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Find Opportunities on the Other Side of the Horizon: 4 Expert Tips to Internationalize Your New Business

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September 23, 2020 7 min read

Opinions expressed by Entrepreneur contributors are their own.

Internationalization is an ambitious but attainable step in any startup’s lifecycle. Once considered to be at the tail-end of a business journey, companies nowadays have the luxury of being able to internationalize relatively soon after they launch. The internet has been the biggest accelerator of startups establishing an overseas presence faster, while the recent COVID-19 crisis has proven that there is even greater scope for small ventures to successfully branch into new markets.

According to a survey from Wells Fargo, 87 percent of US companies are optimistic about expanding internationally for long-term growth. However, having the tools to expand, and knowing how to do it properly—without falling into legal trouble, failing to understand consumer culture or ignoring technological differences—are two separate things. If you rush into foreign waters unprepared and insensitively, you could jeopardize your existing success and reputation. 

Here’s how to internationalize your startup, with insights from founders who have done just that:

1. Size up your home market.

First things first: Assess when to enact your internationalization strategy.

Conventional wisdom says you need to dominate your home market before you consider establishing a presence elsewhere. Previously, most investors considering funding your international expansion would first ask you to prove that your company was successful in its current location. If you couldn’t, you’d struggle to get the funds. 

Nowadays, there is no longer a standard linear format to internationalizing. There are a number of startup hotspot countries and cities that make it easier to take a leap without necessarily dominating your domestic market beforehand. 

Oswaldo Trava, Founder of InstaFit, notes that a key step is to “identify the largest, ripest market.” This especially rings true for founders from smaller local markets, like Israel or Sweden. Because the population size is relatively low and therefore limited, it can be worthwhile focusing on European or U.S. markets from the get-go. It essentially comes down to momentum—if you can get enough traction where you are now, focus on domestic growth. If where you’re operating is too contained to make a big enough splash, consider going international from day one.

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2. Get your legal, language, and logistics in order.

Some of the most common pitfalls when internationalizing are also some of the easiest to avoid. 

On a practical level, you have to have a sound legal framework set up. Compliance should be one of your top priorities: you need to know and adhere to the local tax, data handling, and labor laws to ensure you don’t face heavy penalties further down the line. There are plenty of useful online resources like Remote that can help you prepare for the legal regulations as you internationalize, however, speaking with a legal professional is most effective. The initial fee may dip into your startup’s internationalization funds more than you’d like, but it’s worthwhile to guarantee that you’re growing a business on a secure foundation. 

Gabe Zichermann, chief executive of Failosophy, notes that almost every country has a foreign trade investment arm where foreigners can get extremely useful about internationalizing. These arms can be part of the consulate or a separate institute, and may have a number of locations. A quick search online should reveal the closest relevant arm to you.

To listen in to Gabe Zichermann and Oswaldo Trava discuss how to internationalize your business sign up for a risk-free trial of the Start Your Own Business course and check out our live webinar on 09//20 at 3 pm ET.

Another consideration is language. English is the dominant language when internationalizing, but of course, this can vary according to your majority audience. Whichever language you will be working in, you have to be extra sensitive about using native speakers to write your product or service description, UX, copy, onboarding, and general messaging. More than ever, users are hyper-sensitive to grammatical errors and if you merely copy and paste your content from Google translate, you risk losing customers who may think that your brand is a scam. In fact, poorly-written websites and emails are known signs of cybersecurity threats.

Beyond legality and language, you also need to scope out the infrastructure of your new market. Assess what internet penetration is like, the level of digital literacy, and have a firm grasp of online user behavior in the country. For example, if you try to launch a video conferencing startup, you need to be certain that as you internationalize, your servers can support the surge of additional customers.

RELATED: Sign Up For a Risk-Free Trial of Our On-demand Start Your Own Business Course

3. Match your pricing and payment options to your markets.

A big part of internationalizing is recognizing patterns in markets and accommodating them. Having a customer base and a valuable offering can only be successful if you pave the way for people to seamlessly pay for your product. As Zichermann, puts it, “people have different levels of ability and willingness to pay for things in different countries.”

Your pricing strategy has to therefore account for two things – appropriate pricing and appropriate modes of payment. While some markets may think $10 per month for a service is reasonable, other markets will find it too expensive. Zichermann recommends using the purchasing power parity (PPP) tool to judge how amounts translate in other countries and understand, for example, what a basket of goods costs in the United States compared to Mexico.

Likewise, modes of payment should be dependent on what your target market is already familiar using. For instance, Latin America is predominantly cash-driven, China prefers Alipay and WeChat, the United States opts for credit cards, and Europe is weighted towards debit and credit cards. If you’re serving small, niche groups, it’ll be easier to tailor payment solutions to them, but if you’re focusing on larger segments of the population, following local payment customs will remove possible friction at an especially crucial point in your user journey.

RELATED: Sign Up For a Risk-Free Trial of Our On-demand Start Your Own Business Course

4. Internationalize your team.

Building an internationally-renowned business starts at home. If you want to make a brilliant impression as you grow, you need people on your team who are from a variety of backgrounds, with a variety of skills and local knowledge. These people don’t have to be solely responsible for your internationalization strategy, but they can support your cultural bridge into new markets.

Ideally, bring people on board who are culturally competent in the places you’re targeting – meaning, they speak the language, have worked in the location, and know local practices inside and out. For customer service roles in particular, these qualities will establish positive customer interactions and contribute to longer-term relationships because people feel that they are being understood. If you’re a small venture with a restricted budget, internationalize your team using freelancers from LinkedIn and Upwork. These platforms are actually great to pin down people in your preferred markets, and if they prove to be valuable, they can become full-time employees at a later date.

Internationalizing your team should foster a more diverse culture in your startup, and encourage you to recognize different norms and national celebrations from around the world. This type of openness not only increases your creative and innovative potential, it also puts your company in a stronger position to attract diverse talent and business partners, and continue growing across the globe.

A huge part of internationalizing is earning the trust of customers in new markets. Every location you enter should be treated as a separate and unique challenge, and you should be prepared to reset your business clock every time you branch into a different area. What went well in a previous market won’t necessarily jibe for another, but researching and reacting to those variations will make you a multi-faceted, successful brand.

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The Trump campaign celebrated a growth record that Democrats downplayed.

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The White House celebrated economic growth numbers for the third quarter released on Thursday, even as Joseph R. Biden Jr.’s presidential campaign sought to throw cold water on the report — the last major data release leading up to the Nov. 3 election — and warned that the economic recovery was losing steam.

The economy grew at a record pace last quarter, but the upswing was a partial bounce-back after an enormous decline and left the economy smaller than it was before the pandemic. The White House took no notice of those glum caveats.

“This record economic growth is absolute validation of President Trump’s policies, which create jobs and opportunities for Americans in every corner of the country,” Mr. Trump’s re-election campaign said in a statement, highlighting a rebound of 33.1 percent at an annualized rate. Mr. Trump heralded the data on Twitter, posting that he was “so glad” that the number had come out before Election Day.

The annualized rate that the White House emphasized extrapolates growth numbers as if the current pace held up for a year, and risks overstating big swings. Because the economy’s growth has been so volatile amid the pandemic, economists have urged focusing on quarterly numbers.

Those showed a 7.4 percent gain in the third quarter. That rebound, by far the biggest since reliable statistics began after World War II, still leaves the economy short of its pre-pandemic levels. The pace of recovery has also slowed, and now coronavirus cases are rising again across much of the United States, raising the prospect of further pullback.

“The recovery is stalling out, thanks to Trump’s refusal to have a serious plan to deal with Covid or to pass a new economic relief plan for workers, small businesses and communities,” Mr. Biden’s campaign said in a release ahead of Thursday’s report. The rebound was widely expected, and the campaign characterized it as “a partial return from a catastrophic hit.”

Economists have warned that the recovery could face serious roadblocks ahead. Temporary measures meant to shore up households and businesses — including unemployment insurance supplements and forgivable loans — have run dry. Swaths of the service sector remain shut down as the virus continues to spread, and job losses that were temporary are increasingly turning permanent.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, chief United States economist at Capital Economics, wrote in a note following the report.

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Black and Hispanic workers, especially women, lag in the U.S. economic recovery.

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The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.

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Ant Challenged Beijing and Prospered. Now It Toes the Line.

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As Jack Ma of Alibaba helped turn China into the world’s biggest e-commerce market over the past two decades, he was also vowing to pull off a more audacious transformation.

“If the banks don’t change, we’ll change the banks,” he said in 2008, decrying how hard it was for small businesses in China to borrow from government-run lenders.

“The financial industry needs disrupters,” he told People’s Daily, the official Communist Party newspaper, a few years later. His goal, he said, was to make banks and other state-owned enterprises “feel unwell.”

The scope of Mr. Ma’s success is becoming clearer. The vehicle for his financial-technology ambitions, an Alibaba spinoff called Ant Group, is preparing for the largest initial public offering on record. Ant is set to raise $34 billion by selling its shares to the public in Hong Kong and Shanghai, according to stock exchange documents released on Monday. After the listing, Ant would be worth around $310 billion, much more than many global banks.

The company is going public not as a scrappy upstart, but as a leviathan deeply dependent on the good will of the government Mr. Ma once relished prodding.

More than 730 million people use Ant’s Alipay app every month to pay for lunch, invest their savings and shop on credit. Yet Alipay’s size and importance have made it an inevitable target for China’s regulators, which have already brought its business to heel in certain areas.

These days, Ant talks mostly about creating partnerships with big banks, not disrupting or supplanting them. Several government-owned funds and institutions are Ant shareholders and stand to profit handsomely from the public offering.

The question now is how much higher Ant can fly without provoking the Chinese authorities into clipping its wings further.

Excitable investors see Ant as a buzzy internet innovator. The risk is that it becomes more like a heavily regulated “financial digital utility,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Utility stocks, as far as I remember, were not the ones to be seen as the most exciting,” Mr. Howie said.

Ant declined to comment, citing the quiet period demanded by regulators before its share sale.

The company has played give-and-take with Beijing for years. As smartphone payments became ubiquitous in China, Ant found itself managing huge piles of money in Alipay users’ virtual wallets. The central bank made it park those funds in special accounts where they would earn minimal interest.

After people piled into an easy-to-use investment fund inside Alipay, the government forced the fund to shed risk and lower returns. Regulators curbed a plan to use Alipay data as the basis for a credit-scoring system akin to Americans’ FICO scores.

China’s Supreme Court this summer capped interest rates for consumer loans, though it was unclear how the ceiling would apply to Ant. The central bank is preparing a new virtual currency that could compete against Alipay and another digital wallet, the messaging app WeChat, as an everyday payment tool.

Ant has learned ways of keeping the authorities on its side. Mr. Ma once boasted at the World Economic Forum in Davos, Switzerland, about never taking money from the Chinese government. Today, funds associated with China’s social security system, its sovereign wealth fund, a state-owned life insurance company and the national postal carrier hold stakes in Ant. The I.P.O. is likely to increase the value of their holdings considerably.

“That’s how the state gets its payoff,” Mr. Howie said. With Ant, he said, “the line between state-owned enterprise and private enterprise is highly, highly blurred.”

China, in less than two generations, went from having a state-planned financial system to being at the global vanguard of internet finance, with trillions of dollars in transactions being made on mobile devices each year. Alipay had a lot to do with it.

Alibaba created the service in the early 2000s to hold payments for online purchases in escrow. Its broader usefulness quickly became clear in a country that mostly missed out on the credit card era. Features were added and users piled in. It became impossible for regulators and banks not to see the app as a threat.

ImageAnt Group’s headquarters in Hangzhou, China.
Credit…Alex Plavevski/EPA, via Shutterstock

A big test came when Ant began making an offer to Alipay users: Park your money in a section of the app called Yu’ebao, which means “leftover treasure,” and we will pay you more than the low rates fixed by the government at banks.

People could invest as much or as little as they wanted, making them feel like they were putting their pocket change to use. Yu’ebao was a hit, becoming one of the world’s largest money market funds.

The banks were terrified. One commentator for a state broadcaster called the fund a “vampire” and a “parasite.”

Still, “all the main regulators remained unanimous in saying that this was a positive thing for the Chinese financial system,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.

“If you can’t actually reform the banks,” Mr. Chorzempa said, “you can inject more competition.”

But then came worries about shadowy, unregulated corners of finance and the dangers they posed to the wider economy. Today, Chinese regulators are tightening supervision of financial holding companies, Ant included. Beijing has kept close watch on the financial instruments that small lenders create out of their consumer loans and sell to investors. Such securities help Ant fund some of its lending. But they also amplify the blowup if too many of those loans aren’t repaid.

“Those kinds of derivative products are something the government is really concerned about,” said Tian X. Hou, founder of the research firm TH Data Capital. Given Ant’s size, she said, “the government should be concerned.”

The broader worry for China is about growing levels of household debt. Beijing wants to cultivate a consumer economy, but excessive borrowing could eventually weigh on people’s spending power. The names of two of Alipay’s popular credit functions, Huabei and Jiebei, are jaunty invitations to spend and borrow.

Huang Ling, 22, started using Huabei when she was in high school. At the time, she didn’t qualify for a credit card. With Huabei’s help, she bought a drone, a scooter, a laptop and more.

The credit line made her feel rich. It also made her realize that if she actually wanted to be rich, she had to get busy.

“Living beyond my means forced me to work harder,” Ms. Huang said.

First, she opened a clothing shop in her hometown, Nanchang, in southeastern China. Then she started an advertising company in the inland metropolis of Chongqing. When the business needed cash, she borrowed from Jiebei.

Online shopping became a way to soothe daily anxieties, and Ms. Huang sometimes racked up thousands of dollars in Huabei bills, which only made her even more anxious. When the pandemic slammed her business, she started falling behind on her payments. That cast her into a deep depression.

Finally, early this month, with her parents’ help, she paid off her debts and closed her Huabei and Jiebei accounts. She felt “elated,” she said.

China’s recent troubles with freewheeling online loan platforms have put the government under pressure to protect ordinary borrowers.

Ant is helped by the fact that its business lines up with many of the Chinese leadership’s priorities: encouraging entrepreneurship and financial inclusion, and expanding the middle class. This year, the company helped the eastern city of Hangzhou, where it is based, set up an early version of the government’s app-based system for dictating coronavirus quarantines.

Such coziness is bound to raise hackles overseas. In Washington, Chinese tech companies that are seen as close to the government are radioactive.

In January 2017, Eric Jing, then Ant’s chief executive, said the company aimed to be serving two billion users worldwide within a decade. Shortly after, Ant announced that it was acquiring the money transfer company MoneyGram to increase its U.S. footprint. By the following January, the deal was dead, thwarted by data security concerns.

More recently, top officials in the Trump administration have discussed whether to place Ant Group on the so-called entity list, which prohibits foreign companies from purchasing American products. Officials from the State Department have suggested that an interagency committee, which also includes officials from the departments of defense, commerce and energy, review Ant for the potential entity listing, according to three people familiar with the matter.

Ant does not talk much anymore about expanding in the United States.

Ana Swanson contributed reporting.

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