We are truly living in a global world these days. Many startups I meet with today are either taking advantage of offshore development or have pushed up plans to expand sales internationally. Given the broader scope of this trend, I have changed the category name Offshore Resources to represent a broader theme, Globalization. While taking advantage of a global economy is a great idea, it certainly can be disastrous for some companies. You can’t just take your existing blueprint for sales and R&D and adopt it in a foreign country. I mean didn’t we learn our lesson from the world expansion of the British empire? So if you are thinking about expanding globally, I suggest reading Jeff Nolan’s post on making sure you have local market knowledge. There are a number of great examples and issues that he outlines.
While you may think VCs only want to hear about your company using offshore resources and selling internationally, I am oftentimes underwhelmed by the naivete of some of the entrepreneurs about how and why they are expanding globally. For example, before doing business in other countries, I suggest making sure that you take care of your home market first. The US is a large market, the customers are closer, and the cost of doing business is lower. In fact, if you can have your first customer within driving distance that is ideal. Trust me, customers love knowing that you can show up at a moment’s notice to solve any problem. It is easier to keep a customer happy when you can show up in a half hour than in 24 hours. On the offshore development side, just think through why you are offshoring work and what kind of work you plan on doing in a foreign country. Over time, I have increasingly come to the conclusion that if you are going to do it, make the investment upfront to hire your own team. While the idea of using consultants to get to market quicker sounds attractive, the churn rate is way too high. The time and effort you put forth to train consultants becomes wasted when they jump ship and find a higher paying opportunity.
Ed you are correct about the globalization effect.
But when you look at things from the outside in….US is too profitable and too big a market for non-US companies to ignore. And, yet there aren’t too many here.
We are a typical example: We (Opelin) are less than 2 years old… we are working with some Indian customers…But the REAL market for start-ups is still the US.
The problem is that most US VCs do not want to really invest in companies that have initial R&D overseas. Its okay if small sub-components are built in India or phone-calls are answered in India…but the whole product in India? It breaks the VC sweat here…
Hence you have off-shoring/out-sourcing software companies from India. But name one true software product company…you wont find ANY.
Maybe, we at Opelin (www.opelin.com) will break the mould. Our product is complete. Our first Indian customer has bought 26,000 licences. We are negotiating another 100,000 licences in India.
Time to convert our beach-head to a full invasion. I hope we succeed, because that will create a working model for our cousins back home.
America, look out for sunflowers (the Opelin logo). VCs look beyond the glass and granite of America. Long live the GARAGE… where dreams start…. anywhere in the world.
I think offshoring is only about lowering the tax bill…..maybe it did not start out that way, but i think that is what it is now. Transfering production around to where they will have to pay the least taxes.
No one really believe they are there to “capture emerging markets” in the slums of the world.