Building The Global Startup: A Roadmap To Success In International Expansion

This is the third post in a series focused on building a global company from the ground up.

In my last post, I discussed the importance of developing an explicit international strategy. But who should drive the process, and how can you best achieve commitment to its execution?

The Loudcloud Experience

The first couple of years of Loudcloud, one of the original cloud computing companies, which later became Opsware and was sold to HP for $1.65 billion in 2007, provide a useful illustration of the challenges of rapid international expansion, even in the best-managed companies. The business had taken off like a rocketship from its founding in late 1999—revenue grew from $2 million to $55 million in a year. While that growth was exciting, it led to a very high financing valuation for such a young company: $820 million for a company just nine months old. High valuations mean high expectations, and bookings expectations for Loudcloud were sky-high. To add to our challenges, we had more than 30 competitors rushing to grab market share. Faced with a large bookings target and nearly unlimited funding, our head of sales came up with a plan to expand internationally, opening European offices and hiring aggressively to build the business as rapidly as possible. The entire business was moving at breakneck speed, and the other functions of the company (including sales management) had their hands full just meeting U.S. customer demands. As a result, the European offices didn't all get the time and support they needed to achieve productivity.

In the extraordinary circumstances of the time, that was understandable, but it proved costly when the rules changed. I joined in March 2001, and when the recession of 2001 hit, we had three fairly expensive European sales offices with varying levels of productivity and maturity. While the U.K. office was contributing, our offices in France and Germany were burning cash that we didn't have, with few bookings to show for it. We ended up shutting them down, at a cost of major management distraction and substantial severance and legal expenses, especially related to exiting France.

In any company, and especially in a startup, there are far more things to be done than time or resources to do them. In a high-growth company, the core domestic business will inevitably tend to consume most of management's attention and the support of the company's functions. Taking the company international is a long-term project that demands sustained effort. Your international aspirations will go unfulfilled unless you start with an explicit strategy, supported by all of the functions of the company, adequately resourced, and led by an executive with the ability, authority and time to pursue the international business.

Assign An Owner From The Beginning

Down the road a year or two, once the international business is established, you may decide to appoint a worldwide VP of Sales or Field Operations to run it, or in some cases create a separate International division. At Opsware, for example, once we hired Mark Cranney (now my partner running Market Development at Andreessen Horowitz) to run sales, we also gave him responsibility for international operations. However, in a startup situation, I recommend giving the initial responsibility to someone else on your team if possible—particularly if the core business is still heavily focused on the U.S. market. You don't want quarterly bookings to suffer, or your fledgling global strategy to get hurt by short-term sales pressures, so you should probably not give the role to your VP of Sales, even if she really wants it.

This person's role is to:
Be the voice of international on your team and throughout the company.
Become the company's expert on overseas trends, competitors, partners, users, customers.
Get out of HQ: From a very early stage in the company's life, make frequent visits to key overseas markets to gain firsthand knowledge and build the company's reputation and relationships—and set up productive, efficient visits for you and other executive team members.
Represent the company at overseas industry events.
Lead the development of the international strategy, leveraging all of the knowledge gained, and involving all key groups in the process.
Lead discussions and negotiations with prospective partners, bringing you and others in as appropriate.
Recruit and lead a small global startup team.
Potentially manage the initial startup in the first several countries.

Ideally, you want someone with international experience, who knows the company well and is seen as passionate, credible, and impartial by the rest of the team. They should be someone you trust to speak at overseas conferences and to represent you in negotiations with partners or launch customers around the world.

This is one of the roles I played for Excite@Home and for Silver Spring Networks, and to some extent for Opsware in its early years. The role demands a ton of time and frequent international travel—at Silver Spring, I estimate my team and I spent 30%-40% of our time on the road, with the other 60%-70% evangelizing and building capability back at HQ.

Given the time demands, this person shouldn't have day-to-day operating responsibilities that could suffer. In my experience, this is a natural role for your VP of Business Development, if you have one that meets these criteria. (If you don't, you may need to find one!)

Involvement Builds Commitment

Your international strategy should be the roadmap that guides the whole company's pursuit and support of the global opportunity over the next 3-5 years. Like any strategy, it will be useful if it's relevant and realistic, which it will be if all key groups in the company have a hand in developing it—from Sales, Product Management and Engineering, to HR, Legal, and Finance. Your BD VP's role is to provide facts and data and context, and to drive a process that enables their participation in an efficient manner.

Ultimately, you own the company's strategy as the CEO. Make it clear that becoming global is a critical priority for you, and participate actively in the process. Broad involvement means broad commitment to the result. Don't let it be an academic "staff exercise"!

At Silver Spring Networks, developing a version of our advanced wireless technology to meet European spectrum requirements was a critical element of our strategy to capture the emerging international smart grid market. We involved key engineers directly in understanding the business opportunity—not just the technical requirements—and exploring strategic alternatives. Thanks to this involvement, the engineering team became key partners in enabling our international success, despite a busy roadmap for the U.S. business.

From Strategy To Action

Once the strategy work is done, roll it out to the company and make it your personal mission as CEO to make it sure it's translated. 

John O'Farrell is a general partner at Andreessen Horowitz. He led the firm's investments in Facebook, Twitter, and Groupon, and works with portfolio companies on partnering, strategic transactions and global expansion. O'Farrell has an MBA from the Stanford Graduate School of Business and a Bachelor of Electronic Engineering from University College Dublin. He speaks English, German, French, and Portuguese.

[Image: Flickr user llahbocaj]

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