How To Break From The Arctic Region

I've lately had many discussion on how the break from the Nordics & Baltics and make one's service or product really global. Just recently I had this discussion here at Nordkapp where I work, so it does not only concern software products but equally all the service provides with international ambitions.

For a technology startup this question focuses many times on the issue of whether they should pack their bags and move to the Silicon Valley or whether they should build a strong user base first at home. Another viable option might be to reach out to London, but then again, many think that will only slows you down in your quest to global market share and you should head straight to the eye of the storm where the battle for the critical masses are fought.

This is more of a ongoing conversation than something that can be answered with a clear Yes or No, but here are some thoughts to start with:


  1. If you know which market you want to get to think about getting a board member, an advisory board member or an investor from the market. Instead of trying to bombard firms operating in the given market with a requests for shallow partnerships or just opening an office there, by aligning someone's interest with yours ie. giving them a stake in your success you can instantly tab into their network of contacts. These people already know who are the people you don't want to work with, because even though someone might have a nice resume they also might have a bad reputation among the local players, which would make your market entry a disaster. And vice versa: They know exactly who are the perfect partners for you and you don't end up taking the one you happen to know from a Trade Show two years ago. To get these people on board you need to focus, do your research on who is the right fit with you, work hard, dedicate time to it and make the offer really worth their time.

  2. For any consumer technology startup, don't just visit US and get a sales guy in there. Move there permanently for a few years if that's the market you aim for. And if you're building the next consumer web service, that is most likely the market you should aim for to get the traction over competitors. That said, you should still cultivate your network back at home so you can also benefit from that and link other firms from back home to your new contacts. This goes for the time of high growth when you're just building your product, but especially for the time after you have made your millions. You can have a huge advantage by having a network in both ends whether you start another startup or decide turn into an investor.

  3. When choosing an investor, you want to be careful for not choosing some small local fund, because they might actually limit your company to reach its full potential since they'll hold you back in fearing that they might get squeezed out in the later investing rounds. Also, since cycle times for an exit are growing (what was an exit in 5 years, looks more like an exit in 8 years now) you need a big enough fund that can follow up without running out of money.

  4. Same goes for advisory board members: Some people active in the Finnish startup scene have voiced their concern about the quality of people present in many of the more informal investor get-togethers. You don't want some former technology company middle manager from the early 90's influencing your vision, because they advice you to take the path they are familiar with which more often than not is something different from going global from day one.

  5. Even though Silicon Valley is the epicenter of much of the activity in the consumer technology startup world don't only look at the US. Do see how fertile ground India, China or Asia might be for your product. When they all start to look good, remember to choose your battles. As a startup you have very limited resources and if you'd like to push through you need to focus your efforts.


What else should a startup consider when trying to go international?

Here's Jaiku founders' advice on how to choose between London and the Silicon Valley when building a successful startup (original post here)


Photo by oskay (CC:BY).

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vesterinen November 13, 2008

This is what we need, discussion on this issue. Right after I published the post Kaitsu pinged me via Skype chat by telling me that it's rough text I wrote, but that it sure sparks a conversation. I sure hope it does, as the issue is worth addressing.

More importantly Kaitsu said that what I wrote is only the other half of the coin, and he's absolutely right.

Similarly, if you read the piece behind the link Kaitsu posted Ryan has some solid points, which prove that exactly the opposite is true what I've suggested above.

"Look at last.fm (£140 Million!) and moo - if you ever needed an example that you don’t need to move to Silicon Valley, they’re surely it."

"Events like FOWA, dConstruct, Mix and Max are also equipping people in Europe - the level of support is skyrocketing. There are also a ton of BarCamps and Open Coffees sprouting up. Not to mention the excitement around mobile (Mobile Mondays, Sweedish Beers, etc)."

Ryan continues:

"If a web app is boot-strapped (as DropSend was) you really don’t need to move to a startup hub. Why? Because if it’s a decent idea and you’ve got a little bit of business sense, you can turn that into a product that is worth upwards of $1 Million (depending on the idea and market). If you’ve thrown $35,000 at a web app and you can eventually sell for $1 Million, that’s a pretty damn good return on your investment."

"There’s way too much pressure in the web app industry to be the next $100 million dollar company. Screw that. Let’s all focus on being passionate about our great ideas and growing them into viable, profitable businesses."

And I certainly can't disapprove any of there arguments. Quite frankly, I actually fully agree with them. That is partly why I started organizing OpenCoffees in Helsinki and why we're organizing Slush in Helsinkin in two weeks time.

I want to believe what Chris Chultz says in the comments of the post that Kaitsu linked us:

"Entrepreneurship doesn’t exist in one locale, and neither does success."

Thus, what I wrote does not imply that one should move straight away to Silicon Valley, because to stand out there is certainly not any easier than in Europe since that's where the most cut throat competition is. Instead what I am suggesting is that once you have traction and proof of concept, be smart about it and see where the opportunities are. Do not believe me, Paul Graham nor your local investor, but do your home work and see what will work for your product given what you're trying accomplish. If you know the right people in the Arctic Region then that's a no brainer: you stay here. But if you don't then find out who are the right people for your startup to be the success you have decided it will be and figure out how to get to them regardless of where they might live.

I have many times reiterated that it's not the idea that you should invest in but the people. Now I could revise to say that it's not the idea, nor the place, that you should invest in but the people.

What do you think? Does location matter and if so how much?

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Kristoffer Lawson November 13, 2008

I have to be honest and say that I do believe it is easier in hubs like London or the Valley. Not because development is any easier, but because the competition and vibe will push you on more. Plus it's much easier to get a larger mass of those crucial early adopters in those areas, as well as partners. Email, tweeting and jaikuing only go so far and personal meetings can make a difference. It has to be said, too, that there is much more investment going on in those locations.

That doesn't necessarily mean moving away. I think you have to have the right contacts before seriously considering that. It's definitely not impossible to make a success in the Nordic region. There's a lot of excellent talent here (amongst the best in the world). I reckon the key is to be visible, as much as possible, and to keep those ambitions high.

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Pekka Parnanen, November 14, 2008

Thanks guys for kicking off this interesting discussion on a great subject. Being now 10 years in Silicon Valley in start-up scene - I might be a bit biased to this question. But, here's some food for your thoughts.

It is of course a matter of fact what do you want to be when you grow up - owner of the lifestyle business vs. make it big! Gain 1M for the 35k investment ain't bad but to sell your company with 1B like MySQL is great! If you set your goals high and you are surrounded with great people (co-workers, VCs, the whole ecosystem) - you can do it. Skype being another example. Instead of thinking of building another Nokia, we should think how to build 100 MySQLs and Skypes!

Work the ecosystem. You need to understand the whole ecosystem - from customers, partners, influencers, pr, innovation, VCs etc - to really understand what the hell is really going on in your industry. That is the market opportunity approach - not the technology push approach where we Nordics are usually really good. This changes - constantly, like who's hot and who's not, business models, ecosystems etc. The only way to understand it, is being in it, being part of it, and incluencing it yourself - otherwise you will only follow, and that just might be too late. Good example of this was when Facebook opened up their applications. 6 months after that there was no Finnish companies doing (really) Facebook apps - same time there were VCs in Silicon Valley only financing Facebook app companies. And now this opportunity is already pretty much gone. But new similar opportunities are coming up - and they usually happen almost overnight.

This does not apply only to the companies that need to be IN the US markets but also to the companies that would need to UNDERSTAND the US market (or rather Silicon valley) - understand the business models, how guys like Yahoo!, Google etc operate, what is in the pipeline, and where and why VCs are investing right now, this week, not last month. The only way to gain the understanding, is walking the walk and talking the talk yourself, networking, participating and being involved. And unfortunately you can not do it via Google search, Facebook or e-mails - or visiting Silicon Valley for a week every three months (trade shows). You need to be in Silicon Valley.

I strongly support Petteri's and Jyri's video comments - and look what happened to these dudes!

It is true that Silicon Valley is not the easiest market in the world but in many areas it happens to be THE place where you need to be - if you want to make it. Sinatra's song 'New York, New York' said 'if you make it here, you can make it every where...' applies to Silicon Valley nowadays. Silicon valley is totally the opposite to the famous saying 'Whatever happens in Vegas, stays in Vegas' - it is 'Whatever happens in Silicon Valley, will NOT stay in Silicon Valley' but will have global influence.

I am happy to see that many start-ups from Nordics are starting to get it - and seriously figuring out the best way to integrate to Silicon Valley, and in some cases in really early stage, from the start. So, good luck, be proud, work the ecosystems - and make it happen. And if it does not happen the first time, it might happen the second time. Don't give up! If it happens the first time, make it happen the second time as well ;-).

Hope to see many of you at Slush! I totally hope that the weather will cooperate with the theme and we would have slush in Helsinki to keep it really real! Needless to say but the sun IS shining in Silicon Valley!

//Pekka

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Jon Martin November 14, 2008

I'm not well-informed enough to know the answer here. However, I think it is worth pointing out that Israeli companies don't seem to have any trouble not being in Silicon Valley. I read that per capita they start more companies and more successful companies than their US counterparts. I don't recall where I read it and it may be untrue, so take it with a pinch of salt.

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Kristoffer Lawson November 17, 2008

Good point on the Israeli scene. That is helped by much more investment going on. Then again, why is that?

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Ville Vesterinen November 18, 2008

Pekka,

Thanks for the insight from the eye of the storm! I tend to agree with you on most of the points you outlined, even though I still think one should carefully think what she wants to achieve and how much she's willing to sacrifice for that success.

That said, your point about the only way to understand the ecosystem is being in it, being part of it, and including it yourself in it could not be more true. Otherwise you will certainly only follow.

Jon and Kristoffer,

Here's good document outlining how the Israel scene got build: www.tekes.fi/julkaisut/victa.pdf