Editor’s note: This is a guest post by Alexios Ballas, who is founder & CEO of Fashinating. Fashinating was one of the first companies to receive accelerator funding in Europe outside big country hubs like the UK and graduated from the Openfund program in 2009.
Okay, you have a great idea, you managed to gather an A-team of co-founders and you are ready to rock the global startup stage! Nothing is stopping you except maybe one thing: your location. What if you do not live in a large, super-advanced market like the US and the UK? Let’s face it, not all, but most global technology businesses have started or at least moved quickly to one of these markets before going global.
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This, unfortunately for you, has various re-enforcing consequences. If the users of these markets are the first to receive cutting edge technologies, they are also the ones that learn how to use and react to them, which in turn makes them the best candidates to test the next new wave of technologies. It is a vicious (or virtuous) cycle, which you cannot ignore. Most start-ups with global ambitions need to test their products in these markets early – let’s call this the ‘Foreign Market’ problem.
That of course is not your only issue. In order to scale your business you are going to need funding and good advice. Again you are in a disadvantaged position; money is not in abundance, your market is probably not educated enough on technology startup funding structures and advice from global tech companies is possibly limited.
Local vs. international investors
Trying to fund-raise in markets where the “convertible note” is an unknown term for most investors requires double the effort as you need to educate and talk about the basics rather than stuff that matter. This makes the angel market particularly hard to navigate, especially if there are no previous local success stories to lookup to. Fortunately, investors and governments around the world seem to notice the potential of Web and mobile startups and we are starting to see an ever-increasing number of accelerator programs and VC firms appearing in the periphery.
A good example is my home country, Greece. The Next Web recently reported from Athens, a city that hosts five startup-focused funds: The Openfund, PJ Tech Catalyst, Odyssey, Driin and First Athens. There are also a range of other initiatives like the ZeroFund and local representation of Hackfwd.
This is certainly good news and a very good reason to be active in your local startup ecosystem. Our company was born through a community event, namely the legendary Athens Open Coffee meet-ups. VCs value individuals who actively contribute to their tech communities. Part of their value is their proximity to these hubs of people, which combined with their local knowledge, helps them identify outstanding individuals (like you).
This is also the reason why fundraising in a market like the UK or the US is not easy for outsiders given that they are not connected with the local scene. Greek startups that were brave to raise funds in the US include Pinnatta, Daily Secret, BabelVerse and BugSense, all of which had to move abroad for prolonged periods to raise the money. If this is not possible for you, local VCs are your best chance for an early funding round. However, a not-fully-developed ecosystem though with no significant start-up experience should make you cautious.
You need to ask yourself the following questions: Does your VC of choice have previous startup experience? Do they have readily available funds to support their most successful companies? Are they able to link you with top-tier international VCs in the future? Rarely the answer is ‘Yes’ to all of these questions.
If I had to choose, sufficient follow-up money and experience would be at the top of my list. Getting the stamp of a respected local VC means that you stand out of the crowd and you should use that leverage to draw co-investment from international funds as soon as possible, preferably from the very start. Your local VC is great to have and you should definitely let them lead the deal. This will assure the funds abroad that the company is looked after at close-quarters. On the other hand, the international VC will provide you with invaluable strategic guidance and knowledge of your target markets. Getting them early will also ensure better networking and follow-up funding for your next round, gravitating you towards larger players.
VC co-investment is one way to help you solve the ‘Foreign Market’ problem. Just bouncing early product ideas to your investors will help you identify assumptions that might be right where you are but are not necessarily true in your target location and culture.
Launch in your target market first
Whatever your funding situation though, you should always launch in your target market first! Start locally only if you are targeting markets with similar cultural and technological characteristics with your own; a great example here is Taxibeat, a Greek mobile Taxi service helping to improve the quality of service in many countries that suffer in that respect.
If you are looking to make it in an advanced market though, chances are that the feedback you will get in your country will be in the wrong direction. You will be surprised with the comparative results; we have seen conversions differing for up to 300%. Thus, stop wasting your time with local users and get your product out there!
It is also very important to have a presence on the ground. Quantitative results through A/B testing are great, but qualitative feedback like speaking with your target users is paramount. Jon Vlachoyiannis of BugSense did just that and quickly realized that their then name of choice, which sounded intuitive for Greek speaking users (Sfalma.com), was impossible for Americans to pronounce. This is actually a very common problem for non-English speaking start-ups and only a glimpse of the localization pitfalls.
If you have a solid idea that is patentable in your target market, go ahead and patent it! There has been a lot of talk about patent trolls and large co-operations killing small businesses through this system. The fact is that patents were built to protect inventors from unfair competition and no-one fits this description better than you. The fact that you are not local makes it harder to fight potential imitators.
Our company is utilizing the value of its US patent at its current stage, but an even better example is Kostas Eleftheriou of BlindType. He developed a keyboard app in Greece, which he immediately patented in the US and was later quickly acquired by Google, mainly because of the patent value. It is better to spend a few thousand upfront if these might value millions in the future.
On the ground in a major market
Patents excluded, the advice is clear; if you want to create an international technology business, it is good to have at least one founding member ready to move abroad to a city like London, New York or San Francisco to acquire local knowledge, make partnerships and above all help you realize your dreams.
Moving to London to develop our company is one of the best decisions we have taken and something that I should probably have done earlier. The experience, collective knowledge and energy of these cities combined with the unique characteristics of your local market, whether that is cheaper labor, location or culture should help you excel in your endeavors.
True innovators and multi-million companies like PeoplePerHour, Upstream, Velti, InternetQ and travelplanet24 have managed to excel having based their research operations in a country like Greece. So, why can’t you? Good luck!
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