If you asked me to state the biggest challenge facing tech startups in selling internationally, I would say it’s recognizing that they are, or soon will be, selling internationally.
That may seem obvious, but many tech startups don’t recognize themselves as exporters because, rather than shipping physical goods across a border, they’re often dealing in intangible assets.
In tech, there’s no limitation on where your customers live. Your very first sale could be from the United States, India, or Colombia. Making a strategic plan for that reality is imperative because startups must aim to go global from Day 1.
Tech startups, uniquely, were made for international trade. The whole premise of being a successful tech startup is to scale up quickly, and the only way you can achieve that kind of growth is by going to new markets. If you compare Canada’s relatively small population of 37.5 million to the world’s 7.7 billion, it’s easy to see how there may be more opportunities coming from beyond our borders.
And that’s a good thing because it’s proven that, on average, Canadian companies that export are more profitable, productive, innovative, competitive and resilient, and last longer than businesses that don’t sell internationally.
The whole premise of being a successful tech startup is to scale up quickly, and the only way you can achieve that kind of growth is by going to new markets.
Canadian startups need to step up
According to Industry Canada, as of December 2017, there were about 1.15 million small- to medium-sized enterprises (SMEs in) Canada, but only 46,500—less than 5%—were exporting. Given the vastly greater number of potential customers outside our borders, this is a missed opportunity.
The risk is real, but so are the solutions
I’ve worked closely with tech SMEs, and I’ve been an entrepreneur myself and worked in a tech startup. I understand first-hand how daunting taking on yet another business task can be. From research to trying to obtain financing, every team member is already changing hats more often than Queen Elizabeth II.
It’s, therefore, not surprising that Canada’s SMEs are hesitating to dive into the global market. Compared to larger businesses, they not only have fewer resources to learn about international markets and regulatory compliance, but they also face greater challenges for growth. This is especially true for companies seeking financing, for example, as they’re generally small, have no long-term financial statements, and have no physical assets or inventory. Canadian start-ups also grapple with trade inexperience, a management talent gap, and a risk-averse culture towards entrepreneurs.
In my network, I’m sometimes asked how serious the risks really are, especially if you’re not shipping physical goods. Not only are the risks real for even technology companies, but in our shifting political and economic world climate, they’re changing all the time.
Take the General Data Protection Regulation (GDPR) as just one example. It’s a new law, implemented on May 25, 2018, that protects data and privacy for all individual citizens in the European Union and the European Economic Area. In other words, if your software or app inserts cookies or involves personal data transfers without first getting the buyer’s consent, you could face severe penalties.
Other risks to consider include:
- a market’s government and regulatory environments;
- the local economy;
- legal and tax compliance;
- labour laws;
- protecting your intellectual property (IP) (while not inadvertently infringing on others’ IP);
- avoiding corruption; and more.
Not to mention the age-old trade risks of making sure you get paid and that you have adequate cash flow.
Top tips to build your international expansion strategy
The great news is that whatever Canadian startups lack, they make up for with a vibrant, technological entrepreneurial spirit. As reported in the Global Entrepreneurship Monitor’s 2016-2017 Global Report, Canada, along with Sweden and Luxembourg, leads the world with highest entrepreneurial activity in the information communications technology sector.
There’s also a wealth of resources and practical solutions to help Canadian tech startups build an international expansion strategy, including:
- Canada’s national network of incubators and accelerators;
- The International Scoping Canvas, which puts forth the main questions to consider when expanding; and
- resources at edc.ca, including a growing set of digital tools to help you access live and on-demand webinars, expert answers to your questions, insight on overseas companies, vetted suppliers, and more.
Canada, along with Sweden and Luxembourg, leads the world with highest entrepreneurial activity in the information communications technology sector.
New partnership provides ground-breaking support for tech companies
The breaking news, however, and a resource that I’m really excited about, stems from a new, three-year strategic partnership between EDC and MaRS. Just announced on Nov. 19, the partnership includes the development of an international solutions suite. This is a whole program of advice and expertise that’s tailored to help your tech company identify new global markets while giving you tools to scale, regardless of company size or how long you’ve been in business.
Here are some of things the suite will offer:
- Research reports: Best-in-class reports from prestigious databases to answer your questions and help you research markets of interest.
- Market opportunity assessments: Companies that are ready to enter a new market right now can get in-depth analysis and advisement on their markets of interest.
- Country guides: In-depth reports on different countries and opportunities, with the first being the UK Country Guide launching Nov 19.
- Courses: Featuring a variety of relevant trade topics, offered both digitally and online, that can guide you even from the earliest stages of development.
- A library of resources: Guides, videos, and other resources to help you take your business international.
- Events and webinars: Exploring the must-know topics that are relevant right now.
To me, the EDC-MaRS partnership shows how we’re recognizing the positive impact tech companies have on both our economy and way of life, and in turn, placing increased emphasis on the importance of technology companies going global from Day 1.