
Ask HN: Why are web startups slow to expand abroad? - weel
When Yelp realized that Europeans may want to rate small businesses as well as Americans, they were confronted with Qype, a fairly direct knockoff started in Germany about a year after Yelp was founded. Because their business depends so heavily on how many reviews you already have (http://goo.gl/ykXu), it'll be hard to take them on.<p>So Yelp missed an opportunity somewhere during year one, but hey, it happens. They were busy and you can't do everything at once.<p>What strikes me as stranger is the businesses that have existed for several years, but still don't look across US borders. When I wanted to have some copies of my thesis printed, bound and shipped to Amsterdam, 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.<p>All right, all right, setting up a supply chain for mailing physical widgets in lots of confusing little European countries is hard. So let's look at a business that deals in purely virtual goods: Wufoo.  I can't find a Wufoo-like thing that'll speak Dutch to me. At all.<p>Now you may object that Wufoo takes payments, and figuring out how people in lots of confusing little European countries like to pay their bills is not easy.<p>Which brings me to the last category: web startups that provide some really cheap service or content and that fund themselves largely by ads, or by the expectation that some large company will buy them out and figure out a revenue model later (if ever).<p>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<p>Now don't get me wrong. I respect the entrepreneurs that started web-log.nl . They probably did a fine job, for all I know.<p>But there is an obvious missed opportunity for the US firms, methinks. Or is it just too hard?
======
mahmud
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.

~~~
skowmunk
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?

~~~
notahacker
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

~~~
skowmunk
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.

------
dasil003
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.

~~~
tomjen3
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.

~~~
dasil003
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.

~~~
skowmunk
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.

~~~
dasil003
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.

~~~
skowmunk
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)

------
frossie
You want to see something to make you cry?

[http://feedback.smugmug.com/forums/17723-smugmug/suggestions...](http://feedback.smugmug.com/forums/17723-smugmug/suggestions/244273-partner-
with-a-european-uk-lab-to-provide-timely-a)

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.

------
Samuel_Michon
_"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.

~~~
spif
Don't forget <http://getmarvia.nl>

------
Xixi
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).

------
barrkel
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.

------
aniket_ray
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.

------
vanschelven
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)

------
mdemare
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.

~~~
Goladus
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.

------
skowmunk
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.

------
iamelgringo
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.

~~~
JoachimSchipper
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.

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

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

~~~
barrkel
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.

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

------
acabal
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.

------
aspir
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.

------
loewenskind
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.

~~~
skowmunk
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.

~~~
loewenskind
>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>

~~~
skowmunk
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.

------
ekidd
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.

~~~
fun2have
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/>

~~~
ojilles
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")

~~~
fun2have
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...](http://ec.europa.eu/justice/policies/privacy/docs/international_transfers_faq/international_transfers_faq.pdf)

------
cme
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.

------
davidw
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.

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

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

------
alexkay
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.

