Becoming a truly global company is the end goal for the vast majority of start-up business owners as it allows them to engage with new customers and markets, drive revenue growth with economies of scale and expand product and service offerings. However, those ambitions cost time and money, and start-ups are unlikely to generate the significant profits to support them. Investment is therefore central to a start-up’s ability to scale its operations to meet growing demand for services and support expansion plans abroad.
Outside investment is an excellent strategy for supporting global expansion. UK fintech start-up, Starling Bank, revealed in September last year that it was planning to raise more than $50 million from investors to drive expansion into Europe and beyond. “As Starling Bank continues to grow, and our customer base expands every day, this funding will help us consolidate our current share of the market and drive our growth both in the UK and internationally,” the company’s Chief Executive, Anne Boden said.
A wealth of other start-ups, from Amsterdam-based ticketing enterprise, Tiqets, to London-based ecommerce software company, Cloud.IQ, have all looked to third parties during the last 12-months to secure seven figure sums to fund new product development, expand in-house teams and move beyond home markets. ‘Going global’ is a logical step if you have an emerging or existing customer base abroad and want to take your business to the next level.
Trading in new regions and targeting new demographics is an expensive process and will require a significant outlay. There is a myriad of investment channels available to you at this stage, including online lending, angel investors and crowdfunding. You could also apply for a business loan. However, venture capitalists are arguably the best option if your start-up has high growth potential as you will be able to secure larger sums of money. Securing capital is never an easy process. You will need to show evidence of real process, that there is a market opportunity for your start-up to grow and then sustain an upward trend over the long-term. Innovative technology should also underpin your USP and core processes.
Raise venture capital
Targeting investment is the easy part, but how do you actually secure it? Start-ups are often focused on short-term success, but they rarely consider building a company with outside investment such as venture capital in mind. The decisions you make during the formative stages of business can have significant implications for how attractive your start-up is to investors. Your choice of legal entity, for example, is actually fundamental to this. A corporate structure is a better option than limited liability company (LLC), and following on from this, C-Corporations are preferable to S-corporations. You should also be aware of different classes of stock and how you are to structure your company’s ownership interests.
Rounds of investment
Investment rounds are an important aspect of start-up investment and you will need to be familiar with the private investor network to secure funding from third-party sources successfully. There are a variety of investment rounds in the start-up sector, but for those aiming to expand globally, Series A is usually the most important. Series A investments often range between $2 million to $10 million in value for up to 30 percent of the company. The investment is intended to help companies launch a successful product into new regions. The injection of capital will open up new markets and help you to engage with different demographics.
For true global expansion, Series B investment should be pursued. By this stage, your start-up is close to becoming a truly established business with a successful product or service. Understanding the machinations for Series A, B and C investment rounds can improve your decision making in terms of how you pursue potential investors. There isn’t a limit to how many rounds of investment you can pursue either.
Renowned businessman and entrepreneur, Keith Krach, believes establishing a close relationship with companies across a wide range of industries is the ideal precursor to a successful partnership. Krach, and his company DocuSign, adopt a “friends first, partners second, customer eventually” mantra to secure investment that aligns with business goals and objectives. He also says a “60-60” partnership where both parties measure success by each other’s metrics is key to building trust. Those principles have been central to DocuSign’s impressive roster of partnerships with a selection of the world’s preeminent tech giants, including Google, Microsoft, SAP, Visa, Intel and Samsung.
To secure the right investment for global expansion, you need to build your start-up from the ground up with outside investment in mind and then tell a clear and compelling story backed up by a robust plan and relevant financial data to appeal to investors. Show them that your business plan gives them the best chance of winning and the funding will follow.