Born Global or Die Local – Building a Regional Startup Playbook

Entrepreneurship is everywhere, but everywhere isn’t a level playing field. What’s the playbook for your region or country to make it so?

playbook

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Scalable startups are on a trajectory for a billion dollar market cap. They grow into companies that define an industry and create jobs.  Not all start ups want to go in that direction – some will opt instead to become a small business. There’s nothing wrong with a business that supports you and perhaps an extended family. But if you want to build a scalable startup you need to be asking how you can you get enough customers/users/payers to build a business that can grow revenues past several $100M/year.

With 317 million people the U.S. has a large enough market that most U.S. startups ignore the rest of the world until they scale in their own country. Outside the U.S. a rough rule of thumb for scale is a local population greater than 100 million (and language, cultural and/or regulatory barriers to delay or keep out U.S. entrants.) China, Russia, Brazil, India, Indonesia all meet those criteria. (Obviously this depends on industry and application.) However, most countries don’t have sufficient population to support scale with just their local market and ultimately need to be global players – from day one.

Regional Ecosystems
I’m in Australia and just spent time with some great entrepreneurs in Melbourne.

Bay of Fires Tasmania

Bay of Fires Tasmania

One of the groups I spoke to was the Australian Sports Technology Network. This group realized that Australia has a great reputation as one of the world’s best sporting nations. They realized if they could develop and promote a well-coordinated sports technologies industry, they could capture their unfair share of the $300 billon sports consumer market. So they put together a sports technology ecosystem – gathering sports startups in apparel and footwear, protective wear, equipment, nutrition, wearable devices, data and video analytics, and web and mobile solutions and brought them together with investors, retailers and distributors, universities, research centers and national sporting organizations.

Creating a vertically oriented regional ecosystem is a pretty amazing accomplishment for any country or industry.

However, in meeting some of the sports startups one of the things that struck me is that most of the founders who said they wanted to grow big hadn’t given much thought about how they would go about building size and scale.

The trap most of them fell into (common almost everywhere): they were reading the blog posts and advice of Silicon Valley-based companies and believing that it uniformly applied to them.

It doesn’t.

Born Global or Die Local
The biggest mistake for most of these startups was not understanding that optimizing their business model for the 24 million people in the Australian market would not prepare them for the size and scale they needed to get to big.

Instead of beginning with just a focus on Australia, these startups needed to use the business model canvas and articulate which of their hypotheses should be tested locally and what would require getting on an airplane to test by watching someone’s pupils dilate face-to-face.

For example, one of the critical business model hypotheses they could test locally is Product/Market fit – the connection between their Value Proposition (what product or service they were building) and the Customer Segment (who they were building it for.)

business model globals

Further refinement of Product/Market fit could be done locally by using Value Proposition Design.

bus model and value prop map

value prop map

But other critical hypotheses such as activities, resources, partners, channels needed testing offshore. For example, many of the Australian sports tech business models shared common elements. They intended to get scale for their business by growing in the U.S. while building their products in China. And their branding and demand creation activities were going to occur primarily outside of Australia. This meant they would need U.S. channel partners and Chinese manufacturers and customer acquisition and activation programs outside their home country. And as good as the Australian angel investors have been, there still is dearth of serious follow-on funding in Australia. This means that most follow-on rounds of tens of millions of dollars, if needed will likely come from outside the country.

Step 2 figure out what needs to be tested globallys

While the network was very helpful getting these startups together and introduced to investors, it wasn’t clear how and when these startups tested their “going global” hypotheses.

No one had written the playbook.

Building a Regional Startup Playbook
What’s been missing from regions outside of Silicon Valley is a “playbook.” In American football a playbook contains a sports team’s strategies and plays. It struck me that every region needs its own industry playbook on how to compete globally. For Australian sports startups, a playbook might lay out in detail the following steps:

  • Build minimal viable products and test product/market fit in Australia
  • Identify activities/resources/partners locally and then globally
  • Get seed funding in Australia
  • Trip 1 to China to understand manufacturing landscape, potential partners and rough cost of goods
  • Trip 2 to the U.S. to understand distribution channel landscape, potential partners and rough cost of customer acquisition
  • Test product/market fit in the U.S.
  • Trip 3 to China, pick manufacturing partner, start low volume production
  • Test channel and demand creation activities in the U.S.
  • Trip 4 to the U.S. Establish U.S. sales office
  • Trip 5 to the U.S. to get Series A funding in the U.S.

Each industry in a region should develop a playbook that expands and details the strategy and tactics of how to build a scalable startup. When a playbook is shared through regional collaborations (like the Australian Sports Techn Network,) entrepreneurs can jumpstart their efforts by sharing experience instead of inventing the wheel each time a new startup is launched. Now all they need is a playbook. As markets mature, and investors and the ecosystem become collectively smarter, the playbook will change over time.

Lessons Learned

  • A scalable startup typically requires a local population >100 million people
  • If your country doesn’t have that you need to be born global
  • Your country/industry needs a “go global” playbook

19 Responses

  1. Dear Steve, Thank you for writing. Many entrepreneurs from small countries fail simply because they try to grow organically – perhaps, something that has always worked for entrepreneurs in the U.S. It is also critical to note that points you raised today matter more in some vertical markets – I’d like to share an example – as per an estimate of WHO, the demand for medicinal plants is likely to increase more than US$5 Trillion in 2050. In terms of geography, the global herbal medicines/ supplements/ botanical drugs market is divided among Germany (28%), Asia (19% especially India, China, Korea), Japan (17%), France (13%), Rest of Europe (12%) and North America (11%). And then there are a lot of activities in herb-based R&D happening right here in Malaysia! So if I’m running a High Value Herbal product development startup in Malaysia, probabilities of me discovering and validating my customers, partners and investors is greater in eg Japan than in Malaysia. If you permit I’d use the term “Get Out of the Country”. In a LEAN way, of course.

    Like

  2. It’s intersting, European countries have the same problem.
    No one of the UE 28 has a local population >100 million people and each country has his organization, rules and law.

    Is an error for a startup to tune/customize the product for some countries ?

    How to cheaply test if two popolations (for example French and Spanish) has the same problem with the custumer development method? Skype interviews? Forum/Facebook Groups?

    Like

  3. Hi mr. Blank,

    Really love what you have analyzed for the australian startups as it could also apply to many startups here in southeast asia where most economies are less than 100m people save for indonesia, off the top of my head.

    What would be a mutually useful
    Agenda for you and for startups in Seasia if we were to request your point of view of the startup scene in ASEAN?

    Thanks for blogging and sharing,
    Rangsarn

    Like

  4. Thanks Steve for sharing your insight. Love you title. That being said, I think it is misleading to say people can get to PMF with a “trip” to the US and raise a series A with another trip to the US..you know better I believe.

    You also know that startups in SV have an unfair execution speed and ecosystem advantage.

    I believe that going forward, startups will likely start scaling faster internationally – maybe as early as Series A/B (preventing Rocket Internet copycats to take advantage of market inefficiencies) and perform local product/market fit from the strength of their domestic market and ecosystem…just look at what Facebook did to Cyworld in Korea (and that was a while back…).

    At BootstrapLabs we have observed this phenomenon for over a decade and things are not changing fast enough for a lot of local entrepreneurs around the world. Where you are “born” as an entrepreneur does not have to define where you build your company.

    People move to different cities or countries to pursue the job of their dreams, the spouse of their dreams…why wouldn’t entrepreneurs (who are most risk tolerant than many of us), not relocate themselves and their companies to the place were they have the highest likelihood of “global success” if that is their ambition.

    I believe talent, passion, ambition and determination can be found in the most remove places of the world, but places capable of letting this talent reach its maximum potential is not. Silicon Valley is one of these unique places and until other such places emerge, moving there might be your best shot at achieving your dream.

    Would certainly enjoy getting together with @NicolaiWadstrom to compare notes on the topic:)

    Kind regards and thank you again for all your work, support and love for entrepreneurs!

    Like

    • Ben,

      I think the point you make, “… misleading to say people can get to PMF with a “trip” to the US and raise a series A with another trip to the US…” is the same one I was trying to make.

      I wasn’t offering “here’s _the_ playbook.” What I was (badly apparently) trying to suggest was that each region needs _a_ playbook.

      I tried to sketch a sample of one out so smart people like you can correct, edit and add the right playbook for your area and region.

      Go for it. Make it better. Publish and share it.

      steve

      Like

      • Thank you Steve for publishing my comment and inviting me to further participate. The only playbook I can offer at this point is the one we have spent years to build at BootstrapLabs for foreign founders with differentiated products/technology that have the passion, drive and ambition to build global companies/impact, no matter where they are from or currently located in the world:

        Take-Over the World Playbook for (tech/software) entrepreneurs located anywhere on the planet:

        1 – Ask yourself why you want to build this business
        2 – Ask yourself how big is the opportunity/market
        3 – Ask yourself if your goal is to support yourself and your family or making a dent in the universe (and hopefully achieving the former)?

        If the later, keep reading:
        3 – Assemble a kick-ass team that can code, design, hustle
        4 – Be confident about what you know, humble about what you don’t
        5 – Fall in love with the pain point you want to solve, not the solution
        6 – Learn, live and breathe lean startup mindset, methodology
        7 – Add a bit of Innovation Jugaad spirit (“do more, with less, for more”)
        8 – Build MVP, validate problem/solution fit with happyish customers/users
        9 – Raise a bit of capital/seed/love money if you have to to get there but don’t mess-up your cap table with silly deals as it will kill your chances of future success faster than you can pronounce Series A.
        10 – be very vary of early large customers offering you money for your product in exchange of customization. This may end up killing your dream of scaling globally and unfortunately a pattern we detect in every ecosystem outside of Silicon Valley given the lack of follow-on funding infrastructure…startups have to sacrifice scalability of product in exchange for early revenue.

        If you want to scale and haven’t given up on your dream to make a dent in the universe, keep reading:

        11 – Ask yourself, is my product/market/solution global or regional only. Say “Africa for Africa” or “Middle East for Middle East”, am I a “me too” of something that already exist in Silicon Valley?

        If answer is yes, than you should probably stay local and find (local) capital that cares about this market/opportunity.

        If answer is no and you are differentiated, if your product has global potential, if you users are somehow already in the US (and curiously in the bay area), then do as follow:

        12 – Contact me or Nicolai at BootstrapLabs to confirm all of the above. Worse case scenario we could save you a lot of expenses, disappointment and headache by telling you that you are probably best off staying where you are…If we think you are indeed pretty amazing, we will do the following things together:

        – Invest some seed capital in your company to give you some boost and Silicon Valley social proof
        – Reincorporate your company in Delaware
        – Convert your local company in wholly-owned subsidiary so you can hire talented developers in your home country (in-sourcing).
        – Help you secure long term visa so you can stay and work in america, build your startup and ultimately raise a Series A
        – work side-by-side, day-in and day-out to achieve product market fit and scalable product market fit
        – Open all the relevant doors in our network to accelerate your iteration loop/information flow and attach the right skill sets and people to our founding team members.

        13 – Upon successfully raising your Series A round in SV, think about leverage global grass-route network across the globe ASAP, otherwise RocketInternet and other clone factory will for you.

        Please say “Silicon Valley is a state of mind more than it is a place”, I would agree but for that very reason, it will take decades for other ecosystems to “change their mindsets”.

        In conclusion, my best advise for founders that want to go global (and have all the right stuff per the above), come to Silicon Valley sooner rather than later, get adopted by the ecosystem and scale back to the world from here with deep pocket, patient, smart capital.

        Like

  5. Steve: great to have you visiting Australia and thanks for this post on regional startup playbooks. However, I question whether the same playbook constraints apply to Web/mobile startups as to physical products sold through a physical channels?

    In our space, higher education, I understand that regulatory conditions may differ from country to country. However, in general when both the product and channel are bits there seems to be somewhat more homogeneity (at least in western development nations).

    Like

    • Ashley,
      Short answer – yes, but to a different degree.
      Longer answer – web/mobile platform choice (Android vs. IOS) varies widely by country.
      web/mobile demand creation (acquisition/activation) will like vary as well.

      Higher education reimbursement (who the payer is) is very different per country.

      steve

      Like

  6. Coming from a small country can be a genuine advantage. I have been with several startups in Denmark (5 million people) and we always realized from the start that scaling required global market penetration. We typically started in Denmark, then took Norway/Sweden, then the Netherlands and Belgium, then Switzerland/Austria, then Germany, then the UK and so on. We always took the smaller markets first as it was easier to get to 20% market share in a small market than in a big market. I lived three years in Germany building the business for Navision (acquired by Microsoft) and we beat the local competition with a better products and a better business approach. It took time and was not without tough competition, but I sincerely believe we had a number of advantages:
    1. The competitive pressure in Denmark is not very tough since the market is so small. It is a good place to start.
    2. We never expect that anybody will speak our language, so we speak theirs
    3. We are always small when crossing the borders, so we simply have to be smarter than the local competition.
    4. We become international operations long before our English, American, German, French, Italian, Turkish etc. competitors have got their act together (living in their comfortable medium sized market)
    Quite frankly I don’t think we need a world playbook here. We already have it and it works pretty well.

    Like

  7. Steve, what would it be a playbook for B2B Startups in PaaS Market?

    Like

  8. Thank you for such an interesting article, Steve. I share the same questions as “uomodellamansarda”. I´m currently creating a startup in Spain (pop. 45M) using the Lean Startup method and the Canvas and found I have to look for my potential customers outside the country, but within the E.U. common market because online sales in Spain are so dismal. I´m currently looking for a manufacturer in the target country to be close to the end-users (i.e. buyers) and to avoid xenophobic backlash to my products (the buyers in the country in question claim to prefer locally-made products).

    I know a few expats from this target country, and I don´t believe I can achieve proper product/market fit interviewing the Spanish people I know because of cultural differences with the target countries.

    Does anyone else have experience with overcoming or adapting to cultural differences when testing your hypothesis?

    Like

    • Hi Mark, have you found any good resources for your last question about adapting to cultural differences? In my case, I am a US startup trying to reach international customers, so I am grappling with how to do customer development / hypothesis testing in a single (or multiple) international markets. Thanks!

      Like

  9. Hi Steve,

    As one of members who had the fortunate opportunity to pitch to the panel in which you were a member, while you were here in Australia, I was initially taken back by some of the feedback.

    But after processing it, I realised the fundamental problems with my approach. I want to thank you for your guidance because it made me refocus and you have made a significant impact on my startup – even with only a few minutes of feedback.

    I am working through the Business Model Canvas and developing a playbook, but I am doing it with our customers. The outcome of this is that they get a kick out of being involved and it has led me to change a few designs based on their feedback that is more in-depth.

    We are now in pre-commercial discussions with some key medium and large enterprises to begin a “paper-based” trial of our product at the same time we progress through the build process for the MVP. I have been through the prototype and basic tests within a few companies, but nothing that compares with our current plans.

    This will have a positive impact on our MVP and help with early adoption as we augment a few enterprise processes and governance forums prior to product trials.

    Thanks again and see you in the future.

    Regards

    Andrew

    Like

  10. […] This article was one that especially clicked with me as he was in Australia and talking about how the size of your local market matters. […]

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  11. For Australians cut through – Trip 1 to China – organise with China Blueprint. Trip 2 to US – organise with ANZA. They will expedite quality connections and add enormous value.

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  12. […] to be translated to regional speak and conditions. That’s why I came up with this notion of a regional playbook. Ten years ago there was no global knowledge about entrepreneurship. Literally overnight we flooded […]

    Like

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