5.

Be Born Global

Target the World from Day One

If you ask around in Silicon Valley, you’ll find many people who can give you a step-by-step guide to starting a company. If you’re not already located there, the most obvious (and often unspoken) first step is to move to Silicon Valley. It offers access to a unique culture and gives you proximity to talent, customers, and acquirers.

Once you’re there, it is disturbingly simple to follow precedent and best practices when making a range of seemingly complex business decisions. Where should the company be based? Silicon Valley. Where and how should it be incorporated? As a Delaware C corporation.

How should the technical team be built? Locally from the ready talent pool. The best computer scientists graduate from Stanford, a forty-minute drive away.

Where should the product be piloted, and where can the first customers be found? If customers are businesses (B2B), then the ready local business market in California should be the first target (including other startups in the Valley). If customers are individuals (B2C), then they can easily be found among local tech-loving residents. The earliest adopters—businesses as well as consumers—are concentrated in the San Francisco Bay Area.

Where should the market scale? The United States is a $21 trillion economy, and the largest technology and software market globally.¹ For most startups looking for a niche to target, the United States is sufficiently large. California alone, the fifth-largest economy in the world, is a large enough starting point.

These decisions may be simple for entrepreneurs in Silicon Valley. But for everyone else, there are no obvious answers to these questions.

Frontier Innovators don’t share Silicon Valley’s myopic local view. They build their startups in a different way: they are “born global.” There are three dimensions to being born global: the founder, the company, and the team. In chapter 4, you explored how Frontier Innovators themselves are born global cross-pollinators. The second dimension, covered in this chapter, is the way Frontier Innovators build companies that can sell in multiple markets and capture global opportunities. The third dimension, covered in chapter 6, is the way they build distributed teams, leveraging talent from wherever it is most available.

Critical to Success at the Frontier

Among the most successful startups at the Frontier (particularly among smaller countries or geographies), expanding to multiple markets is directly linked with success. Among the ten unicorns built in Southeast Asia over the past ten years, seven scaled rapidly internationally. Of the three that stayed local (for now), two were based in Indonesia, Southeast Asia’s largest market with over 264 million people.² Perhaps symbolically, when Garena, a Southeast Asian technology unicorn, filed for an IPO in 2017 on the Nasdaq, to reflect its pan-regional presence, it changed its official name to Sea (now also its ticker symbol).³

Frontier startups expand to other markets early in their life cycles. In the Southeast Asia sample, the average startup entered its second country by year four and its next market within another year or two.⁴ In Africa, among a sample of the most valuable technology companies, 64 percent had launched into a second market by year four.⁵

Being born global is increasingly a Frontier imperative, as UiPath’s founders know well. Founded by Daniel Dines and Marius Tirca, UiPath is Romania’s first-ever unicorn. UiPath offers robotic process automation (RPA), which, through artificial intelligence, allows computers to learn repetitive tasks and, over time, automate them. For example, an insurance company that needs to transcribe physical claims from its clients into its internal evaluation system can use RPA to automate the process and free its staff to work on the higher-value tasks of evaluating claims. Similarly, an accountant who needs to categorize clients’ particular expenses in repetitive ways can use RPA to automate the task.

Daniel and Marius opened the original business in 2005, focusing only on the Romanian market. A decade later, UiPath was still subscale and primarily a consulting firm. But in 2015, the founders decided to shift their strategy, offer a technology platform, and focus globally. They partnered with Ernst & Young to distribute UiPath’s solution to the Ernst & Young corporate ecosystem.⁶ Once UiPath opened the global aperture, it rapidly expanded beyond the embryonic Romanian ecosystem, becoming a global powerhouse.⁷ Three years into its platform model, UiPath was operating in eighteen countries. The company now has more than a thousand employees and has raised more than $1 billion in capital from leading venture capital firms such as Accel, Sequoia, and Google’s CapitalG.⁸

UiPath is perhaps the fastest-growing enterprise sales company of all time.⁹ A key driver, as Daniel explains it, was its ability to master global sales from the moment the founders decided to go global.¹⁰

What’s Old Is New

While the phenomenon of being born global is new in startups, it has been documented as a strategy in more-traditional industries. In 1993, McKinsey & Company published a report documenting the rise of SMEs—small and midsized enterprises, typically with less than $100 million in revenue—having a global focus.¹¹ Small exporters in Australia started selling internationally almost from the beginning, often in the first two years.

At that time, the strategy of building a multimarket sales model from the get-go flew in the face of conventional wisdom. Best practice was to internationalize incrementally, starting with a domestic focus and then selling through intermediaries over time.¹² Eventually, seeing enough traction, companies might establish an international subsidiary, but often in places that were culturally most proximate.¹³ With enough success, they could then become major foreign sellers.

McKinsey uncovered a generation of SMEs that were born global. As its report and decades of subsequent academic research demonstrated, a different approach to building successful companies existed—and was working.¹⁴

What’s playing out now at the Frontier is a similar rejection of conventional wisdom. Frontier Innovators are selling in multiple markets early in their journeys. Indeed, mastering this strategy is fundamental to their success.

Drivers of the Multimarket Model

For Frontier Innovators, there are a few intertwined reasons that being born global is increasingly a strategic imperative.

The first is a realistic assessment of the addressable market. The size of a company’s total addressable market (TAM) is a key metric by which venture capitalists gauge a startup’s potential. Unfortunately, in many (though certainly not all) emerging markets, the local TAM is too small for the company to scale to a meaningful size. However, for strategic entrepreneurs, the smaller the local market, the larger the total market. Entrepreneurs in Estonia or Singapore are forced to think globally, whereas startups in India and Brazil often focus locally. As Daniel observes, “Being from this remote part of Europe helped us think big.”¹⁵ Having a small local market allows startups not only to sell in multiple markets but also to start from anywhere.

Being born global can also function as a learning strategy. It helps innovators improve the core product, evolve the business model, and benefit from economies of scale. Divyank Turakhia, founder of the Dubaibased global advertising technology company Media.net (which he sold in 2018 for $900 million to a Chinese consortium), explains: “Different markets have different margins and different risk profiles. Some may seem on the surface as less attractive relative to others that may be growing faster and have higher margins. But being present in them now still makes sense as you learn about markets and build relationships.”¹⁶ By expanding across markets, the whole organization is forced to improve and build a product offering that is competitive everywhere. Over time, this generates economies of scale. Divyank says, “As you upgrade your technology and product, you will get higher margin in those you’re not as competitive in today.”¹⁷

Ultimately, being a multimarket company translates into an offensive advantage. Frontier Innovators who are born global can lay out their stakes first in the most-attractive markets, increasing the cost for second movers. When Zola, which you met in the introduction, expanded from East Africa to West Africa in Ivory Coast and Ghana, it was staking out a claim in the most attractive markets. There are other startups that offer a home solar system solution similar to Zola’s. But if competitors were similarly looking to expand, it could make more sense for them to look elsewhere.

Born global startups can often outcompete single-market-only players. They can rely on profits from some markets to concentrate resources to fight in the most-competitive markets. Compounded by cost advantages conferred by global economies of scale and the learning from which they’ve benefited, born global startups are uniquely positioned to win.¹⁸

In many ways, staying local is not an option. Other companies from elsewhere will eventually arrive on the scene. Therefore, for Frontier Innovators, being born global is often a requirement to survive.

As they say, the best defense can be a strong offense.

It Doesn’t Work for Everything

At this point in the discussion, being born global may seem like a natural strategy. Yet its application is nuanced. Many startups have learned this the hard way.

Uber expanded rapidly around the world. It entered Singapore in 2013, and China in 2014.¹⁹ Seemingly as fast as it expanded, though, it started to retrench to its core geographies. In 2016, after spending more than $2 billion and with no profits in sight, Uber exited China and sold its local operations to the national player, DiDi, for $7 billion.²⁰ In Southeast Asia, a similar story played out, and Uber sold its operations to Grab (itself backed by DiDi).

Why is it that some models seem destined to be truly global while others are not? Three drivers explain whether certain players come to dominate markets globally while others remain more regional or local.

The Nature of the Network Effects

The first success factor is centered on the nature of network effects. Network effects reflect the phenomenon that the value of a service or product increases as more people use it. Some startups have global network effects, while others have more regional or even local network effects.

Google, for instance, has become a global standard in search engines, in part because searching the internet has global network effects. The value of information isn’t regional. North American users get greater value from the platform when knowledge from Europe or Asia is cataloged. The value of information is global, and thus winners have tended to enjoy global monopolies. Facebook enjoys a similar dynamic. Relationships aren’t only local but also international (particularly among the university students where the company began), and thus the value of the platform increases globally.

In contrast, there are business models that have regional or local network effects. Ride sharing is one. While there are globe-trotters who value having a single app they can use to summon a car in any city, for the vast majority of users the value of the transportation app is local. Of course, there are network effects: the more drivers who are on the app, the more users who will want to join, and vice versa. However, these network effects are localized. That’s one of the reasons the ride-sharing industry is unlikely to have a global winner emerge. Local players, be it Gojek in Indonesia, 99 in Latin America, or Careem in the Middle East, are equally placed to create the right network effects to dominate their local or regional markets.

Resource Intensity

The second driver that predicts whether global models succeed relates to resource intensity. Where there is higher resource intensity, global winners are more likely to emerge, whereas models that are more asset light are more likely to be local or regional. Cloud computing is a great example. Amazon Web Services (AWS), as well as Microsoft Azure and Google Cloud, have amassed leading positions, together enjoying approximately 50 percent of the global market.²¹ These global players dominate because offering a cloud computing product is extremely resource intensive. Amazon and Google must purchase, maintain, and staff server farms and must build software to manage and secure them. Amazon’s capital budget for this has been in the billions of dollars over the years. This leads to classic economies of scale: the high-fixed-cost investment can be spread over a larger client base, at progressively lower prices, in turn cementing the economies of scale. These markets trend toward global monopolies.

The same is true of hardware startups. These often require much larger capital investments upfront so that they can go through safety testing and build the products at scale. Yet once they work, they often enjoy sustainable monopolies. No wonder Elon Musk’s SpaceX is only one of a small handful of successful space startups (and now delivering payloads to space for governments and corporations around the world).

A similar dynamic exists in certain markets where access to limited, highly specialized talent is required. For example, in the artificial intelligence market, the most precious resources are data scientists and datasets. There is a shortage of available talent specialized in machine learning and artificial intelligence. The best companies have the most-advanced technology and the largest datasets. This in turn attracts the best players. The best players cement and accelerate the technological advantage. This situation will likely yield some global winners.

As for ride hailing, it’s not very resource intensive upfront. Sure, the app manager must pay a lot to recruit drivers and attract riders over time. Yet this is a much smaller comparative investment than the actual technological development that a company like SpaceX would have to undertake for a new rocket. Therefore, it is much easier and cheaper for local competitors to launch and gain share in the ride-hailing business.

Local Complexities

The third predictor of whether startups become truly global relates to local complexities—and in some cases veto-like dynamics that exist in certain markets or industries. For instance, companies like Facebook and Google enjoy leading market positions almost everywhere on the planet. The most glaring exception of course is China. This is driven by a regulatory moat, because the companies’ websites have been blocked by Chinese regulations (and the government-controlled Great Firewall). In their place, local alternatives have blossomed. Baidu has become the local search leader, and Tencent has a dominant platform in messaging.

Of course, an outright government ban is an exceptional barrier. Yet much more subtle complexities exist as well. Many industries have specialized local regulations that make it challenging to port models across borders. Financial services is a prime example. Most countries impose strict standards on institutions that want to become custodians of their citizens’ savings or provide them with credit or insurance products. That’s why historically fintech has been a local game, although this is slowly changing.²²

Strategies for Frontier Innovators

Every industry is unique. Before going global, Frontier Innovators must evaluate their particular industry dynamics and understand the likelihood that a global, regional, or local model will win the market.

Assuming that resource intensity is high, network effects are global, and there are limited local complexities, then Frontier Innovators should scale as fast as possible to responsibly capture as much global share as possible before someone else does. If the opposite is true—if there are regulatory barriers, low resource intensity, or more regional network effects—then Frontier Innovators should instead focus on their regional or local markets. Figure 5-1 illustrates these principles.

Most markets are somewhere in the middle—for example, markets with high resource intensity but few global network effects, or vice versa. Understanding this dynamic is critical to determining your strategy. Ultimately, any course of action will be an educated bet.

If the decision is to be born global, then a few strategies are essential for success. This includes prioritizing and then staging expansion, developing a product that localizes easily, and building an organization that functions across markets. Let’s explore each in turn.

Born Global Market Selection

Being a multimarket company doesn’t mean taking a shotgun approach and expanding haphazardly from Mauritius to Mongolia or Botswana to Bali. The first step for an entrepreneur is determining the market selection, prioritization, and staging strategy. Frontier Innovators start thinking about these questions from day one and refine them over time. A key early question is whether some markets are testers and others are must-win.

Tester Markets

Broadway is famous for testing its shows in small markets before committing them to the big stage. Similarly, using market laboratories can be a powerful strategy. SkyAlert, which operates an earthquake early-warning system, took this approach. In most earthquakes, people do not die from the shaking but rather from getting trapped or crushed under collapsing buildings. Technologically, it is possible to perceive and distribute an early warning, because a quake is first felt near the epicenter and travels outward from there. Through its network of distributed sensors, SkyAlert promises its users a head start to evacuate buildings and can work with companies to automate security protocols (e.g., gas shutoff).

SkyAlert began in Mexico City, which Alejandro Cantú, its CEO, describes as his innovation laboratory. The early versions were focused on research and development rather than commercialization. Developing SkyAlert in Mexico City was much more affordable than other major cities for product innovation. Salaries were cheaper. Cost of acquisition was cheaper. Mexico was Cantú’s early base of operations and testing ground, but, to scale, he will look elsewhere, starting with the United States.²³

Must-Win Markets

For some Frontier Innovators, there are certain markets that are must-win, without which they will never reach scale. In Southeast Asia, Indonesia is often a linchpin. In the Middle East, as Fadi Ghandour—co-founder of Aramex and an investor in many local leading startups and whom you will meet in chapter 11—explained to me, “To win in the region you need to win Saudi Arabia. It is the largest market.”²⁴ Ned Tozun, CEO of d.light, explains it similarly for the global solar lantern market: “We absolutely needed to crack India. There are other markets that are less price sensitive. But India is the most price sensitive and one of the largest. We had to win India. Otherwise, we’d lose the world.”²⁵

The must-win market may not always be a place. In some industries, it could be a particular set of anchor clients (e.g., to win in the sea shipping market requires partnering with one of the few large global shipping conglomerates) or a high-profile subsegment of the market. It is crucial to identify these industry dynamics and target these must-win markets.

Building a plan for future expansion early on is critical. For Zola, its decisions about market expansion were backed by detailed quantitative analysis. Zola executives ranked prospective new markets according to a variety of criteria, which included factors like market size (e.g., total energy spending, population size), level of corruption, macroeconomic risks (e.g., political stability, inflation, the ease of doing business), ability to pay (e.g., GDP per capita and mobile money penetration, which is key to getting repaid digitally), customer demographics (e.g., access to the grid, rural versus urban population density, each of which has unique customer uptake behaviors), consumer behavior (e.g., who would be likely to try new products), logistics (e.g., road penetration, import taxes), ease of doing business (e.g., the time it takes to open a subsidiary, the simplicity of hiring), and culture (e.g., the language spoken and the importance of local connections).

It often makes the most sense to expand from an established anchor market to similar markets in the region. Scaling across countries is much easier if they are proximate, not only physically but also culturally and administratively. Zola considered many options for a second market and ultimately decided on Rwanda, which was physically proximate, was easy to do business in, and had a geography where the team already had operational experience. From there, the company decided it was important to have an outpost in Western Africa, so it headed to Ivory Coast—a small market in and of itself, but a foothold in another region.

Frontier Innovators must make a concerted effort to plan how they will scale their enterprise across markets. Of course, the plan should not be set in stone. Things change. However, it is crucial to understand which markets can serve as testers, whether any markets are must-win, and what an expansion rollout might look like over time. These decisions drive hiring plans, capital raising, and, of course, product development.

Build an Adaptable Product, and Localize

Like successful entrepreneurs around the world, Frontier Innovators think deeply about building great products that customers value. Unlike most of their Silicon Valley counterparts, however, they layer a global mindset into their product development from the get-go. Products are built with an architecture that can be modulated for different price points, adapted to local languages, and tweaked to reflect varying customer needs. If executed well, this inherent flexibility allows startups to scale globally at a rapid pace.

Zola demonstrates this product adaptability. The basic product is a home solar system, which couples a solar panel with a charging box (installed inside the house) and adds a variety of compatible, high-efficiency appliances (e.g., lights, fans, radios). If customers want to increase their system, they can simply plug a new solar panel in to the box and add other, higher-intensity appliances like fans or televisions.

This focus on products and customers was instrumental to Zola’s growth. While Rwanda and Tanzania share a border and similar electrification rates and product demand, Ivory Coast and Ghana are wealthier on average and have higher electrification rates.²⁶ In West Africa, customers sought systems not for baseline lighting but as backups to the grid, or to power a broader range of appliances like televisions. These systems needed to be more powerful. Zola’s flexible architecture, which required a considerable upfront investment (far more than if it simply offered a one-size-fits-all system), allowed its model to successfully sell in the Ivory Coast and Ghana markets without a complete reengineering.

Some Frontier Innovators go one step further and decentralize a portion of the product development team, allowing individual markets to customize the core product for local demand and needs. For Frontier Car Group, which you met in chapter 3, technological development is centralized in Europe, but individual countries have flexibility in adapting products to meet local market needs.

Building a flexible product is essential to scale across markets. So is building a flexible team.

Build an Organization That Can Grow across Markets

Launching in different markets is a challenging endeavor that requires an adept leadership team. Companies typically aim to combine an internal global expansion expertise with localized ownership strategies when they develop their teams.

Some Frontier Innovators assemble a specialist team to help build new geographies and carry the culture across borders. Whereas the core team is focused on ensuring that the company’s product or service resonates within the current footprint, these specialist teams excel at scaling across borders while preserving the organization’s unique advantages.

Matt Flannery is no stranger to creating global operations. In 2004, he co-founded Kiva, a nonprofit that offers microfinance loans to individuals in emerging markets. Now Kiva has more than three million borrowers and nearly two million lenders, operates in more than eighty countries, and has funded more than $1.2 billion in loans (with a remarkably high 97 percent repayment rate).²⁷

One of Kiva’s early barriers to growth was the limited availability of capital: growth in the number of borrowers required a commensurate growth in lenders. This realization inspired Matt to found Branch, which offers microloans to consumers in emerging markets. Via an app, and leveraging alternative digital data, Branch offers its users, primarily underbanked customers in developing countries, access to credit at lower rates than available in the informal system. Branch was launched in 2015 and already has more than four million customers. It has issued more than fifteen million loans and has distributed more than $500 million.²⁸

As it expands to new markets, Branch sends small “swat” teams to get the local business off the ground. Branch entrusts global expansion to these teams. Like the elite police SWAT teams after which they are named, these are teams of high performers, typically young teammates thirsty for a global experience who have already spent meaningful time at home offices understanding the business. Their directives are clear: register the business in the new market, get a local lawyer, secure office space, register the app, get the first few customers, and find local leadership for the new operations.

At Branch, the swat teams’ last responsibility is to hire and integrate a local leader. In doing so, the team looks for candidates with a mix of entrepreneurial spirit, leadership skills, and strong cultural alignment with the rest of the organization. The specialist teams are responsible for leaving behind a cohesive and global culture engrained in the new local management team.

Local leaders should ultimately lead the operation. A product should rarely be copied and pasted from one region to the other; it often requires a combination of local adaptation, appropriate positioning, and relationships with ecosystem players. To adapt it to local needs takes local expertise.

Born Global: The Bottom Line

For Frontier Innovators, being born global is often a necessity rather than a choice. Their local market may not be large enough to sustain the company at scale. By taking a multimarket approach, Frontier Innovators piece together a large opportunity from fragmented regional markets.

A born global strategy is not only an offensive move to capture market share but also a defensive one. If you don’t go global, your competition will, and it will come to you. As you learned in chapter 3, Frontier Innovators focus on resilience by building a portfolio of activities, and one key way is by serving multiple markets.

As Louis Pasteur said, “Chance favors the prepared mind.”²⁹ In this case, building a born global organization favors the prepared. As you discovered in chapter 4, fostering a global, cross-pollinated mindset and network among the leadership team is key. In chapter 6, you will explore how Frontier Innovators build distributed teams, leveraging the best of multiple ecosystems.

In the coming wave of technological innovation, entrepreneurs won’t look to Silicon Valley for best practices on managing dispersed operations from an early stage. They will instead aspire to emulate the entrepreneurs on the Frontier, who have been doing this for years.