How to expand your startup internationally

International expansion is a complex process that requires careful planning. Startups often face challenges understanding the local talent market and navigating a different work culture, alongside practical considerations like data sovereignty and new tax regimes. 

“I believe that a common sign that a startup is ready to expand is when it already has market pull from customers in a new geography, even without a targeted local sales strategy,” says Annalise Dragic, partner at Sapphire Ventures. 

“Beyond that, it’s absolutely crucial to have a mature product, a successful sales strategy, a critical mass of clients, and effective operations set up in your home market before expanding elsewhere.”

Going international

Flash Pack is a UK startup offering adventure holidays for solo travellers in their 30s and 40s. 

The business was launched in 2014 with a viral selfie, which led to sales from various international markets such as the US, Canada and Australia. 

Although its cofounder and CEO, Radha Vyas, realised they had a brand and product with global appeal, they didn’t want to rush into global expansion. Instead, the team focused on its home market first, which Vyas says was the perfect way to start learning about consumers and their preferences whilst perfecting their product. 

“We conducted small pilot tests for other markets like Germany and the US,” says Vyas. “Once we knew we had product-market fit in the UK and knew how to scale the company at speed, we turned more focus on the US – a market where we had already managed to acquire customers organically.

Despite being founded in the UK, the US market now accounts for 65% of Flash Pack’s customers. 

“The US was already making a significant contribution to revenue with very small amounts of spend,” adds Vyas. “The key takeaway is that we didn’t rush it and invest before we were ready. We made sure we did as much as we could for the UK first without being distracted by all the other international opportunities.”

Challenges to overcome

International expansion is a complicated process and not one that should be entered into without thorough preparation. Understanding a new market and the legal processes that control it is a major undertaking. However, it is essential to manage the various elements of the project to optimise chances of success.

“Expansion in general can be really expensive but the US in particular is more costly, with most companies finding they run out of cash quickly,” says Vyas. “We tried to do as much as possible from the UK before investing in boots on the ground in the US. We have now started hiring our launch team in the US and we are looking to expand the HQ over there in the next few years. 

“When approaching expansion in the US, it’s important for the founders to soak up the US mentality and way of thinking. Lee Thompson and I as founders, for example, are planning a move to the US next year to build our own networks and immerse ourselves in the market.”

This is a view shared by Kevin Chong, cofounder and co-head of Outward VC. He says that while product and market fit in the expansion market may mirror the home market, the go-to-market strategy may need an overhaul and require different partners with different business development skill sets.

“Startups will need to prepare exhaustively before launching overseas,” says Chong. “This may require existing investors to inject additional capital to allow time and resources for the preparation to ensure that the expansion is worthwhile. 

“One of the founders will also need to relocate to the expansion market, so they’ll need to ask themselves if one of them can commit to relocating themselves and their family.”

Thinking ahead

While the process of international expansion can be daunting, a successful operation can prove fruitful for startups. Expansion offers an opportunity for startups to become a truly global business and even – in some cases – a household name.

“My advice to startups – wherever they are based and looking to expand into – is to think beyond the initial decision about what new markets are a good fit for their product,” says Dragic. 

“It’s so important to have a fleshed out strategy for growing within that new market once you land. This might include localising your product, establishing regional partnerships, procuring regional service providers and mapping out what a team on the ground will look like to support your growth.

“Getting ahead of your go-to-market needs is the most effective way to protect the investment you are making to expand internationally.”

Chong says timing your expansion move is key, and a business would ideally have reached scale and operating sustainably in the home market by the time it chooses to expand.

“A startup will need a solid base to fall back on if the international expansion does not succeed,” he says. “If the desire to expand is coming from founders, they’ll also need to make sure that the existing shareholders are convinced and fully supportive of the move.”

Go all in or not at all

At Flash Pack, Vyas and her team have many ideas to broaden its product range to drive more growth, but she says even if you can do everything, it doesn’t mean you should. Vyas notes the importance of choosing the strategic levers you’re going to pull at each point in time carefully. 

“If there isn’t a clear path to value creation through geographic expansion, then don’t rush it,” concludes Vyas. “It can be a very costly mistake. If you’re going to do it, go all in. The balance of developing new products for a new market versus expanding your existing offering is a difficult strategic question.”

You may be interested to read about Getting support when you start to export.

Kirstie Pickering - business journalist

Kirstie is a freelance journalist writing in the tech, startup and business spaces for publications including Sifted, TNW, UKTN, The Business Magazine and Maddyness UK. She also works closely with agencies such as CEW Communications to develop content for their startup and scaleup clients.