For many local technology companies explosive growth means daring to leave the comforts of home, according to serial entrepreneurs and investors supporting an initiative to help Canadian businesses expand to international markets.
“Don’t get me wrong, opportunities abound in Canada. But for a large number of companies realizing their full potential requires expanding beyond our borders,” according to Jeremy Laurin, president and CEO of the Innovation Synergy Centre in Markham (ISCM). The ISCM is a non-profit organization that serves as a support hub for Ontario’s tech start-ups and innovative SMBs.
The ISCM recently partnered with the National Angel Organization – Ontario (NAO-O) in a conference titled Building Your Micro Multinational to provide information and networking opportunities for Ontario-based start-ups seeking to enter international markets.
At the conference, Laurin outlined three key reasons why local tech start-ups seek out global markets:
- Larger revenues
- Ability to attract more investors
- Opportunity to expand and realize full potential
“With larger revenues companies are able to attract more investors. With more investors and partners, these companies are able to expand into new areas or further develop their expertise,” said Laurin.
Most Canadian companies that have found success abroad “follow a formula” according to W. Daniel Mothersill, president of NAO-O, a non-profit organization charged by Ontario’s Ministry of Research and Innovation to head an province-wide angel investor program to support small businesses.
“There’s this stereotype of the Canadian entrepreneur as being a good inventor but a bad salesman,” he said. “But successful local companies employ the 95/5 formula – 95 per cent sales and revenue from abroad and five per cent sales and revenue local.”
This means concentrating efforts and resources in developing international opportunities, said Mothersill. “Having one salesperson in the U.K. is definitely not a go-to-market strategy.”
Tech start-ups seeking to expand abroad need to assess their capabilities and plans thoroughly, according to Stephen Pollack, CEO and founder of InsideSpin.com, an online community that helps technology entrepreneurs network and obtain information for building their business.
Pollack, handles a variety of board, advisory and consultancy roles in a number of tech companies. He was most recently founder and CEO of PlateSpin Ltd., a Toronto-based software company specializing in virtualized server management tools. The company, which earns more than $25 million in global revenues, was recently purchased by Novell for $205 million.
Pollack shared 10 key insights he obtained during his involvement with various start-ups through the years:
- Fears of the unknown – Most start-ups are held back from venturing beyond Canadian borders because they know nothing about markets outside the country. The only solution to this is to research and explore the market you intend to enter. Entrepreneurs can also seek out partners that are based in the target country or familiar with the territory.
- Protect your Intellectual Property – Before venturing out, make sure that your intellectual property is adequately protected both in Canada and the region you intend to enter.
- Secure technology permits – Governments have various regulations covering the release and sharing of technology. The U.S. and Canadian government for instance, require that you obtain an export permit for encryption technology.
- Establish a distribution strategy – How will you distribute your product? Who will be responsible for marketing and selling the products? These are some of the questions you need to answer.
- Finding your first employee – Be thorough in vetting your partner or representative abroad. Make sure that person is capable and is a good fit with your company. Be aware of cultural moors that may impact your professional relationship.
- Be willing to spend more – Operations abroad may require you to provide a different compensation package than the one you give to local employees. Salary expectations, benefits, and vacations are some of the items to consider.
- Remote support – Establish a mechanism to support your staff, partners and customers abroad. This will include areas such as communications logistics, chain of command, technical support and customer care.
- Product localization – Make sure your products and services can be readily accessed by the local market. This will include making sure the company Web site, marketing materials, spec sheets, product instructions and others are in the local dialect or language.
- Establish a positive business reputation – Cultivate a positive image in the foreign country you are operating in.
- Realize you can compete anywhere – Don’t give up before you even start. Believe in your own potential.