How should US tech companies go about growing globally? Paul Appleby, CEO of Kinetica, recently drew on his experience of building companies around the world to explore that subject with Mark Pretty, Partner, Technology Practice based in Sydney, at a recent breakfast event in Silicon Valley.
Mark Pretty: Paul, if we look first at your career and your international journey over the years, what have been the major lessons you’ve learned along the way?
Paul Appleby: I suppose a few big lessons. First off, I hear a lot of companies say ‘we’ll just put one or two resources in, test this new market and see what happens’. If we’re talking about enterprise B2B, that doesn’t make any sense.
For example, if you’re selling in Korea, you’re selling to some of the world’s largest manufacturers, in shipping or automotive - massive enterprises. You really can’t sell to those companies unless you’ve got critical mass: pre-sales, sales and post-sales, to support those customers.
I would encourage anyone considering international expansion to be really thoughtful about what markets you’re going to enter. And invest to support those customers in the same way as if you are supporting customers in your home market.
And what about if you are an early-stage, fast growth company thinking globally?
PA: Don’t go too early! As I said before, you need critical mass to support customers.
So, the best thing to do is to find a repeatable path to money in your own market first, where it’s easier to support customers, test and fail, and hopefully learn and succeed.
Then, it’s about making well-informed decisions about which markets you’re going to go after. Be very specific about who they are. Just saying you’re going to go into Asia-Pacific isn’t precise enough. Which countries are you going to put resources into? It might not even be whole countries, it might be specific cities. Or just one company, if it is significant enough.
The thing is we are in an increasingly global market, the pace of change is accelerating all the time, so you really have to get into those key markets earlier than ever before.
MP: Choosing which country to invest in, how does that decision get made?
PA:Well, it’ll be driven by whether your solution is B2B or consumer, so where is that technology being embraced most? Where does it have the most broad-based appeal?
Then, it’s a case of picking those economies that are the easiest for a young company to land in; where the economies are strong, there’s a propensity to buy enterprise-grade software, and where the rule of law actually applies!
In Asia, that’s a pretty easy question to answer. You start in Singapore and Australia. The former is a very soft landing for a newish company, the economy is strong and safe, and it’s a great hub if you want to use Singapore as a base. Building a business using the hub and spoke model is a very smart way to do it. Then, expand out into Malaysia, Vietnam, Indonesia, and India.
Australia, and I’m not saying this because I’m Australian, is very attractive as a small economy with lots of big companies. Very fertile ground, because those large companies have a strong propensity to buy enterprise-grade software.
MP: And what about Europe?
PA:It’s a pretty simple answer. You land first in London because they sort of speak the same language! And Germany, of course, which is an amazing market to operate in.
Brexit? It’s a tough one, I still think the UK economy will always be one worth investing in.
It’ll be one to watch, the UK is such a strong enterprise market, all the major software companies are there. It’s going to change over time, but really, where else are you going to go? One of the biggest things to be concerned about is European employment law, and just about everywhere else you land, it’s much harder on that front.
MP: You’ve clearly had a lot of success, but any mistakes you’d like to admit to, with regards to international expansion?
PA:It’s very easy to get over-excited about the huge and growing markets of India and China. But I would caution, these are very difficult markets to sell into. I’m not saying you shouldn’t, because I have succeeded there, but that’s not where you go first. Just because they are the biggest prize, doesn’t mean they’re your first step.
If you do go to China, the easiest and safest way is to sell to the multinationals who are already there, then if you are succeeding, it’s the privately-owned companies in China next, and only then it’s the state-owned enterprises. But only with the right partner, another whole challenge in itself.
And don’t forget about Japan. I don’t know how you can forget about the world’s fourth largest economy? Think about it, but that said, it is an extremely complex market to enter, and you have to make sure your local partners are absolutely the right ones.
MP: Would you advise going direct to some of these countries, or choosing a channel partner?
PA: Listen, if it’s enterprise B2B, you have to go direct and be physically present. You need a minimum set-up of pre-sales, sales, and post-sales before you launch. Can you really rely on a partner to look after your IP and drive the right outcomes for your customers in a way your own employees would?
MP: Thank you, Paul, for your insights. I hope it’s helped us understand what it takes for US tech companies, and those from other parts of the world to succeed beyond their home market.
If you’d like to continue the discussion, Odgers Berndtson has specialist Technology Partners around the globe.
Mark’s interview with Paul Appleby took place in Silicon Valley during a week of events hosted by our Partners in North America – Kathryn Ullrich (San Francisco), Lisa Hooker (Austin, TX) Sally Drexler (LA) Elaine Grotefeld (Vancouver). Speaking at other events that week were Michael Drew (London), James Garthercole (Shanghai), Andie Rees (Singapore), Gaurav Seth (New Delhi), Irina Milekhina (Moscow) and Johan Uittenbogaard (Tokyo).
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