An Overview of Market Expansion with Simon Brender
Intelligence, curiosity, open-mindedness and adaptability are critical characteristics needed to get any business off the ground and drive accelerated growth. In this article, we are excited to invite guest writer Simon Brender to share his advice and overview of how a company can approach market expansion.
The global nature of the startup community provides the opportunity to work with really diverse and interesting teams, spanning from the US, Middle East to teams throughout Asia. Nothing beats the energy of an early-stage startup and the passion that founders bring to the table (let alone the cool technology). Simon has helped these companies navigate some of the common pitfalls, reduced the time needed to generate intrinsic value for businesses and ultimately create new jobs. He has found this hugely rewarding, on many levels, and loved his experiences of building out the commercial foundations and expanding the customer-base and teams across Asia.
Read more from Simon in Expert Insights: Expanding to Singapore with Simon Brender.
There are a number of factors that you need to consider when it comes to entering new markets. In this post, I will be exploring both trends and key areas to investigate when approaching a new market.
The Market Trends Observed
For the purpose of this discussion, I will be generalising the trends, while also keeping in mind factors which can influence them, such as the market maturity for the capabilities offered, the stage of the startup, nature of its funding, tenure, background of the leadership team and growth strategy. Below are the trends I have seen as some of the most impactful:
- Market Maturity: Startups looking to enter the Asian market for the first time often don’t invest sufficient resources in validating this, yet it fundamentally changes the go-to-market strategy. Validating whether the capability you’re offering addresses a known pain, with surplus demand that needs fulfilling, across your target customer personas or is still nascent and requires you to build awareness and generate demand to help realise future gains underpins any successful growth strategy. The stage of maturity can vary drastically across different markets, industries and even companies so it’s important to validate the needs of the market before deciding where to commit full time, dedicated resources or deciding on the distribution channels. Passive approaches that underestimate the demand and underinvest in the region can lead to a self-fulfilling prophecy of underperformance whilst aggressive growth plans and unproven assumptions can be costly and leave you exposed. Making markets, building mindshare and generating demand requires investment and takes time.
- Stage and Funding: Bootstrapped startups tend to be more cautious in their approach, rightfully so, with the successful ones tending to adopt a data-driven approach (rather than acting on intuition). Using the data to determine which initiatives to double down on in order to drive sustainable revenue growth sounds intuitive but doesn’t always play out in practise. For many of the later stage startups, or those with easier access to capital, there tends to be more appetite for taking risks. Whilst every startup has to take risks and move quickly, there seems to be more of a tendency for decisions to be made on intuition, leading to some of the fundamentals of building a new business getting overlooked – especially cash flow. The recent trends of rapid expansion in headcount followed, very quickly, by massive reductions within late stage well funded startups supports this. Adopting a more data-driven approach early on in your setup or expansion is a proven way to accelerate growth in the mid to long-term.
- Tenure and background: For those that have been in the technology industry for a long time, especially within Western Software companies, the Asian market has always represented a fairly small share of revenues (perhaps 5-10%) relative to the North American and European markets. However, recent changes in the dynamics of the market are leading to Asia quickly becoming the fastest growing region for B2B software globally and offering huge potential for future growth – across a wide range of technologies, Asia now represents 15-25%+ of global spend and is growing at a faster CAGR than the more established markets. Increases in salary costs across the emerging markets of South and Southeast Asia are making it easier for companies to justify investing more into B2B software platforms, whilst companies of all sizes, across all industries, are investing heavily in Digital Transformation initiatives. The growing number of startups throughout the region is also adding to the number of potential customers. Many execs trade on perceptions and heuristics formed over their career to help them make quick decisions. Some of which may be outdated. Investing based on facts and data is the only way to avoid falling into this trap and unlocking the full potential of the market.
- Growth Strategy: Each market responds differently to various growth strategies. Whether product-led, sales-led or some combination of the two, it’s essential to have sales and marketing working in unison when you’re trying to drive rapid growth in a new market. Unfortunately, that is commonly overlooked and marketing budgets are underinvested in, whether that’s early, growth or late stage startups. The infrastructure needed to support and sustain growth also commonly doesn’t receive the investment it needs and can lead to challenges with customer retention. Startups that do it well, bring together a broad range of data to look at demand and conversion from both inbound and outbound approaches and iterate on tailoring their growth strategy for each market.
Understanding Market Expansion
I’d firstly encourage startups to acknowledge that venturing into a new market is much like starting a new business – momentum is king and builds through iterating and adapting to the market rather than holding firm to a preconceived, prescriptive sequence of events. Whilst most people will acknowledge this and set out down that path, we take comfort in the perceived certainty that well prescribed plans offer us. However, at an individual level, many of us feel uncomfortable dealing with uncertainty and change. This becomes more pronounced as the number of individuals with a stake in the success of the business/expansion grows so it’s essential to lay the right foundations early and take steps to reduce the time needed to validate the go-to-market strategy and demand before driving the expansion.
Managing risk by leveraging data-driven approaches needs to be the priority in the early stages over intuition and the illusion of control that overly prescriptive, assumption-based planning provides us with—it feels great and may be easier to understand but doesn’t necessarily help drive the results needed. In most cases, these approaches lead to significant amounts of wasted energy and resources that detract from building momentum. You can think of it as a combustion chamber with holes in it and each of those holes being an unproven (and flawed) assumption. The engine may be running but it’s not necessarily creating the force needed to move the needle.
Approaching Market Expansion
Whilst it’s not specific to one market, I view approaching market expansion in a really simple input-output framework:
- Concept: Initial stage of validating the base proposition in the local market. Intuition suggests potential but there may be limited supporting evidence. Taking a broad perspective on the data points used to support the decision and looking for initial signals is enough at this stage.
- Evolve: Clarity around how well the base proposition is resonating with the market(s) is starting to emerge. There may be limited validation of the unit economics of the solution specific to the local market and market demand. This is unlikely to be stable, but sufficient throughput of new opportunities and frequent interactions on existing opportunities is starting to appear in the data. It’s a great time to start investing in building out the initial team but consider options to retain some flexibility. The last thing anyone wants to do is lock in too early to a market and lose the ability to adapt and evolve as the understanding of the market starts to mature.
- Leverage: Build on the early momentum within initial markets and leverage customers and relationships to drive broader awareness and accelerated growth in the proven domains. There’s an opportunity at this stage to seek out adjacent markets and new use cases to increase potential market size. At this stage, you’re looking to expand the team and double down on driving growth. Thinking through the support networks needed to support expanded teams becomes critical—leaving them exposed and dependent on key support functions based elsewhere can suppress momentum, which needs to be avoided at all costs. Maintaining and building on momentum is essential for anyone looking to grow quickly.
- Evaluate: No one gets it right the first time. There’s bound to be some missteps in the earlier stages but no one benefits from throwing good money after bad. Re-evaluating offerings, target markets, accounts and ideal customer personas helps provide an objective basis for compiling facts and making data-driven decisions. For those that are working well, the focus needs to shift to driving repeatable processes to support new customer acquisition and customer retention. Retention challenges are a major red flag that needs to be addressed early or can become a serious liability that can be hard to keep control of.
- Reinforce: At this stage you can really open up the throttle and start driving predictability throughout the business. Removing any last remnants of technical and operational debt, streamlined customer onboarding, support, minimise customer churn and focus on building out the operational cadence needed to drive continuous improvement over time.
In order to lay the foundations needed, I’d encourage startups to view it as a maturity curve where you’re looking for data-driven evidence to support progression from one stage to the next and narrowing down from a broader base over time. For some companies, especially those with an established brand in a mature market, that progression can happen quickly whilst it can take time for those that are less established to fully test the market. Whichever applies, the key is being objective and honest with yourself that hard evidence exists to support the decisions.
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This article is part of the Understanding Market Expansion Series, stay tuned for more articles and insights.
This article is a guest post written by Simon Brender, which has been edited and adapted by the Rainmaking team for publication.