Global reach for start-ups

 Will 2013 be the year of the startup here in Greece? There are reasons to hope so. After years of events, discussions, brainstorming and prototyping, many teams seem to be on the cusp of starting real businesses. The funding bottleneck for IT-based ventures has now been removed, as four new early-stage funds are at last ready to start investing.

All of these funds, naturally, are looking for one thing: global potential. We will not be funding copycat businesses targeted to the Greek market, however good the execution; not even copycats aimed to the broader Balkan market. Market size is too small, and exit possibilities are very limited. 

The name of the game is global reach, out of a Greek base. So how can we plan for that, how can we educate ourselves, what type on networking do we need, what kind of partnerships abroad? By “we” I mean the founders and employees in the ventures, but also investors and advisors. 

Here is a way to think about these issues. There seem to be three generic strategies to expand out of Greece.

1. The immediately global business. If the service can be developed and delivered from anywhere to anywhere, as in some software-as-a-service (saas) models, it does not matter if you are in Greece and your user is in Ohio. The hard part is in devising something which appeals to users in distant regions with no need for localization. If you have that, regional offices are not needed, and strategic partnerships, if needed, can be built from afar. Among the Greek startups that I know, Workable HR fits into that model. It has a niche saas product, which meets a recurring need of companies around the world and can be equally useful to any mid-size employer of tech-savvy English-speaking people, whether in New York or in Helsinki. In such cases, international associates are useful mainly in getting early feedback for the product, and in getting the (web-based) marketing campaigns right in each market. Beyond that, it is up to management to decipher signals from the web and react accordingly; but they can do that mostly from Greece.

2. The plug-in route. If the venture is developing new technology in the narrow sense of ‘technology’ (e.g. a new recognition algorithm, such as that which drives BlindType and  Fleksy) or an app that could be an enhancement of a dominant application (such as a Pinnatta to be added on a major communication platform like MSN or Skype), then growth may require that they become part of a global hub so that they can plug into the networks of coopetition there; and at some stage, to be acquired by a major US based player. To assist in such cases, our community may need good links to Silicon Valley players (investors or advisors). Sometimes the right hub may be Silicon Alley, or Silicon Roundabout, or Silicon Glen.

3. The roll-out. Most marketplace models bring together groups of suppliers that are based in one location (country, city, or neighborhood) with local or international consumers. Taxibeat, Incrediblue, Dopios, Cookisto all fit here. Many content providers, such as review sites, are also location-specific. So good ‘hybrid startups’ such as these will start in one or two locations, formulate a good version of the product by trial and error, and then roll out to more locations, one by one. In each location there will be need for marketing, sales and localization that can only be done in situ. If you are a large company by the time you begin your international roll-out, then you can hire successful local executives to do this for you. But if you are small when you attempt it, then you can only offer risky equity or bonuses; which means that you need to work with entrepreneurial types, not corporate officers.

My guess is that very few concepts that we’ll see in the next couple of years can be ‘immediately global’. Several will require the plug-in route, and most will require roll-outs. This, then, could be the biggest challenge to our community: to develop and perfect roll-out techniques for small companies with innovative models, across a wide range of national contexts. This is not an easy challenge: historically, becoming multinational has been the province of large companies with established products. But our ventures are constrained by our small home market, and so they will have to try to expand early.

To succeed in roll-outs, the community will need to exchange experiences, to share contacts in interesting markets, and to develop horizontal expertise that will be useful to several different ventures. This is the area where cooperation within the Greek startup community will be most critical. If we can pull it off, this could be a characteristically Greek model of global reach. (Greeks are well placed to understand both developed and developing country contexts – but that is a subject for a separate post).

The alternative is to devise products that require minimal local business development, more along the ‘immediately global’ model. There is a tradeoff here between depth and breadth, but whoever can do both multi-locality and scaleability can be hugely profitable.

Entrepreneurs should think how their model fits into these three categories, and then plan for expansion accordingly. Investors and mentors should develop capabilities to be able to help them in each of these strategies. At Openfund, we hope to contribute significantly to this effort.



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