Internationalizing Startups: Opportunities, Decision Support, Mistakes, and Tips

Digitalization brings the world closer together and is the key to international markets for businesses. And it’s not just large and well-established corporations expanding abroad—more and more startups are also taking the leap. But is international expansion the right move for every startup, and how can it succeed?

In this article, we explore the opportunities and challenges startups face. We offer decision-making guidance, highlight common mistakes, and share tips to help ensure a successful international expansion!

What Does Internationalizing a Startup Mean?

Internationalization means a startup expands its business beyond national borders. It becomes active not only in its home market but also serves new target markets abroad—in addition to its domestic operations. This opens up new revenue potential and growth opportunities.

Forms of Internationalization

Startups have several options when it comes to entering new markets:

• Exporting goods to other countries
• Establishing a foreign branch (permanent establishment)
• Creating a subsidiary
• Launching a franchising business model
• Looking for partners for cooperation
• Selling licenses and usage rights

Which form of internationalization suits a startup depends on the industry, product or service, and business model.

Internationalization is the Norm, Not the Exception

As early as 2016, a Statista report showed that 63% of Swiss startups were active in foreign markets. Additionally, 75.5% planned to expand abroad. This shows that even back then, internationalization was more of a standard than an exception.

Opportunities and Challenges for Startups through Internationalization

So why are so many startups going international? Because it offers numerous opportunities. But challenges must also be considered.

Let’s take a look at the key opportunities and challenges:

Decision Support: Which Startups Should Expand Internationally?

Despite the many opportunities, international expansion isn’t right for every company. It may be worthwhile if:

• the business model is scalable
• there are real growth opportunities abroad
• the startup has already established itself in the domestic market
• the home market is saturated
• companies want to diversify risk and position themselves for the future

It’s also important to assess the target market’s product-market fit (PMF). Does the product or service fulfill a strong need in the new market? Or does it require heavy adjustments? The fewer changes needed, the easier internationalization will be. Conduct a market analysis to determine if adaptation is worth the effort.

Many companies underestimate the importance of mindset. Is the team ready to operate internationally? Can multilingual teams collaborate effectively? If not, this needs to be added to the implementation agenda.

The 3 Mistakes Startups Should Avoid When Expanding Internationally

In recent years, numerous companies have tried their hand at internationalization. However, not all of them have been able to gain a foothold in the target markets. However, this also has an advantage, as you can now learn from the mistakes and experience of others. Below we take a closer look at the three most common mistakes made by companies.

Mistake 1: Insufficient knowledge of the market, target group and culture

Do you know your home market like the back of your hand? However, this does not mean that the target market is the same. Every market is different and many start-ups make the mistake of not paying enough attention to the target market when internationalizing. This is because customers have different needs and there are different legal regulations, specifications and guidelines.

However, if you do not deal with these, it can be your undoing. The same applies if you do not familiarize yourself with the culture of the country. Because then you are almost bound to make a mistake and your foreign expansion may fail. Also check the brand protection of other companies and protect your own brand.

Mistake 2: No local marketing and no infrastructure

Have you recognized the market potential and discovered that there is a demand for your service or product? Even then, market entry can fail if the appropriate logistics and marketing are lacking. Some start-ups fail to set up a supply chain in advance and establish reliable partnerships with logistics partners and local companies. A lack of online marketing in the appropriate language can also prevent you from successfully reaching your target group. Many companies also underestimate the importance of a website that matches the local target group.

Mistake 3: Lack of resources

A lack of or insufficient resources can be a reason for the failure of the startup’s internationalization. For example, some companies underestimate the costs and time involved.Low liquidity or an overburdened team can then lead to the project being abandoned or even to a financial distress.

IT infrastructure is also a crucial resource. After all, an international startup needs an ERP system that can map all processes and payment transactions at home and abroad. Different incompatible systems lead to data chaos and data silos, which result in costly processes and work steps.

10 Tips for Successfully Internationalizing a Startup

If you want to successfully internationalize a startup, you should of course avoid the mistakes mentioned above. At the same time, we have a few tips to help you successfully implement your project.

• Tip 1 – Create a strategic plan: To ensure that your project is a complete success, you should draw up a well-developed plan. Determine which type of internationalization suits you best. Determine the measures you need to implement and create milestones and visions. Such a plan can also be useful in other areas, for example to convince investors of your project.
• Tip 2 – Carry out a market and target group analysis: Analyze the target market, the competition and the target group in detail. Also familiarize yourself with political and cultural differences. Startups thus increase their chances of successfully establishing themselves on the market and hitting the mark when it comes to meeting needs.
• Tip 3 – Familiarize yourself with laws and tax legislation: The laws and corporate taxes in Switzerland can differ considerably from those in other countries. Familiarize yourself with consumer protection and rights, customs, taxes, data protection and legal provisions. Violations can sometimes result in severe penalties or even a ban, and the conditions differ in the EU and in third countries.
• Tip 4 – Website and marketing in the national language: Start-ups should rely on separate websites and targeted marketing in the respective national languages. A survey showed that 56.2% of customers consider information in their own language to be more important than the price. 72.1 % of respondents only visited pages in their own language. Therefore, you should not simply use a translator, but also rely on an appropriate URL that inspires confidence. You should not only adapt online marketing via social media in terms of language, but also consider public holidays and cultural particularities.
• Tip 5 – Set a budget and ensure liquidity: A liquid company is a successful company. Liquidity planning not only plays a decisive role in the success of a company, but also in the internationalization of start-ups.
• Tip 6 – Create an IT infrastructure: Internationalization requires numerous additional processes in the company. You must also be able to map the accounting aspects of sales abroad and track supply chains across national borders. A platform that maps all business processes can help your company become more efficient and reduce costs in the long term. In addition to these advantages, there are other reasons for an ERP system. So invest in an IT infrastructure that suits your company in good time.
• Tip 7 – Build an international team: An international team with employees from the target country often understands its customers and the market better. This can circumvent the problem of the language barrier in the target country. Your corporate image is professional and customers may have a contact person who speaks their native language.
• Tip 8 – Attract investors: Many investors come from abroad or have connections abroad. Make an effort to attract investors who can help you establish yourself in the target market. Your carefully prepared business plan with a clear strategy will help you do this. You can also attend events that are relevant to your sector.
• Tip 9 – work on your mindset: Success begins in the mind! To successfully conquer the markets of other countries, the team’s mindset needs to be right. Is everyone pulling in the same direction? Is there the will to go through the challenges that this project entails? If so, your chances of success will increase.
• Tip 10 – Involve experts: Internationalization is a project that requires a lot of expertise. Don’t take tax law, financial planning and IT infrastructure lightly. Instead, get experts on board to help you avoid potential obstacles.