Launching An International Tech Startup: The Challenges And Benefits
140,000 new startup companies are reportedly launched every day. While the epicenter of tech innovation is undeniably Silicon Valley, a tide of new hubs emerging across the globe are gaining recognition.
The “real gold” of Silicon Valley reportedly lies in its mentors. But new startup communities who benefit from governmental subsidies and an ecosystem that promotes growth and sharing, are now viable alternatives. The costs of launching your business Silicon Valley and the fight for talent — with fresh faces quickly snapped up by behemoths such as Google, Apple and Facebook — means this can be a challenge and many are turning to these other locations to home their startup.
Emerging businesses across the globe take advantage of lower setup costs and the flexibility that a connected online world brings. What’s more, strategic locations can benefit from varying global legislation: influencing competitor clauses, user privacy data collection, and tax laws amongst other factors that can give a company a powerful competitive edge. This can also effectively position a business to better meet the needs of consumers.
I spoke to startup founders from new emerging locations across the globe. This article explores the advantages they experience launching a business in those countries, and the difficulties they also face.
NORTH AMERICA: In Toronto startups fight for new graduates.
Ron Spreeuwenberg is the founder of edtech mobile software HiMama, the company has headquarters in Toronto, Canada and Baltimore, MD.
Our key markets are the U.S. and Canada – and we have offices in both locations, helping us to grow our key markets. The HiMama office in downtown Toronto is right in the centre of the city’s startup scene. There are a number of co-working spaces for new businesses that help them to keep the costs down. We are very close to the University of Waterloo, and many talented undergraduates have taken internships and permanent positions with tech startups like HiMama. There are so many startups, and a great demand for talent as a result of this.
ASIA: Internet data laws in Malaysia mean guaranteed user privacy.
Mohsin Ali Khan is the Head of Marketing at hide.me VPN, headquarted in Kuala Lumpur, Malaysia where governing laws means greater privacy protection.
In the VPN industry, it is very important for us to build trust with our users. They need to understand that we are serious about their security and privacy. Through operating in Malaysia we can assure our users that we don’t store any user logs. Many VPN providers like vpntap operate in countries where the law makes it mandatory to store these logs. If law enforcement officials require it, they would be forced to share this information.
The biggest challenge we faced launching in Malaysia was finding good human resource. Startups previously needed a partner that was local. However the government has relaxed these policies, which makes it much easier for startups today.
We operate outside of our key markets (U.S., U.K., Australia, etc) and initially found it hard to get media attention in these countries. Getting media coverage on strong publication has helped to prove our credibility, however the distance can make it harder.
While it may be true that there are some countries that are more affected by government censorship and monitoring, internet security is a global issue and we make efforts to refine our product for a broad audience.
SOUTH AMERICA: Colombia has great tech talent, but restrictive government regulations.
David Feldsott is the founder of PanTrek travel search technology, headquartered in Medellin, Colombia. PanTrek connects U.S. travellers with inter-city bus companies in Latin America.
We chose to be in headquartered in Colombia so that we could be closer to the bus companies we work this. This way we are able to attend meetings in person, and better understand the business culture. Many Latin American businesses are weary about working with international companies and prefer a local presence.
In Colombia government regulations are very restrictive, and this makes handling payment and legal issues more complex. We are required to have an accountant to sign off on our books, and Colombia’s tax rates are incredibly high – the sixth highest globally! Financial technology here is years behind the U.S.
We work with U.S. banks and payment processors that can be used by our U.S. customers. This also adds an extra layer of complexity. As many Latin American companies lack trust in other companies they demand same-day payment, which can result in large transfer fees.
A benefit of operating in Medellin is that the technical talent is on-par with the U.S. but the hiring costs are far lower; engineer salaries are under a third of U.S. levels, and even less if you compare to Silicon Valley. As a tech company our largest expense is talent, and this means we can hire much more aggressively. We are recognized in the tech community, and PanTrek is a highly desirable place to work. Operating from Medellin means we don’t have to be a small fish in a big ‘Silicon Valley’ sized pond.
EUROPE: In Paris incubators and government subsidies support startups.
Emmanuel Rozenblum, CEO and Founder of TripAside runs his business from Paris, France, targeting U.S. air travel passengers.
Our location is central to our product – we started our layover tours in Paris, before expanding through Europe. Being outside of the U.S. we struggled at first to reach our American B2B customers, for example online travel agencies. As a result, we decided to skip out the middle man and went directly to our customers using social media and content marketing tools.
Being on the ground means we are closer to our guides, and we maintain up-to-date knowledge on legal procedures, such as visas and public transport strikes, and other things that can impact our business.
That does not mean running a tech startup in France has not been without its fair share of problems. It actually used to be very difficult to launch a business in France due to the administration and tax procedures.
However we have come a long way and it is now possible to register a company with just 1€. Startups, public institutions and large companies in tech have begun to work together – through organizations such as La French Tech. In France there are a lot of startup incubators and subsidies available to help startups launch.
AFRICA: 54 countries each with different rules and mindsets.
Bruce Tapping is the CEO of Africa Bookings Ltd, a U.K. registered business that runs its administration from Harare, Zimbabwe.
Africa Bookings promotes African hotels across the continent. Africa has 54 countries and a very fragmented market. There are different rules, laws and mindsets in each country. We are tackling this problem by opening a number of regional offices so that we are able to provide local representation and support with these hotels.
The internet revolution is still relatively new in many parts of Africa and has not been fully embraced. It is therefore far better to have a man on the ground. Operating outside of the key market is risky and through maintaining an in-person presence we have seen far better levels of engagement with our product. We have chosen to be closer to our partners, but as a result we are removed from the investment world. This makes it harder to network and get attention from the right investors for international markets.
Go back just a few decades, and you would have seen most tech startup activity concentrated to Silicon Valley, Boston and major capital cities.This is no longer the case, international businesses can still target local and U.S. audiences effectively from any spot on the globe.
Many of these places come with their own benefits; reduced costs, startup hubs that promote innovation and even lenient legislation that actually gives some businesses a greater competitive edge.
However operating a business far from your target market can be a challenge. Small businesses may also struggle to gain credibility, target B2B and gain industry attention and media coverage. Each location comes with its own quirks, the positive and negatives. As new startup hubs continue to pop up across the globe we can expect even more advances, be this through improved startup procedures, better communities or the ways to make yourself known to a distant audience.
