HSBC

What Startups Looking to Expand to Foreign Markets Must Know

Tuesday June 04, 2019 , 5 min Read

India’s startup ecosystem has established itself as a global force to be reckoned with, and it should therefore come as no surprise that many of our home grown brands are looking to earn their stripes in foreign markets. Leading the charge last year, was ride-hailing service Ola that set up operations in Australia before hitting the road in the UK and New Zealand markets as well. Following closely on its heels was hotel chain Oyo in Nepal, Malaysia, China, Indonesia, the UK and Europe. E-learning startup Byju’s, also initiated its global foray this year. The list goes on. While many could claim that these startups had the funds to bankroll global expansion, there is a lot more that goes into finding success abroad.

The multinational banking major HSBC, which has helped several startups across the globe with their international operations, says that the first five Cs that any startup should gauge are:

The ease of operation in terms of the legal, regulatory (Compliance) and banking ecosystem in the target market
Its own Connections in the target market with an eye on their business model
The softer aspects like Culture and language
A robust Communication framework between the target and home markets
Caution to take stock of business feasibility and mapping their own projections and contingency plans to accommodate the uncertainty.

Compliance

When going global—compliance becomes the cornerstone of importance on which the rest of the elements pivot. Navigating various local, federal, and national legal, regulatory & compliance frameworks can be challenging. Take the example of Ola when looking at its international expansion.

“In the UK, where Ola is scaling rapidly, every burrow and local council has to give out a license for every business to operate. Comparing that with one state or national permit here, the number of regulations one has to go through are exponential. But a collaborative approach working with different stakeholders helped in the adoption and success cities outside India,” said the industry source close to Ola.

When you as a startup are looking to get a more holistic vision on the regulatory framework of a target market, HSBC India ‘s dedicated corporate relationship team for Startups can help significantly. “We can offer support on everything from providing insights on local markets via our ‘global connection portal’, International Business Guides, guidance/audience through regular knowledge sessions, and one-to-one discussions get your introductions to Local Business and Professional Partners.” says Anuj Kanwar, Head Transaction Banking, Business Banking, HSBC India.

Simplifying cross-border payments for startups: While startups may be more than familiar with payment standards in India, they need to adapt to the standards for each new country they enter. This is a major challenge for many startups looking at international markets

Likewise, businesses can look to HSBC India for support on everything from basic account opening, making local and cross border remittance, assistance with understanding and adapting to local banking nuances to help manage surplus funds and meeting working capital.

“Before you deploy your cash you need to know where it resides, how much of it remains accessible and most importantly how much I need to meet my core operations,” says Arpan Nangia, Head of Sales, India & South Asia, Commercial Banking, Global Liquidity & Cash Management.

Connections

As a business expands, it’s important to have the right network, which will evolve along with economies of scale. Any startup looking to expand to a foreign market should thoroughly research and identify the right network of people, opportunities and roadblocks and set in place processes that will remove the need for damage control and heavy lifting later on.

“Each market has its own set of mobility challenges and Ola focused their efforts on devising the right strategy that not only suits the local transportation needs but also fits the environment. This led Ola to adapt offerings in other countries. For example, Ola is the only ride-hailing app in the UK that offers commuters a selection of Private Hire Vehicles (PHVs) and metered taxis through one consumer-friendly platform,” said the source, who requested to remain anonymous.

Culture

A key aspect of setting up in a foreign country is the landing team. The first employees should have a clear understanding of the business’ goals. It’s important to remember that these are the people who will not only enable the business but also advocate for its growth. Having locals as part of the landing team is crucial as they bring a unique understanding and perspective. Also, to attract the right talent, the job description and roles advertised should be clearly stated.

According to an industry source close to Ola, “Indian businesses can reap the benefits of launching operations in overseas markets. As with any new venture, the overseas expansion process is time consuming and requires careful planning and thorough research. Organizations should also pay attention to cultural differences that may result in alteration of business practices. By expanding operations in untapped markets, organizations can establish a new base of eager customers without the immediate threat of competition.”

Communication

In this digital age, timely communication is key and having the right tools in place for cross-border collaboration is key. It’s also important to have a network of mentors and service providers in place, so that the launch and daily operations carry off without a hitch

from Day 1.

Caution

Last but not least, it’s important to assess if a business is truly ready to expand. The truth is not everyone should go global. Several of the big players in the Indian ecosystem have been forced to take huge losses and withdraw from the markets they forayed into owing to everything from strong local competition to having insufficient infrastructure, While the benefits may be tempting, the home turf advantage may be the greatest asset for some companies, and one enjoyed by local competitors in foreign markets. The key is knowing when to stay and when to venture forth.