It’s been already 3 months that NUMA has settled in Station F, managing the Scale Hub Program, a business launchpad dedicated to international startups that aim to launch their startup in France and in Europe. To celebrate, NUMA recently invited Reza Malekzadeh at Station F for a special event on international scale. General partner at Partech Ventures, Reza Malekzadeh has built his career and reputation by joining early stage ventures and leading them to a successful exit, but also by working in large groups to help them transition to new business models. Based in San Francisco, Reza is also leading the vibrant French Tech community there.
This event was a great opportunity for entrepreneurs to have a discussion with Reza Malekzadeh and Damien Roch – Managing Director of the NUMA Scale Hub – on the startup and VC scene in France and in the Silicon Valley. Here are some useful insights on scaling abroad.
Scale internationally: pros and cons
There are different reasons that may push an entrepreneur to decide to launch its business abroad. For early stage startups, the main driver is primarily revenue growth. Going abroad means entering a new market → acquiring new customers → increasing sales → and filling up the piggy bank at the end of the day. Internationalization is also a good way to sustain a competitive advantage upon some competitors (eg. by creating international alliances to get access to complementary assets). Finally, entering a new market may be a great opportunity to increase a company’s capacity to innovate (eg. by adapting the technology to local markets, or hiring new talents locally).
But some costs and risks have to be taken into account when going abroad, especially for early stage startups. Before making such a decision, it is worth analyzing carefully that 1) the startup owns the required resources to go there (eg. a lot of startups crash when settling in San Francisco because they didn’t take into account the high cost of living there), and 2) that it is a good investment opportunity, and not just a business one (eg. having an office in Morocco does not mean that it is logical to make business there, maybe the market is not adapted for the product at all).
Silicon Valley: a dream for French startups?
There are a lot of advantages to settle a business in the US, not only regarding the size of the market (4 time zones, 320 million people), but also regarding practical business aspects (one currency, one language). Also, it is worth mentioning that being in the US is not only a great opportunity, but also often a prerequisite for success. Indeed, it is very rare for IT startups to succeed in the US without having a local presence in the country. For example, French founders from Criteo or Talend went to the US before achieving such a high level of success. When it comes to the Silicon Valley, one cannot deny the incredible opportunities the ecosystem offers, having a concentration of the main tech players in one and unique spot (Facebook, Google, Apple…). It is then very easy to do business with them, as the teams are already there.
Yet, of course it does not always make sense for a startup to settle in the Silicon Valley – nor in the US. Having an addressable market there is fundamental. Also, one could think that the Silicon Valley is the-place-to-be when deciding to settle in the US, but once again, it depends on each business. For example, OVH decided not to go in the Silicon Valley but rather to Virginia because it was a better opportunity for them to settle there.
Timing is everything
“When is the right time to scale abroad?” is a recurring question from entrepreneurs. The majority of startups that show up in the Silicon Valley are not ready for it, and they eventually leave the next year back to their home country. This is very unfortunate, because they could have avoided this situation if they had done their proper “homework” upstream (ie. considering all the necessary resources). On the other hand, taking its time can be a wise decision. For example Intuit waited for more than a decade before rolling out to France as it was a complicated market to tackle from a regulatory standpoint. Finally in hyper growth market, waiting could be damaging as Uber that arrived too late on the Chinese market to compete with well-established and local Didi. So, what is the good strategy? As building a house, the first step is to create solid foundations. First, it is important for any startup to concentrate on its home market to validate its product-market fit and gain experience in its own country. Once done that, it is also crucial to have references that can be leveraged hereafter. This is particularly true in the US, where having a good technology is not enough, the storytelling is the key: people buy stories, not products. Any reference, use case and proof of concept will be valuable assets when raising funds.
In the end, the main advice when scaling internationally (once prepared for it), is to focus on one market and then expand little by little, because it is very hard to be everywhere at the same time (eg. multiple law regulations). Regarding France, the country is currently offering a very positive ecosystem for international entrepreneurs to settle in, and for investors to come and acquire local companies (even American VCs are investing in French startups, which is very rare!). The Silicon Valley is now looking at this promising transformation with great attention (Station F, new Presidency, French Tech initiative…), so let’s surf the wave!
You have a question about startup internationalisation? You want to meet us? Send us an email at [email protected] or come to us anytime at the NUMA Scale Hub at Station F (CREATE zone, block 7, 2nd floor).