Ask HN: Why are web startups slow to expand abroad?

Most startups need to accept two things: white labeling and licensing.

Dunno why they can't get this through their heads. I have proposed to tens of startups in their nascent days, asking them if I can take their platform, localize it and offer their services in the middle-east. NONE of them took my offer. It's almost cheaper to clone than to ask for a license or partnership.

Folks, you don't need to have shrink-wrapped software to license. I will happily launch a localized service off of your CVS trunk. So stop being irrationally greedy and license your work to others, or sit and watch a thousand clones bloom.

White-labeling is another thing that nobody seems to get, sadly.

I wish startups would learn a thing or two about affiliate marking.

Why would somebody whose success depends on safe guarding their IP and developing their IP, share it, especially when they are still small and can't hire an army of lawyers to make sure that their IP is protected even if its shared?

why would white labeling work in an industry, where physical goods have next to no value and the whole value is in a company's IP? isn't white labeling used more in low-IP industries/products?

Forgive me but doesnt white labeling implies some sort of written agreement preventing white labellee (?) from stealing those codes? from my limited understanding white labeling is just licensing the product sans branding?

True, Business arrangements like whilte labelling do involve written agreements. But having a written agreement is just one factor, how robust the written agreement is in protecting the rights of the IP owner, hmm that would depend.

And usually you would want lawyers who are on your side of the table to review, if not write up the agreement, not the lawyers that the prospective business partner brings (unless they are a well known and trusted entity whose creds are sky high, like in the case of YC)

Also, a legal document, especially dealing with international business is only as good as the country with the weaker and less robust legal system. I am originally from India, a country with a democratic government, relatively decent free will and an independent judicial system, and still it is far from being as robust as that in the US. Now there are many countries where the legal system is no where as independent as the one in India, so you can make a guess as to how much protection the legal systems in those less 'free' countries will give in spite of having a 'legal document' in place.

This also happens to be the reason why I am trying to set up a company in the US first for my next start up, because it still offers one of the best protection for businesses, while simultatneously being one of the best markets.

Someone that's prepared to pay for access to the source code, the rights to use a brand in a particular country and the lawyers to draw up a licence agreement is a godsend to a company like Yelp whose functionality and business model can easily be copied by locally developed alternatives focused on their domestic market

I agree, people from a local region or at least those originating from that region can always localize a product better than somebody from half way across the world (unless they are really good at soaking up foreign cultures, even there, there are limits)

And this is the reason why, many of the MNCs have, not just business offices but also technical/development offices across the major markets.

Of course, most startup unless they are really innovative and have some inherent advantages, cannot carry out that feat. One very good example that I can think of which has carried out an excellent simultaneous launch across two different markets is Ginzametrics. In my view Ray Grieselhuber having worked in Japan for long must have been a huge factor in his successfully tapping the market there, right from the start.

I have seen the business side of really great HR/PR policies/strategies like encouraging diversity in workforce that is quite common in the big MNCs. That diverse workforce helps a company gain understanding of a global market much better than a homogenous workforce. Also, that diverse workforce can help a company replicate/customize systems in nascent foreign markets much faster.

Hmm...there is something incredibly sexy about a strategy that delivers a double or triple whammy.

This is one of the more thought provoking comments I've read on here recently. It never even occurred to me to license something like a webapp for localization.

Why has this never occurred to me before? How come I've never read about this? Are we missing something obvious? On a quick look, this seems like an idea with a lot of potential. I wonder if there's some big detail/downside/hangup we're missing.

I've heard a lot of the poker clients are all the same software, licensed out and re-branded with different celebrities. Same deal with many dating sites. "Dating for busy professionals" is often the same site as "Dating for catholics" with different display ads.

Offhand, I'd guess you need a predictable revenue funnel and an environment where niches are determined by self-image rather than unique product requirements. Dating & gambling are both rich enough spaces that it makes sense to exploit every niche possible with the fastest available solution and then move on. Is the same true for something like Wufoo?

You could also buy a chatroulette clone license for $100. Not sure how many he ended up selling, but I bumped into a couple people who grabbed chatroulette-as-a-feature for their sites.

I would love to see a localized Mint.com where I live, but I can't see them going international. I know there's complex issues getting 'hooks' into the many varied bank services, but still it would be great for consumers in Europe. Just one example.

This is pretty hand-wavy. For certain types of companies where the software can be isolated this might not be so bad. But I expect most users would expect to be able to use cloud services internationally, sharing with people in other languages, or porting their account to another language etc. The external licensing model introduces user experience and logistical nightmares a plenty.

As the lead developer on a global site, I can explain very succinctly: i18n adds complexity a lot of complexity to your code, and complexity in your code slows you down.

If you are an early stage startup with a shaky business model and are still pivoting rapidly you just shot yourself in the foot by internationalizing. You know that quick feature you just hacked together in an afternoon? Now you need to design it first with localized text in mind, then have it translated, then run it through QA because you don't speak the language, finally deploy it where you have new caching and scalability aspects to consider. It's not far off to consider an order of magnitude slower, especially if your translators are across the pond and turnaround is now a 12-hour minimum.

Consider the startup that has users and is starting to gain some traction. Suppose your team is <10 and revenue is covering 50% of your costs, you feel like you are about to break out. If you decide to i18n to 7 European languages at that point what can you expect? Well, I don't think it's unreasonable to expect double your revenue, but you should also expect your costs to double as well, between all the translating work, multilingual support costs, increased code complexity, legal costs, and all the nitty gritty details that are going to bite you. Plus now you are slower, so you've just pushed yourself further from profitability.

If you are small, it's much cheaper to double your revenue in your local market rather than expanding. Once you get big and your code fits the business model, then suddenly i18n becomes much more of a fixed cost, and a smaller percentage of your overall cost as well.

If that is so big an issue, just keep it in english - you won't get as many users, but you would get more than you would if your service was only for Americans.

And hey, England, Wales, Scotland and both Irelands do speak English natively.

Not to mention Canada, Australia, New Zealand, and a bunch of other countries where English is the de facto official language.

That doesn't really address the original question though does it? In any case, you're still not out of the woods. Here are some examples of things we deal with as an international VOD site:

* Multi-currency support (without Braintree helping us it would have been impossible at our volume, customers DON'T like currency conversion fees). * Non-language localization issues. * Local legal issues (we couldn't offer subscriptions in France due to their bass-ackwards public policy) * Global film rights issues * The fact that films are known by different titles in different countries, even if they are both English. * 24-hour user cycle, no good time for maintenance, have to think harder about when to schedule email communications/feature launches, etc.

Not that that stuff is so terrible, but it does end up introducing a lot of work you haven't anticipated (eg. what happens to account credit when users move between countries), and you're still not really localized.

Great explanations, you have put the gist of the issue here in the most succint way while covering almost the entire breadth of the problem.

I know I may get downvoted for posting just an agreement/appreciation. But sometimes, it just feels good to openly acknowledge good knowledge and logic. So be it.

It also feels good to hear it from someone who can appreciate the issue, since internally all we hear is pressure from partners who are chomping at the bit for full i18n.

Hi,

I was going over your past comments and it looks like we have very similar views (though, mine may be nowhere as extensive). Right from your views on whining about paying taxes, realities of globalization, the tendency to be blunt and directly address the facts underlying an issue instead of being politically correct or soft pedal it, your incisive comments, ability to grasp and have very logical opinions on very diverse topics - they are impressive. I also found your comments, while some were very tough, were also very fair, which I repect in a person.

Can I a request a favor from you: Would you mind reviewing/critiquing my business idea/application for YC?

I think I can be considered as an outsider to the tech industry and relatively new to the world of web startups, the perspectives of a person with as much experience in the technical/start up world as you can be very helpful. (not to mention your no bull but modest approach, as was apparent in your comments)

If you are ok with it, can we discuss further on email? In which case, it would be perfectly fine with me if you want to communicate through an anonymous email id (I can understand, you don't know me) and I can give you information to establish my credentials through my linkedin profile or any other agreeable and credible method.

It would be great if you can let me know either way, either as a reply to this 'comment' or to this email id: skowmunk at gmail.

Thanks, Skomunk.

(ps: Dunno if you would believe, but "Great explanations, you have put ...." and this were definitely not pre-planned or anything like that. It was after posting it that I started going through your past comments and a "why not try asking?" just stuck)

I agree that managing multi language sites/apps adds a significant people cost. This is often woefully underestimated by the business. It's not the tech so much as the content. It's also hard to manage the content unless the development environment supports it.

However, you can do yourself a huge favour by starting out using UTF8 across the board -- for Europe/US, in particular, and this sweeps up Arabic, Cyrillic, and a few others en route. Retro-fitting character encoding is laborious and, for the data, may not be viable (due to time, effort, and cost) if there is enough of it.

You want to see something to make you cry?

http://feedback.smugmug.com/forums/17723-smugmug/suggestions...

I'll summarise... it starts off with happy European users wanting local-to-them photo printing. Because they are so happy! By the end of their fruitless begging, they are directing each other to a competing service.

So I completely understand what you are saying. The fact is that the US market is so large and lucrative, that many start-ups seem content to focus exclusively on it. The problem is that they create a fragmentation of their future market by allowing national competitors to provide a local service catering to the same niche. Like you said great for those localised start-ups, but not so great for interoperability and convergence.

That said, I totally give a break to media outfits like Pandora and Netflix that have horrendously complicated licensing issues to deal with.

"I was surprised that Lulu wasn't set up for it (they shipped from Spain, slowly and expensively) and there was no local equivalent in sight."

There are loads of Dutch POD publishers. Check out Pumbo.nl, Boekscout.nl or Freemusketeers.nl.

"I can't find a Wufoo-like thing that'll speak Dutch to me. At all."

Wufoo supports dozens of languages, including Dutch.

"What do people in The Netherlands, to come back to my small but fairly internet-savvy home country, tend to use for small-time blogging? Blogger? Wordpress? Nope. Something called web-log.nl"

Blogger and WordPress are both available in Dutch and have been for years. Most of the Dutch bloggers I know use WordPress.

But even though the examples were less than stellar, I agree with your observation: American web startups often take too long before they expand into other markets like Canada and Western Europe. However, the US is a huge market. Most American businesses will never have to expand abroad, there's simply no necessity. The same cannot be said about Dutch web startups.

Don't forget http://getmarvia.nl

As a European, I think the largest problem is the language barrier: at the very least you need to translate everything, and then be able to answer customers requests. Not being able to talk directly to your customers is a gigantic issue, suddenly you are adding an extra indirection layer.

Regarding my startup : ShiningPanda, you will definitely be able to use it from any country in the world, but I strongly doubt it will talk to you in dutch any time soon. Most certainly French, maybe Japanese (though I doubt there are enough opportunities for what we are doing there), but that's about it.

Not that we don't want our service to be translated in other languages, but it would take ressources that we don't have (yet).

It's easier to grow scale in the US because of the homogeneity of the culture and language, and the integration of the economy.

Competitors in Europe or elsewhere are relatively small potatoes in the medium to long term, because the lack of homogeneity means they won't get scale quickly enough. US companies can usually either outcompete them with better technology (cost amortized by scale), or buy them out.

Growing and developing a strong local business model is a better path in my opinion. You could afford to make mistakes and learn quickly when you are at a stronger ground( a market you understand). When you're young, you'll lose your focus while thinking about the European market (using Europe as an example). European companies would ALWAYS (emphasis) spring up to cater to the European market. They might feel that they could cater the the local market better than a foreign organization and they might be right esp. if they have the focus.

Once, a startup has established itself in its focus market, grown and is ready to expand to another market, starting a branch in the European market becomes that much easier. The US success will certainly help in quickly establishing yourself as a global player.

Acquiring smaller companies in new markets is also a strategy that is quite successful and would be easier if you've succeeded in your local market. I'm pretty sure that Yelp would be able to acquire smaller European companies and use them as a starting point for a European expansion.

I'm not so sure first mover advantage really helps when moving to new markets since you are an early mover in your own market and are able to learn for this period there. Also, you could look at the strategy of existing players in new market to figure out the market differences. Because of this, I believe patience is a virtue when expanding to newer markets.

On the upside: From the Dutch perspective this means there's an endless stream of proven, free, clonable ideas just waiting to be implemented. (Or white labeled)

What a load of nonsense in this thread! We're talking about localization, not proving P!=NP. It'll take 5% more work to use a localization library instead of hardcoded strings, and a bit of money for a contract with a good translation agency and you'll double your market.

And your product might suddenly become a hit in, say, Denmark, giving you revenue and validation while you keep trying to conquer the U.S. market.

That's great if your startup has a dial that can be turned all the way to 11. (or 105%, in this case).

Internationalization is almost certainly not the only seemingly minor feature that's been cut by a startup trying to launch and figure out a business model.

If one has a low cost back end that can do the translations, do the legal matching work, set up the conditions tables for these things to work seamlessly for different regions while reflecting the options, choices and legalities of the different region, you got a pan-nation service.

Its not impossible, its a matter of matching the possible returns with the costs of carrying out all the customization. Simple terms - ROI - Return on Investment.

Usually for the startups, it could result in better ROI if they invest available funds to increase capabilities and increase survivability in the home market (especially when it is as large as the US and a field as dynamic as the net/IT) than to spend that money on customization of the same services/capabilities in foreign/small markets. Otherwise, one risks losing the home market itself. There's is something from Sun Tzu on that I guess, about securing your home first.

Of course, once the size, sustainability and cash flows grow, then the picture and priorities can change.

Part of the issue is that you can reach such a huge part of the market with just English. English is spoken as a second language by 1.2 Billion people around the world.

With an Anglophone site, you can reach a substantial portion of the internet.

After that, internationalization and localization takes an awful lot of work and resources, for increasingly smaller piece of the internet. Do you focus on rich, internet savy countries like Holland or Belgium? Or, do you focus on the next two largest languages online: Mandarin and Spanish?

And, then, there's always the problem that the US tends to be a bit enthnocentric. And, companies really don't think about expanding overseas until they are relatively large.

Finally, our educational system is very Anglophone centric, and topics like i18n and l8n aren't really covered. I know they weren't for me, and I finished up 3 years ago. So, the learning curve for a lot of developers here in the US is fairly steep, so they tend to ignore the problem.

As already stated by another commenter, then keep your site in English. You will still have access to a market of millions of typically young, well-educated Europeans. But you need to let them sign up, ship stuff to them, etc. That's where it often fails.

You will need to have your European offerings checked by a lawyer, but with the EU harmonization it might not be that big of a deal.

That's sort of missing the point, though - Dutch users are (usually) able to use an English site, but they won't pay ten times normal domestic shipping cost (and wait a week or two) because you need to ship your product from the States. I'm sure the Brits feel the same.

"Do you focus on rich, internet savy countries like Holland or Belgium? Or, do you focus on the next two largest languages online: Mandarin and Spanish? " - Good question

In biz speak (or probably in non-linear programming too), i guess it would be where the different curves meet, the converging point of per capita potential revenues, the volumes (current and future), resources required to tap the market.

Practically this is how the decision tree may look like:

if one has less resources, then it may be wise to tap the market that has the highest per capita of potential revenues(while having reasonably enough volumes)

If one has medium level of resources, then still tap the high per capita market first with the least amount of resouces spent, then once the biz model is validated, deploy the resources for the future biggie market (high vol, low curret potential per capita revenues)

If one has billions to throw like Google, then of course, throw the money in tapping the future biggie and buy off any of the small amart start ups in the developed markets.

They are having a hard enough time conquering the US market, that's why.

But the other markets are in many cases easier to conquer! The US market has a lot more competition.

Risk/reward. If they're easier to conquer the reward might be similarly smaller.

I would venture to guess that this is not true. For most start-ups, the challenge is to disrupt status quo approaches to particular problems. That said, their main competitors aren't necessarily clones, but conventional approaches to same problem. That, coupled with consumer apathy and ignorance on both sides of the pond, means that the Europe market is not inherently easier/harder than the US market.

I think the question is still what is the best allocation of resources, and sometimes it's easier to focus on doing one thing well than to have too many fingers in too many pies.

You know, that's a good point, but probably not in the direction you intended. The competitiveness of the market breeds better organizations. Businesses in uncompetitive backwaters get wiped out sooner or later when competitors brought up in a tougher environment come along.

In a market with more competition, you should either fail sooner (and that's a good thing), or end up with something approaching best globally, rather than locally.

That doesn't fully apply to the network-effect businesses that HN is otherwise fond of, though.

Getting paid can be harder too. I use Paypal to accept subscription payments for my website, and it works for places like Europe and Australia. But if I wanted to expand to South America, it wouldn't take Colombian Pesos, or a variety of other non-western currencies (last I checked).

If you don't use Paypal, you'd have to set up a merchant account, which may or may not be as restrictive. You'd also might have to pay currency conversion fees or other international business fees for the privilege. Laws in some countries might even require you to establish a merchant account with a local bank, which could be difficult, if not impossible, for a small startup.

This might be easier to do for a larger company, but for a one-man startup like mine the 'getting paid' consideration alone would be productivity suicide for me.

I think it is because there are so many idiosyncratic differences in international cultures and the US, that it may not be worth the risk for a startup to expand abroad. For example, I wouldn't know the first thing about how to start doing business in The Netherlands from a marketing standpoint. I could read all of the books I could stomach, and interview every Dutch-speaking individual available, but that wouldn't be the best use of my time or, ultimately my dollars. I'd probably end up having to pump cash into hiring a US/NL or US/EU relations team to get it going; all the while I probably don't actually have that money.

I'm glad it's this way and hope it takes a long time to change. In the US so many markets have been destroyed by one big company undercutting everyone and running them all out of business. Imagine if this happened on the internet. It's already bad enough with Google, Ebay, Amazon, etc.

I like the fact that I can take a proven idea and apply it to the local culture for a business idea. And if it works well enough the big company will probably just buy you out instead of figuring out how to market to your country on their own. I think it's great for a lot more entrepreneurs than the alternative.

while completely agree with your point, the emergence of such corporate biggies can damage some local small businesses, I would like to present a different side of the same argument (can't help being a devil's advocate :)).

Such big companies and the services that only such big companies can provide have also enabled the development of many new businesses. Its usually those who are complacent and could not adapt to the new business realities who usually get destroyed.

>the services that only such big companies can provide

What services would these be? :)

Honestly, I think for a capitalist model what Adam Smith envisioned would be better: a bunch of small companies competing with each other. What small benefits the bigger companies do bring are offset by the problems they bring [1].

[1] http://www.truth-out.org/topstories/10210vh5

I live in a relatively small city - of 40,000. It simply can't support a Barnes & Noble. If there were no Amazon I would have been at the mercy of the whims and capabilities of the very small local book shops in town to get books. Or drive 1 hour to go to the nearest Barnes & Noble.

But, even Barnes & Noble can't stock all the books that Amazon makes available. With Amazon, if I need, I can get it the next day.

I have a very small company that I run off my regular job hours. I wanted to do some marketing, get some paper, some other supplies, print stuff in the middle of the night and post some flyers around town. If Walmart weren't open and didn't have the supplies, I would have been limited to what I could work out during the regular hours of the small businesses there. The horror is, I don't know why, many of them simply shut off at 5, books shops and some others. Thats crazy.

There was this printing I used to get done at a local business, to be honest they were incredibly sweet to deal with. But their lead time was 3 days at best for printing some 1500 flyers. With OfficeMax in the same city, 2-3 hours, sometimes 30 minutes. It gave me incredible flexibility to change things on the fly - typos, content or whatever.

These were the real situations I faced. Without them, my business might not have been impossible, but definitely quite a bit more complicated.

And, of course, everything has its pros and cons.

Another obstacle are the EU privacy laws. Don't get me wrong; I _like_ the fact the EU has privacy laws, and I personally wish the United States would do a little more in this area (always assuming, of course, that Congress didn't screw it up totally).

But when I ask our lawyer about it, he starts talking about Safe Harbor certification and all sorts of other fun stuff. For us, this isn't a problem—we're in an industry where certifications are generally useful—but for a consumer internet company, it's one more thing you need to figure out.

The easiest way of covering the basics of EU privacy law is to register in one of the countries of the EU. If you are registered in one you are covered by all. This is far simpler then going down the safe harbour route. The UK is quite simple to register with. http://www.ico.gov.uk/

Not entirely all that's to be done. You can't just export data from the EU to the US as the US has less stringent data protection rules.

(This is unless you meant "to register" as "to host")

You can export the data to the USA as long as 1) the receiver is registered with one of the Data Protection Agencies in Europe or 2) as signed the model contract or 3) has signed up to the safe harbour. It is well worth looking through http://ec.europa.eu/justice/policies/privacy/docs/internatio...

Is there any legal issues when going into other countries? I am talking in regard to a company that is dealing in purely virtual goods. My company is thinking about expanding into Canada (where everyone (mostly) but Quebec speaks English) with our app. I wasn't sure if there were any legal issues though, we are an LLC based in the States.

Because the US market is huge, and doing i18n can be difficult. All of a sudden you have users who speak a different language (which is something Americans don't encounter all that often), and potentially different laws and other aspects of doing business if you actually open offices elsewhere.

A lot of europeans are quite unsure if they want their data trusted to U.S. companies.

Really? They still do business with Google, Ebay, Facebook, Amazon etc. daily.

Targeting only their own country is totally understandable. What really irritates me is websites using a .com domain but not mentioning they are US-only until the very last step in the signup/payment process. At least mention this on the About page, or better yet, use a .us TLD if you are not going to expand.