparts, the American entrepreneur is born with a silver spoon in his mouth.  He has the luxury of a massive home market—300 million affluent consumers, 30 million businesses, one language, one currency, one culture, one legal system—from sea to shining sea.  Initially, that’s a huge advantage that allows him to build a company of significant size without even needing a passport.  Google rocketed from zero to almost $350M in revenue in four years—80% of it from the United States market.

The fly in the ointment is that overseas bourses have their own rules, their own tax and finance structures, and their own set of regulations. That’s why laying the groundwork is so vital, O’Farrell says.

He cites the global mission statements from four huge global companies – all of which instill the company’s mission from the start.

  • Google: To organize the world‘s information and make it universally accessible and useful.
  • Nike:  To bring inspiration and innovation to every athlete in the world.
  • Avaya: Provide the world’s best communications solutions that enable businesses to excel.
  • Facebook: To give people the power to share and make the world more open and connected.

O’Farrell suggests following up a unique global mission statement with hiring some good overseas talent. Thirty percent of your management and engineering personnel should have international experience, and new board members should be appointed from overseas locations, he says.

Here are some other tips from O’Farrell:

From the beginning, try to track relevant developments in key overseas markets:

What countries are we getting the most website traffic from? Why?

Ask your employees who are citizens of other countries to keep you posted on what’s happening in their home country—they’ll be delighted to do it.

At least once a year, make an effort to spend a few days in Europe, or Brazil, or India or China. You’ll come back with a hundred new ideas.

Talk to local competitors, customers, partners, investors.

Is this market developing differently from or similarly to the home market?

What local players are emerging that we need to watch?

What user or customer trends offer lessons to improve our product or market strategy?

Who might be a great local partner to get started with?

Reinforce the global leadership message in all-hands meetings, company emails, one-on-ones, performance reviews—get the message out any way you can, and keep doing it! 

Our market is the world!

Carve out some time to discuss international expansion at quarterly reviews or strategic offsites.

O’Farrell has a lot more to say on the topic, and the entire series is worth checking out.

For U.S. healthcare startup owners looking to tout their wares overseas, it’s a must read.

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