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How to take your startup global now

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Startups often enter global markets much too late. By the time they get there, they are facing local "copy cat" versions of their own products that are already entrenched. How can startups accelerate …

Startups often enter global markets much too late. By the time they get there, they are facing local "copy cat" versions of their own products that are already entrenched. How can startups accelerate their international expansion without consuming too many resources?

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  • 1. How to Take your Startup Global NOW! James F. Ryan Managing Partner Farpoint Ventures LLC www.farpointventures.com
  • 2. The Need  There are many startups who have developed excellent products but struggle to bring those products to the global market quickly 2
  • 3. The Costs of Delay  Opportunity Cost • The longer you wait to enter global markets, the more lead-time you are giving to your competitors. • In an interconnected world, news of successful US startups travels around the globe instantly. If you delay too long going to global markets, you may find yourself competing against local “copy-cat” versions of your own product when you finally do enter these markets. 3
  • 4. The Benefits of Being Global  More Revenue • The most obvious reason to enter new markets: New revenue streams that may not even be in the business plan  Diversification • Having 100% of your revenue coming from a single country puts you at catastrophic risk should that country experience an economic downturn  Process and Product Improvement • Certain markets, such as Japan, have such high quality standards that simply doing business there greatly improves the quality of your product and your processes 4
  • 5. How to Go Global?  Try to hire a “VP of Sales” • Difficult to recruit the best talent to small startups • Candidates with global experience demand high salaries o $350K or more in salaries and commissions o Add another $300K/year in travel expenses • Risks o Difficult to find someone who is experienced in every market around the world o Even the best candidate on paper may not deliver the revenues in reality o Even you do find a great VP Sales, there’s a limit to how much one person can accomplish o The opportunity costs of pinning your hopes on a VP Sales for 12-18 months are enormous 5
  • 6. How to Go Global?  Engage “Market Entry Consultants” • They all claim to be the best, how to choose the right company? • These companies often represent tens or even hundreds of products—how can you ensure they work hard for you? o Pay them only on success? o Companies who pay a retainer will take priority o Pay them a monthly retainer? o They will still only focus on your product if they think there is significant upside 6
  • 7. Partner with a Global Player  In a perfect world… • Negotiate an OEM or licensing agreement with a US-based global player • They take care of sales, logistics and technical support; you sit back and collect royalty checks 7  In the real world… • OEM and licensing agreements can take 9-12 months to negotiate • Negotiations eat up enormous amounts of executive staff time • Legal fees can be hundreds of thousands of dollars • After signing, the partner may not focus on driving sales of your product through their sales force, meaning you will still have to mount a sales effort within the partner company to engage and motivate their sales force • Large multinational companies have disjointed organizations; it’s entirely possible that another division of the same company has signed a similar deal with your competition!
  • 8. Thinking Outside the Box Discussion: Are there novel ways to bring your company to global markets that address the shortcomings of the traditional strategies mentioned above? 8
  • 9. Thinking Outside the Box – One Idea  Turn your Liability into an Asset • The problem: o “The inability to penetrate global markets effectively is a liability to my company.” • However, put another way: o “The global revenue potential of my product in yet untapped markets is a very valuable asset.” • Your problem is an asset o Why should you be spending your precious capital paying a VP Sales or consultancy to bring you to global markets? o Shouldn’t they be paying you for the rights to to sell your products in global markets? 9
  • 10. One Idea - Exclusive Licensing Deals  Exclusivity is extremely valuable to local players  Exclusivity in overseas markets that you weren’t targeting anyway is a relatively low cost asset  Dealing with a single player is easier  Offering exclusivity gives you the upper hand in negotiations. You can require the partner to: • Pre-order and pre-pay for a fixed amount of product to cover your start-up costs • Pay for localization, local regulatory approvals, translation of documentation, etc. • Purchase a minimum number of demo units and maintain a training/testing lab • Commit to marketing expenditures, dedicated headcount, training, etc. • Commit to SALES QUOTAS o If the local partner fails to meet the sales quota, they have to purchase the difference or lose their exclusivity 10
  • 11. Thinking Outside the Box 11 Audience Q&A
  • 12. 12 Thank You  For details, contact James Ryan  jim@farpointpartners.com  +1.617.642.8810  www.farpointpartners.com