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To run a start-up internationally, declared panelists at the HBS Entrepreneurship Conference, it's vital to hire people you trust.
Virtual relationships can be terribly hard to manage across borders, particularly in entrepreneurial ventures. Noted Geoffrey Stein, cofounder of Thinq.com, a training development marketplace that's run from five offices in the U.S., Canada, and London, it all boils down to personal relationships.
Added panelist Francois de Borchgrave (HBS MBA '00), cofounder of smarterwork.com, a marketplace for business services, "If the guy's going to sit there in another country and in another time zone, make sure you really trust him deeply. You can't be thinking, 'Oh my God, what is he doing out there?'"
This challenge of building solid rapport with far-flung colleagues is a constant one, admitted panelists, and it's one of the many that faces entrepreneurs who dive into the world of global start-ups. At the session, called "From One Continent to Another: Developing an International Start-Up," five panelists—representing everything from fledgling ventures to the start-up advisory wing of consultancy giant McKinsey & Company-shared some of the methods they use to manage across borders.
Up and ready
Many start-ups take an extremely naive view of what it takes to expand internationally, noted the panel moderator, HBS associate professor Walter Kuemmerle. On the one hand, he said, start-ups sometimes underestimate the challenges of going global. On the other, some of them fail to acknowledge the opportunities that exist outside the boundaries of their own country.
What incentives, for example, can start-ups use to motivate staff living and working in various countries? That's one issue that's not easy to resolve, panelists agreed. Stock options may be one way that new companies can pull everyone in the same direction, they said. However, noted Stein, that tack can be complicated because differing tax rates can diminish a company's capacity to motivate with equity.
Entrepreneurial businesses shouldn't expand abroad until they're ready on the operational side, advised Axel Bichara, senior principal of the trans-Atlantic venture-capital firm Atlas Venture. Nor should they underestimate the costs to expand abroad.
Start-ups that do go international successfully, panelists agreed, usually have a strong base in the United States: not just an American office or headquarters but, most importantly, an American presence. In a fragmented new market, Stein said, any endorsement by branded players is key, particularly in B2C ventures.
The main obstacles that would prevent their own expansion into any particular country, panelists said, would be—in addition to tax implications and financial aspects—a country's capacity for connectivity and its infrastructure. The key is "the ability to have control of your business," said de Borchgrave, citing China as one difficult venue.
Face to face
With offices in Tokyo, Singapore, London, and several U.S. locations, David Champeaux, vice president of GF-X.com, a global exchange for freight transport, noted that it's very important to make sure everyone in the company has a voice. To avoid the potential for colleagues doing what he called "fighting for fiefdoms," and to support the company's global concept, he said, GF-X.com holds a company-wide meeting once a month in London. ("Not every start-up can do this," Kuemmerle joked in an aside.)
Champeaux's group in business development also has a biweekly meeting via conference call. Even the apparently simple task of making a conference call, he acknowledged, is complicated by the need to coordinate the timing of the call so that it's halfway reasonable for colleagues all around the world.
Going for dinner with colleagues when visiting them abroad, suggested Bichara, is a good way to establish one-on-one relationships.
Supporting technologies do aid overseas communication for McKinsey & Co., noted associate principal Chris Ip. However, Ip added, "Real issues can only be discussed face to face. Nothing can replace the face to face."
Thinq.com does "all of the above" in one form or another, said Stein. Working globally, he emphasized to potential entrepreneurs in the audience, "puts a huge premium on selecting people you feel very comfortable working with."
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