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Comment by luckylion | Hacker News Reader

I never understood why startup wait that long to branch out internationally.

I imagine that you need some local presence and need to adjust to local customs and requirements quite a bit, but it should be cheaper to enter other markets when you've "made it" and have solid funding. Instead, it seems they often wait for years while local copy cats develop the market and then pay a heavy premium by buying them.

Is that simply because they don't want to divert attention from building the business? Are VCs more skeptical if you want spend money on international growth?

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If you treat other markets as being cookie cutter versions of your own market, you're going to fail. Nigeria has a fundamentally different set of payment institutions in the norms.

Even within European countries, there are really different processes and flows. Going to The Netherlands? You'd better setup iDeal or you're going to have lower conversion. Are you setting up a retail grocery store in Austria? Get ready for MaestroCard (which is owned by mastercard but is a totally separate platform.)

Let's take the country I spend the most time thinking about: Kenya. Do you want to support M Pesa, the most common digital payment method by a mile? Great, you'd better get ready to set up and integrate against a baroque set of XML apis that require a specific VPN configuration to access. Oh, you want to use the new rest api? That's fine, except that after you go live you find out that it doesn't support all the flows you need and that actually in some weird edge cases the transaction totally falls apart and you have no idea what happened to the money. You can access the MPesa portal to get a giant excel file of all the transactions on your account that are at least a few minutes old, but you can only access that on a few specific machines that have a root certificate installed for the telco and use internet explorer 6 on windows. Also, the excel file format changes... occasionally. But how long do you wait to get the excel spreadsheet? There's retry logic built into the platform, and ...

Or, if you're a product manager who's working at Stripe you could look at your CRM and see that if you can implement these 3 types of reporting features you can go and steal an extra 10% of Netflix's business and pick up a whopping 2 billion $ of revenue. If you add payment support for Mpesa, you've added support for one payment method, but the entire GDP of Kenya is 90B$. Which one would you prioritize?

Incidentally I went to a great Stripe talk where they talk how they homogenize the "incoming purchases" at some point early in their stack and then they can use the same API internally for any of them no matter the location in the world or the payment processor. I don't recall the specific examples but it was definitely like the Netherlands example you pointed out.

> Which one would you prioritize?

I'd absolutely prioritize doing three easy things if I'm strapped for cash, can't hire new developers and need all focus on my initial market. I totally understand why nobody immediately starts offering their product globally.

But when your product has matured, you've secured the next $10m (or $50m or $100m) in funding, you no longer have a single product manager, you can rent offices in Nigeria and hire locals who know the market and the requirements, and you can hire additional developers to deal with local quirks etc, why wouldn't you? Is the attention at the C-level spread so thin that even choosing someone who will set up a local team is taking too much away from growing the core product?

I have no doubt that it's easiest to wait, have somebody else develop the market and then buy them. But it also costs a lot of money. Is not having to figure out how to work with M Pesa worth $200m?

> I have no doubt that it's easiest to wait, have somebody else develop the market and then buy them. But it also costs a lot of money. Is not having to figure out how to work with M Pesa worth $200m?

I think that would depend a lot on your scenario. If you're not currently doing business in Kenya, the ability to accept payment through MPesa is probably worth close to $0. If you're operating in Kenya, the ability to accept payment through MPesa is probably quite high.

My takeaway from this is that the ability to accept MPesa payments is one part of a system that, as you say, can be incredibly valuable and worth lots of money. It's just possible that it's only worth anything in a context where accepting MPesa is valuable.

Regardless, international expansion is not something to be taken lightly. It's perhaps not always as simple as the local market being the same as yours modulo a few minor local quirks.

> If you treat other markets as being cookie cutter versions of your own market, you're going to fail.

This is a critical insight that I've seen missed more than once by business leaders.

For a time I worked for a company headquartered in London. They did business loans. They tried to expand to Germany, The Netherlands, Spain, the US, and Canada. At every point they encountered new technologies and a fundamentally different set of payment institutions.

It's not just payment institutions that are different, though. You've got a whole different regulatory apparatus, credit institutions, supporting data institutions, and consumer behavior patterns. I've run into major differences in culture and symbolism and more.

You need to account for all of it in even figuring out if expanding into a country is a good move. Then you have to puzzle out what you have that you can adapt and what you need to build fresh for this new market.

It's often easy to assume that the next market over is just like yours. As you say, this is often dangerously untrue.

Or that Telco who had an API that couldn't handle more than one concurrent request per minute, and will fall over if I did more than that. Throw in FTP for extra complexity.. Integration challenges are hard. Makes sense for Stripe to buy someone who has solved it.

> Let's take the country I spend the most time thinking about: Kenya

I’m a Kenyan SWE based in the US. Really appreciate the insight you’ve provided in this post I’ve always thought about moving back to Kenya and building a startup but systems and government bureaucracies are so frail and corrupt (perhaps I’m being a little unfair to the country as a whole, my bias comes from stories I’ve heard). But really unsure where I’d even begin or how I’d raise money for a startup out there. Are you working on any interesting projects/startups related to Kenya? How have you navigated maybe any challenging conditions you’ve faced if you have started a Kenya based startup? Let me know if you have useful resources for those interested in starting up a business in Kenya. I’d love to chat further and glean more insight from you. Thanks

Banking and the payment industry have a lot of different compliance and laws to adhere to. Much easier for startups who’s business model is sign up and use my web app.

At my previous job there were conference rooms converted into mini-libraries for the legal/tax teams to review for the 170+ countries they did business in. It was so hard in some places that they would just outsource everything to 3rd parties and resellers to get over the headache.

How exactly would Stripe branch out to Nigeria? It might be less risky and cheaper to just buy a local team with a proven track record, than trying to transplant yourself into a culture that you know nothing about.

yeah, good move by Stripe. Paystack is already battle-tested in the payment fight

I'd guess you could also hire local people. They'd cost money too, but $200M?

Similar things happened with eBay in Germany, the clone was named Alando (then sold for $43m in 1999 after running for a few months).

Stripe is a multi-billion dollar company and will likely have one of the biggest IPOs ever within 1-2 years. $200M is a bargain price to acquire the market leader in an emerging market like Nigeria.

It is a very good deal for Stripe, but I do wonder if would it have been a better deal to buy 2-3 early stage Nigerian startups five years ago.

Maybe the winners aren't willing to sell early/cheap.

Should Stripe be investing in seed/Round A start-ups? Having Stripe as a resource could be big -- funding, advice, and potentially infrastructure.

You're right about that -- Stripe led Paystack's series A and has also led other series A rounds like Fast's.

If you look at Stripe’s strategy, they tend to ride certain horses rather throw stuff at the wall to see what sticks, so it wouldn’t have made sense for them to buy 2-3 when they only need to buy 1 that’s really good.

And that’s what they did when the led Paystack’s $8m series A funding 2 years ago when they were almost 3 years old.

https://techcrunch.com/2018/08/28/paystack-with-ambitions-to...

They spent 200M for the one they now know is successful. It does seem likely they could've had > 10% chance of success for under 20M, but that might just be me being way too optimistic / not understanding the expenses of trying to deal with a banking system.

Yea, banking/PoS and travel are the two industries where you can't just expand internationally without having some sort of physical presence. Mostly due to local regulations around both industries.

Stripe is live in dozens of countries. Not sure why you think they're waiting.

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