An interesting post from Willis Wee in Penn-Olson today prompted me to provide some perspective on the issue of expansion. The question that most people ask: if I build a start-up from a country with a very small market size (say, Singapore but it can apply from Slovenia to Monaco), where should I expand the company to? What I agree with Willis in his article, is that expansion to US is not a vanity exercise and his urging to entrepreneurs in a small market like Singapore to think about the Asian market in general. As time is precious to me, I am going to sketch out a few points which one should consider before expanding:
- Where are the entrepreneurs of a small country?: I have the chance to meet up with some successful entrepreneurs in Singapore and learned a lot from them. One of the common phrases from them is, “Where are the best and brightest Singaporean or
entrepreneurs>?” The answer is that they are outside. In fact, in advising a couple of new tech start-ups, I have invoked the following rule for specifically mobile and web start-ups, “You have less than 2 months or 60 days to finish the minimum viable product and get out of Singapore as soon as you can.” Chalkboard went to Kuala Lumpur in the first month after we received our first round of financing. Why is this so? The reason is scale. Singapore lacks the scale and worse, you get clones for already small market. Where do you go next that you might ask? Contrary to perception, Kuala Lumpur is an interesting market and in some sense, the demographic of users resembled to a certain extent like Singapore. If your company specializes in a web-tech solution for the emerging economy, Jakarta (Indonesia) and Manila (Philippines) are probably your best bet. If your appetite is big and massive, China and India are on the list. However, specifically for markets that demand strong localization, you will need to be there. Of course, you can’t jump into the market so quickly. That comes to my next point.
- Expansion is market research + finding the right people on the ground to work with you: You need to work a few things before going into another market. The first is market research. Does your solution solves the needs of another market? You also need to determine the quips and quirks of another market. Once you determine the need and you are likely to spend at least 2 weeks surveying that market, then start setting up meetings with the locals who you might want to work with. Plain execution is what really matters in the end for expansion. Can you move the needle further as far as you can?
- Why US? Why Asia?: Some will say, “We should be in the US.” and others will say, “We should look at Asia.” It really depends on what customers your business are dealing with. Here’s a data point for one to think about. If you want to build a US$100M company, you need to take out at least one of the BRIIC (Brazil, Russia, India, Indonesia & China) markets. So, you need to work out which market is likely to adopt your business solution in the shortest time so that you can build up revenues and distribution. Working in a massive market is not simple and it requires one to think about the set of processes in replicating and scaling quickly to different markets. But you learn more about the complexities of your business solution if you dip your feet into another market.
Okay, my fifteen minutes is up, and I need to get back to work. But the bottom line is: If you are in a small market, test your product with customers and start scaling, and remember you have 60 days from the time you start.