I have been talking to Independent Software Vendors and SaaS founders lately about international expansion. With FusionGrove being a software company that has gone global over the last 10 years ourselves, there are some key lessons we have learnt the hard way that might help you improve the odds as well as reduce your time and costs for success.
As you move from the start-up phase into the expansion phase, it is natural to look at international markets as the next mountain to climb. The opportunities are significant, just rinse and repeat what we’ve done at home in a bigger market and presto!
However market reality tells a different story. In fact, “only 1 in 5 Australian companies that expands overseas succeeds on a sustainable basis”, according to this article in the Australia Financial Review in 2017. Ouch! If you are considering taking your software business international, here are 10 tips for success.
1. Be really committed.
Success will involve a robust, well-conceived plan with ample funding and resources for the medium term rather than an ad-hoc trial. Ensure that the whole management team understands the plan and is committed to success through the ups and downs. Success is never linear!
2. Build a solid customer engine.
Don’t even consider expanding unless you have a solid engine to identify, engage, acquire, on-board and expand customers in a scalable and repeatable way. Without this engine in place, you will simply burn money and resources.
3. Have a "start-up" mentality.
Whilst it’s important to have a solid plan that is constantly reviewed and measured, you won’t know every variable beforehand and that’s okay. As you learn from success and failure, you’ll need to be nimble and adjust or even pivot. Don’t be afraid or too proud to “fail fast!"
4. Research, validate and focus.
Research is the initial starting point. Just because a market looks promising from the outside, it may have competitors or variables that will limit success. There are mountains of data available both in free format and paid (for instance IDC, Gartner, or even FusionGrove!).
Another option is to speak with other ISV founders and share cross country information. I have done this several times through a Linkedin outreach. It's surprising how many founders are in the same place as you. Once you’ve identified a market, validate it for other business compatibility factors (language, time zone, taxation, company environment etc), then focus on it exclusively.
5. Define your commercial go-to-market (GTM) model.
Your commercial GTM model will really be the baseline for your business plan and all investment. Will you set up an office locally and employ staff? Are you going to sell from your home base in Australia? Or will you appoint partners to re-sell? Each model has each own pros and cons depending on your business and software. We have always established regional entities and employed locally, and recently we have been expanding this model to include strategic partnerships.
6. Leverage partnerships.
Partnerships often look like the easy option for international expansion, however having worked in the business partner landscape for 30 years, it is often overlooked how much upfront time and investment is involved for success. Be clear about the specific roles required in the value chain, what roles will be filled by your partners and what roles you will fulfill. Will this be a services play? Or will this be a complementary revenue driver for the partner? Will it be a referral or commission model?
Once you have identified the partner roles and their opportunity in the value chain, then this will determine what type of partners you need to engage and recruit. We find partnerships work best when there is clear core business value derived from the partner embedding your product into their offering/solution. It typically takes 4 to 6 months of effort to establish a pipeline with partners and just as long to work out you have the wrong alignment!
7. Leverage alliances.
Leveraging existing home country alliances overseas is a great strategy to get initial awareness and momentum, but they won't write invoices for you! Look through your tech stack and see what ISV / SaaS programs they have today, for example the Amazon Web Services SaaS program.
8. Understand and plan for localization and compliance.
It may not be critical in the initial phase; however, you will not be successful without localization and compliance. Today this includes region-specific laws such as GDPR in Europe or industry-specific compliance such as HIPAA which may fundamentally impact the architecture of your software. The key takeaway is don’t take on the market if you really can’t support it.
9. Don’t bite off more than you can chew!
If you can’t fund or scale to a market opportunity then simply don’t do it. Focus on a market where you can be one of the top three players within three years. It’s important to remember, as a new entrant you will be judged harshly and you only get one shot at it. If you get it wrong you could completely burn your reputation and investment. For example, supporting your users and infrastructure environments in different time zones is always an important consideration for Australian companies.
10. Secure a beachhead customer first.
This is the hardest to do, but without a local customer of significance there is always a reluctance to be the first. Ideally the customer will help other customers understand their experience as well as provide you feedback on what’s needed in your product locally. We have always had beachhead customers and found their advice and guidance invaluable.
Expanding internationally can be risky, time-consuming and capital-intensive. We hope these insights will help you solidify your approach.
Click here for more advice on how to operationalize your international expansion strategy and how data can help you avoid investments risks in new markets.