Your company is in a good place. People love what you’re building; you’ve got an active customer base that’s helping spread the word. You’re ready to dominate and you’ve got the Series A cash to do it. In startup-speak, you’ve demonstrated product market fit, viral coefficients are greater than one, and now you’re ready to launch new markets on your path to disrupt the industry. Go big, but go smart.
In this three-part series on Going Global, I’ll cover:
- Selecting the best markets for launch
- Preparing your product for International
- Launching new markets with one employee
Part I starts now.
First off, why new markets?
Think of each city where you don’t yet operate as an untapped revenue source full of eager people who need your product. There’s also what I refer to as the blowfish effect: by expanding your territory competitors perceive you as more formidable which can make them do crazy things. In some cases, this has resulted in competitors prioritizing different markets, or in extreme cases prompted dramatic company pivots, opening up larger market share for you to claim.
To determine the upsides and risks, here’s what you need to consider:
- Market size — Are there enough potential customers to justify operating expenses?
- Customer culture fit — Does the language, demographic, and sociographic of the city match that of your customer?
- Competitive landscape — Does success involve defining a new market or capturing market share?
- Operating factors — Are there regulatory concerns or tax implications in doing business in a particular market?
1. Choose markets wisely.
Don't forget the little guys.
No doubt market size matters. In urban areas there’s high population density and a concentration of media, so word travels quicker and often further. This provides a fertile launch bed for startups looking to grow their ranks and gain brand awareness.
For these reasons, many companies looking to expand opt for top tier metros like NYC, San Francisco, and Los Angeles. The downside is that there’s so much noise in these cities that even your best efforts can seem like a drop in the bucket.
For companies that are already established in one of these areas, it can be beneficial to go to underserved areas first, rather than compete for mind share in the big three. I’ve found that cities such as Seattle, Austin, and Miami provide substantial opportunity and serve as good testing grounds. It’s also often easier to develop relationships with press and potential partners, making it easier to dominate the market.
Quantify the market.
Establish if there’s a sufficient target customer base using free tools on the web. Wolfram Alpha is an excellent resource for high-level socioeconomic and demographic data. Touting a luxury product? Might be helpful to know the median household income of San Francisco vs. Boston is $72,947 vs. $51,739. Launching an app in Español and curious to know how many potential users in Miami? 5,582,351. Make sure you’re at least playing in the right ballpark.
Go where your people are.
Ramping new cities is only sustainable with support from the local community. For this reason, it’s most important look to your users; markets with the highest organic growth show that there’s a culture fit and that you’re speaking to a real need. Don’t just take it from me! This was the advice Paul Graham gave the Airbnb founders during our “trough of sorrow” phase.
Take advantage of personal networks.
If there’s not significant presence in any one area, take advantage of personal networks in cities which you’ve previously lived. Remember how your first evangelists were you and your team’s friends and family? Same principle applies to new markets: get those who already love to your support you. Leveraging these networks can provide a strong initial user base.
Facebook Open Graph and your LinkedIn contacts are a great place to start. Introduce your company and ask if there’s anyone in the space with whom they’d recommend speaking. Remember to be respectful of your contact’s time and relationships; include a ⌘C ⌘V description of your project and your reason for wanting to connect.
How do you know if a market’s a match?
Zero in on who’s using your product and find out if there’s a similar segment in the prospective market. If you’ve conducted a persona study you’ve got a head start. Here we want to answer more location-specific questions.
If you don’t yet have sophisticated data, slice and dice with Facebook Open Graph:
- In the search bar type “People who like <company page>”. You can use your own company, that of a competitor, or a like-minded brand.
- On the right side you’ll be able to filter by demographic
- Underneath you’ll see other pages they like, where they’ve lived, activities they enjoy and loads of other riveting things that people forget they put on the internet publicly.
- Note “liked” competitors, publications + media outlets, and potential local partners.
“If you provide a competitive price and take away some services, customers will adjust accordingly to your clear differentiation. But if you align your strategies to what everyone else does, be assured that a single business bullet will take you all down.”
— Ndubuisi Ekekwe, Harvard Business Review
For many businesses, expanding your territory will mean capturing that of others. Some companies dial up scare tactics and go where the competition is, while others establish presence in the industry center to build awareness.
Time for a targeted S.W.O.T. analysis. How is your company different? Scratch that! Not just different. How is your company going to be the best?! What additional tremendous value can you bring to your mucs? This is the way you will win.
No users and starting out fresh? It’s even more important to research the incumbents. Which companies have similar offerings to yours? How does the pricing compare? What channels are they using for awareness and acquisition? Pour over their marketing materials and note their branding and the positioning of their value proposition. Identify what they’re doing right and what could be improved upon.
4. Learn the local laws.
Know the rules you’re breaking.
Surely laws are in place to protect and preserve the safety, rights, and liberties of the people. But many are archaic, reflecting – as Cindy Gallop would say, “the old world order”– and don’t always find purchase in our era of rapidly evolving tech.
States have varying regulations for many industries including food, transportation, and hospitality. Opening up shop and transacting in different states may require licensing and have tax implications.
Do your homework online, then sync with legal to fill in any gaps before expanding to the new territory. If legislation affects your industry at large, it may be advisable to create a consortium to address the issues with local lawmakers.
Join forces and empower your community.
In the early days of Airbnb we were singularly focused on building a product that our users loved. At our scale back then, regulatory wrist slaps seemed like a far distant future. Fast forward three years, the company is booking more nights than Hilton worldwide, and heck, do the hotel industry lobbyists have something to say!
Ah, but what’s better than lobbying? Passionate users taking up the charge. This past July, Airbnb, Lyft, TaskRabbit and several other collaborative consumption companies joined Peers.org. In an interview with CNET, Executive Director Natalie Foster shares the goal of the organization: “to promote and protect the businesses and groups that allow people to share goods and services… providing a place for them to share stories and talk about related topics, which includes legislation or local regulations.” After all, we’re all in this together.