Growing a startup is hard. Determining the optimal strategy, building the right team, devising the best corporate culture, and executing the most effective plans are all difficult undertakings. And that occurs only after you have found that elusive product-market fit.
What could be more difficult?
Doing it all again, but this time in a completely foreign market.
International expansion might be challenging, but it is a necessary step for many startups in their growth journeys. To analyze our experiences and distill a few core lessons, I sat down with Tee Chayakul. Tee is the Thailand Country Manager of Traveloka. Traveloka has grown into one of the largest and most successful tech companies in Southeast Asia by offering various travel services in one platform and has raised $500 million USD. Tee has spearheaded Traveloka’s expansion efforts in Thailand and oversees all Thai operations.
Before even considering foreign expansion, one caveat applies: You have to have a great product first. If your service has yet to prove itself in its home market, finding success in a totally different market is extremely unlikely.
Now, the following are the three primary actions you must take to expand abroad, as well as one to avoid.
1. Localization via Iteration – To thrive in a foreign market, a company needs to adapt to local market conditions. Nonetheless, the question that I find most critical is how do you decide the parts of the product you change for this market and the parts you keep the same? “We rapidly formulate, test, and iterate hypotheses. Every day was essentially an exercise in continuous cost-benefit analysis, especially at first,” Tee relays from his experience.
He provides the example of payments. Supporting the appropriate payment channels is critical because customers literally cannot purchase your service unless the proper payment channels are integrated. At the time of Traveloka’s entry into the Thai market, the only payment option offered by competing OTAs was credit card. This meant that the market was limited to the seven million customers with credit cards as opposed to the 40 million customers with smartphones. Traveloka knew that it needed to add other payment channels such as an option to use bank transfers via local Thai banks. It was not certain, however, which options would prove most popular and therefore justify
institutional support and focus. Tee suspected that counter payments at convenience stores, for instance, would help drive business, but they are far more labor-intensive than credit cards. After a small initial rollout, he soon discovered that counter payment was one of the most popular payment methods in the Thai market and, although this payment method is supported in Indonesia, it is not nearly as large or varied. Traveloka tested their idea about local market behavior and then executed at scale after observing real-world customer behavior.
2. The Right People – This point appears obvious, but it is worth emphasizing. You need the right people in the right places with the right values. I’ve seen this point illustrated many times when analyzing startups for venture investment: successful execution and adaption just cannot be done without a good team and solid leadership, despite the market or strategy.
Tee points out that a developed corporate culture with explicitly stated values helps you find the people who fit and helps guide their actions after they join. He says, “We have clear values that allow us to balance intellectual honesty and dedication. Each office can adapt accordingly. Relatedly, it’s critical to foster a strong culture from the top or else others will set it for you.”
Another vital part of building and deepening a strong corporate culture is enforcement. The leaders you bring onboard must embody the values of the firm or face consequences when they don’t. From my experience, cultural drift most often becomes a problem when the organization scales to such a point that the founding team lacks the familiarity it once had with all team members. Maintaining – and regularly invoking – a clear set of values helps to ameliorate this problem.
3. Marketing Wherewithal – No one can use your service unless they know of it so announcing your entry to a new market is essential. We both agreed that you must allocate a sufficient share of resources to your marketing budget. That allows you to establish a solid reputation, which will enable your company to scale more quickly and generate more profits.
A sizable marketing budget, however, is far from enough. “You just have to be super user-centric,” says Tee. That means embracing the dedication needed to focus on the customer in the new market so that you can craft the best messages and employ the most relevant media. In many cases, the first step is engaging in adaptive trial and error, starting with quantitative/digital marketing. Tee mentions Traveloka’s Shade of Asia campaign. Facebook usage is extremely high in Thailand, more so than in other markets, so they focused on Facebook market messaging. Traveloka had ten bloggers travel to different countries and compete in taking photos. This generated interest on Facebook via a steady stream of content in the relevant medium.
Now that it’s clear what to do, here is what to avoid:
Don’t run your office in a new market like you’re simply running a separate department – Different cultures, different languages, and different outlooks matter. A business-as-usual approach will leave you open to competitors who actually customize their service to the local market.
While new market entry can be tough, international expansion is manageable if you focus on proper localization, good people, and relevant marketing. By embracing the mindset of adaptability and iteration, you’ll be able to reach new markets too.
Matthew G. Badalucco
I am a Partner of Turret Capital, a healthcare-focused VC/PE fund. I am passionate about private market investing and have analyzed industries and transactions across Indonesia. I have developed my expertise by working at established investment firms and venture builders including Catcha Group, Citadel Investment Group, and Sandell Asset Management. I hold an A.B. with Honors from Dartmouth College, an M.B.A. from MIT, and an M.P.A. from Harvard University.