We were delighted to host this event, which looked at the complexities and sensitivities of building teams internationally. One of the key take-aways from the event was that there is no single playbook for international success. Different tactics work for different firms in different sectors. This realisation should not come as a shock to entrepreneurs, but it does mean you will have to think very carefully about your tactics for global expansion.
The event was chaired by Seth Pierrepont, investor at Accel Partners, and drew on the experiences of the following panellists:
Meri Williams , CTO at Moo.com
Ruth Penfold, Head of Talent at Shazam
Alliott Cole, Investor at Octopus Ventures
Jon Coker , GP at MMC Ventures
Don’t expand internationally for the sake of it
Panellists were clear that entrepreneurs need a logical reason to expand their operations into another country. Alliott said electing to expand internationally before reaching a point where revenues in the home territory were scaling predictably and repeatedly is high risk. Equally, if there is no current market limitation on a company's growth in the home territory, why not double down here?
If you’re an entrepreneur, and you want to build a business and reduce risk, then it’s not a bad assumption that you will need to build your home business first. If you’re selling a product – and you haven't had early adopters in the new country – then the chances of selling cold are zero. You need to have strong connections to build your company.
Consider your options before going Stateside
Going to the US can be a very challenging transition – the competitive landscape is often wider and more varied than at first thought. A business might win some early traction, but the market is large and diverse, and scaling across 50 states can be complex. Alliott often asks entrepreneurs to consider targeting material revenues in their home market before taking on this challenge. The benefit of this approach is that a business can reach a point of stability first and then invest selectively and deliberately in new markets as these are developed.
Be careful about listening to the advice of US start-up experts in isolation. Remember that American entrepreneurs have access to a huge market at home, so they don’t need to think about internationalism as early as European start-ups. As Meri said, don’t just go to San Francisco because you think it will be easy. Success is directly related to your ability to network.
Going early works best for start-ups in some sectors
Contradicting points 1 and 2, panellists agreed that moving to the US – perhaps even before Series A funding – can be right for certain companies. If you’re building a digital health business in the UK, it’s tough, whereas the US has a much more receptive market. The same is true in education – flexibility exists in the US, while budgets are more tightly controlled in the UK. US education start-ups also face less regulation than in the UK.
Speaking from experience, Ruth explained how Shazam quickly expanded beyond its UK origins to take advantage of West Coast talent. Before expanding internationally it's crucial to heavily research how your market operates, policy and regulation, as well as available talent in the new market.
Ignore the hype and focus on the right reasons for a global shift
Customers, talent, and cost savings are the three key reasons to go international, according to Meri . If you’re going to IPO in the US, you will need a US office. Moo has ended up in multiple locations because it makes a physical product and a local presence makes shipping easier.
Success in a new region relies on your ability to identify executive-level advocates with, to quote Ruth, “fire in their bellies” – you need people with a voice, who can really sell the potential benefits of opening an office in a new location.
Location of skills matters, but only if the cost is not prohibitive
Panellists noted that software engineers in different places can hold specialist skills. That can be an important factor in helping entrepreneurs decide where to locate, but it should not be the only consideration.
While access to skills can be a big driver for tech companies, firms moving to the US will face a significant fight for talent. European start-ups will find it tough to get used to both the high churn rate and a range of new HR policies, such as those relating to benefits and healthcare. Entrepreneurs should also note that graduate software engineers expect at least $100,000 on the West Coast.
Building a tech team in the US could cost you four times as much as it might in the UK. Alliott suggests that one sensible way to build expertise in a new region is to look for contractors that offer spot expertise.
Hubs can work but don’t mistake remoteness for a distributed operation
Panellists recognised the potential value of hubs as a way of building a global operation. However, they also issued words of caution. Jon said sourcing talent in new areas can help reduce development costs, but the normal trade off is the reduced ability to tightly manage people, which can lead to lower productivity. Meri said a fast-growing firm might find itself with multiple hubs, with six different teams in six different locations. In this situation, culture is key.
In this instance, language is crucial. Firms often make the mistake of referring to these as "remote teams". Meri said 'distributed', rather than remote, is a much more collaborative phrase. Entrepreneurs, therefore, should ensure their company culture is distributed and capable of dealing with an international operation. Don’t mistake multi-location with outsourcing – your hub must provide a strong link back to your central operation.
Don’t move to the US in the hope that the valuation of your start-up will rocket
Proximity does play a part in investment, but moving to the west coast won’t solve all your problems. As a UK investor, Jon regularly hears the view from entrepreneurs that they think their firm would be valued higher in the US. That perception is often based on blind faith. US companies are valued at a higher rate because of momentum and sophistication in technology, and the investors see that uniqueness. If your talent and market is in the US, then your business has a reason to migrate. But don’t locate your team based on the valuation of your company – you could get badly burnt.
Find the right balance between your base location and your regional hubs
Software engineers, joked Meri , are great at two things: working on code and building conspiracy theories. Prevent those conspiracies by building community. People want to feel like they’re adding value. Don’t make people feel like factory workers; give them something to believe in.
Meri encouraged start-ups to have teams in each location that “build their own thing”. That creativity helps give employees a sense of belonging. Ruth has spent time crafting company values at Shazam and has unveiled a community of ‘Shambassadors’ globally that share ideas, and who live and breathe the values of the company. She encouraged start-ups to give people the opportunity to connect at a personal level. People will stay if they feel personally connected to your business.
Getting people together is great but think outside the box as your firm grows
Seth said his firm sees it as a positive sign when start-ups look to gather their people in a single location for a global meet-up. Meri said Booking.com still gets 5,000 of its people together in a conference session on an annual basis. Such events help create a sense of belonging. However, growing companies will find it tough to arrange meet-ups.
Meri referred to Dunbar’s number and the suggestion that it is impossible to know everyone in your firm once the headcount reaches 150. The challenge, then, is creating an integrated approach across an international business. Panellists agreed senior bosses, particularly the CEO, play a key role in establishing and promoting culture across a global business. Ruth encouraged attendees to empower people in their business to make decisions. You can create a great environment and hire great people, but these individuals need to take charge, too.
For more information, please contact Andrew Richardson: firstname.lastname@example.org
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