Taking too long? Close loading screen.
Connect with us

Business

Why You Should Consider Starting Your Next Business in a New Market

Published

on

October 15, 2020 7 min read

Opinions expressed by Entrepreneur contributors are their own.

What do cannabis, and artificial intelligence have in common? You probably guessed it already: All these sectors have only been around for a couple of years, and most of their players are still in the early stages of their businesses. Additionally, they are often associated with regulatory nightmares, countless hurdles from established players and lots of failed companies.

However, it is also known that new markets like cannabis and blockchain are growing quite exponentially, with entrepreneurs and investors becoming millionaires or even billionaires overnight. Regardless of whether you are just starting out or are an experienced entrepreneur, setting up shop in a new can bring a number of priceless benefits that traditional industries can never match. Here’s why it may be just the right thing for you.

Get an early start

Newly emerged markets represent an opportunity to establish an early foothold in what could turn out to be a massive, global impacting billions of lives. As you might imagine, early movers in nascent markets stand to reap potentially lucrative rewards later on and can play a role in shaping the industry as a whole. 

With that said, blazing the trail is easier said than done, but many entrepreneurs thrive on taking up daunting challenges and are accustomed to taking risks that could pay off big time in the future. Those setting up shop in a new industry will likely have to navigate a veritable gauntlet of obstacles, which can range from regulatory challenges, a shortage of skilled labor and a lack of off-the-shelf solutions for many operations.  

The booming blockchain industry is a poignant example of the potential challenges and benefits of jumping into new, high-potential industries at an early stage. Since it first emerged in 2008, the blockchain technology sector has grown to become a $3 billion industry that is expected to grow at a Compound Annual Growth Rate (CAGR) of 67.3 percent between 2020 and 2025. Early adopters and key growth enablers like Canaan Creative and Coinbase have seen the benefit of their early risk-taking and are both valued in excess of $1 billion. 

Related: Coinbase Snags Top Tech Execs From Facebook, Amazon

But to get to this position, both firms — and the numerous other blockchain unicorns — had to overcome a number of obstacles, which include various social media outlets banning crypto currency advertising and various regulators cracking down on crypto businesses. But as firms adopted clever growth strategies and launched highly sought after products and services, these recent setbacks have done little to slow the growth of the industry as a whole. 

Marco Mottana, who is simultaneously active in two new markets with his company CFX Quantum, believes that entrepreneurs in new industries are usually ideology-driven and are therefore motivated to tackle the obstacles that others avoid.

“Every new industry is its own Wild West,” he says. “The rules of the game have not yet been established — you have to negotiate every little thing ‘manually’ and actually create these rules. My company was and still is confronted with these difficulties, yet my team and I are prepared to take on great challenges since we firmly believe that our technology can contribute significantly to the development of reliable financial instruments.” 

Related: The Identity Of Entrepreneurs As An Engine Of Growth

Innovate and set the standard

is the key to progress, but many business leaders and entrepreneurs see their creativity and inventiveness stifled over time as their business begins to adopt a more corporate structure and turn its focus to ensuring stable growth for their shareholders and investors, rather than pushing the bar. 

In the context of a new market, innovation is rarely an optional step, because there are undoubtedly numerous other upstarts looking to make a name in the industry and lay the foundations for future businesses. 

Innovation is doubly important for firms that are looking to build the infrastructure and tools that help grow the industry and develop new business models, products and opportunities. After all, firms that can successfully obtain patents on highly sought-after Intellectual Properties (IP) early on, or produce Software-as-a-Service (SaaS) solutions in a booming market, can stand to benefit greatly in terms of licensing fees and recurring subscriptions.  

Related: Why Innovation and Entrepreneurship Go Hand in Hand

Take Valve Software, a popular video game development and publishing house, as an example. We can see the potential benefits of transitioning into new markets and laying down the foundations for other platforms. Prior to 2003, the vast majority of video game sales were delivered on physical media like DVDs, while digital downloads were still relatively unheard of. Despite this, Valve broke new ground and launched a video game distribution platform known as Steam. Fast forward 17 years later, and Steam now has over 1 billion users and captures 75 percent of all PC video game downloads, with yearly revenue in the billions of U.S. dollars. 

Likewise, SaaS providers in a wide range of industries are experiencing dramatic growth, while those in high-tech sectors often outperform those in other markets due to the rapidly growing number of tech-based startups. By achieving the CAGR of 35 percent projected by Insivia, SaaS firms with a $5 million valuation can achieve a $100 million valuation in just 10 years, while the most successful companies can cut that time in half by achieving 75 percent CAGR — well within the range of possibility for startups in a booming new industry. 

Expand your customer base

Although launching in an entirely new industry can pay off big time, doing so is a costly endeavor and can be fraught with risks. Instead, many businesses opt to simply expand their products and offerings to new regional markets, helping to grow their customer base and potentially launch new product lines and services that better align with the new market. 

Related: 5 Ways to Grow Your Customer Base Organically

Expanding into a new region brings with it a number of challenges, including costs involved in setting up a business entity in the region; complying with potentially complicated regulations and societal norms; and managing payroll and employees on an international scale. However, unlike when setting up something completely new, there is already a wide range of services and solutions in place that can make going international or setting up globally a less daunting task. 

Antoine Boquen, managing partner of New Horizons Global Partners, is intimately familiar with the struggles firms deal with when setting up abroad. 

“International businesses looking to expand into foreign markets can grow their revenue and customer base dramatically by tapping into local culture, trends and by filling unmet needs in regional marks,” he says. “But doing so is a challenging endeavor, so firms might be best served by hiring an international expansion consultant and professional employer organization (PEO) to help ease the burden.”

By expanding into new markets, firms have the potential to access an entirely new demographic and stay ahead of their competition while gaining access to the local talent and resources that can help further fuel expansion. This is a strategy firms should consider if the market they operate in is becoming saturated on a regional level. 

Source

Continue Reading
Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Business

The Trump campaign celebrated a growth record that Democrats downplayed.

Published

on

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.

Source

Continue Reading

Business

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

Published

on

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.

Source

Continue Reading

Business

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

Published

on

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.

Source

Continue Reading

Trending