Expanding internationally is a major milestone for any growing business. 

“As you scale your startup, there’s simply more money to be made by adding operations in new countries,” said Sébastien Derenne, a member of the J.P. Morgan Innovation Economy team. “And it’s critical to get the timing and approach right.”

Derenne and Peter Bairaktaridis, Head of Innovation Economy in Australia and New Zealand at J.P. Morgan, offer key insights to successfully expanding your business into other countries. 

When your company is ready for expansion

“The best time for expansion is when momentum is high,” Derenne said. The business should be successful in its home country and other expansion markets, if applicable. For example, if your Germany-based company is struggling to get off the ground, it may not be the time to expand into other geographies.

International expansion may require substantial capital and resources, so your scaleup’s financial health is paramount, Derenne said. Companies should evaluate their cash flow, funding and profitability, while accounting for marketing, operations and compliance costs before expanding internationally. 

Differences in expansion timing 

The U.S. has a huge local economy, with companies typically expanding outside the country at series C or later. European startups working within smaller markets usually consider global expansion during series B, or sometimes earlier.

Australia-based companies may expand even sooner given the smaller local total addressable market (TAM). “Once a startup has proven its concept locally and successfully commercialized, it will move very quickly to expand internationally,” Bairaktaridis said. “From day 1, founders build with a global mindset.” 

While Australia-based companies do expand within the Asia-Pacific region, they’re more likely to choose the U.S. or U.K. due to familiarity. 

“There are such big markets outside of Australia that if you are successful in getting 1% to 2% market share, which ends up being quite a substantial amount for a startup,” Bairaktaridis said.

Strategies for establishing international operations

Some companies can operate remotely from their home countries, relying on online sales efforts. But many businesses require physical presence to build their sales pipelines.

Startups should consider several key factors when choosing where they want to expand, as each country has its own nuances. For example, when expanding into the U.S., business-friendly states such as Texas and Delaware can be attractive options. Tech-focused startups often choose established hubs such as the San Francisco Bay Area or emerging tech centers including Pittsburgh, Pa., or Denver, Colo., which offer access to top university talent.

Common market entry strategies include:

• Land and expand: Startups establish their first location where they believe they can make the greatest impact. An agritech startup focused on cattle farming, for example, will likely eschew countries’ big metros in favor of locations with strong rural sectors. Likewise, a fast-casual restaurant chain may choose countries with large metro areas with less market penetration to make its mark before adding other locations.
• Market segmentation: Scaleups often start with the revenue stream they believe will gain the most traction in a specific country. For example, a graphic design software provider might start with a direct-to-consumer product offering a free model with paid premium features. Once that product sees success, the startup can expand its offerings to business-to-business programs.
• Strategic relationships: Collaborating with a local company is also a popular expansion method. For example, a European digital inventory management provider could develop relationships with major U.S. retailers, including local teams and experts, before entering the country.

Common pitfalls when expanding globally

Derenne and Bairaktaridis see many startups make the same mistakes when they enter new countries, including: 

• Poorly defining value propositions: Each country is unique, with distinct selling and product-fit nuances. Businesses should have a clear product-market fit and well-defined value propositions for each country where they expand. “Determine your strengths and tailor your strategy to them,” Bairaktaridis said. “Otherwise, it's much harder to gain traction in larger markets. Don’t assume what works in your home country will automatically translate elsewhere.”
• Underestimating banking relationships: Companies focused on establishing an overseas entity don’t always consider the importance of banking. “For some businesses, banking is an afterthought,” Bairaktaridis said. “They’ll literally walk into a bank branch during an overseas  trip and open an account.” The right banking relationship can help startups set up and manage finances across countries more easily, better positioning them for strategic growth.

Keys to continued international success

To achieve continued success internationally, companies should establish strong business networks.

“Leverage your current network and connect with those who have successfully grown North American, European or Asia-Pacific startups in the same region—including colleagues and investors,” Derenne said. 

Companies can strengthen their networks through industry engagements. For example, businesses can build strong relationships with commercial and tech organizations and invest in retail associations and federations.

J.P. Morgan also hosts events designed to connect clients with other entrepreneurs, VC firms and experts in the local startup landscape. Those connections can prove to be invaluable.

“J.P. Morgan is here to help startups see around corners and make the process of expanding globally a lot easier,” Bairaktaridis said.