Tips for Global Startup Success

This article is cited from a distinguished Japanese paper by Mr. Murakami - a Japanese entrepreneur and visiting professor at Tama University Graduate School of Business. It contains invaluable thoughts on how startups can succeed globally, and deserves a wider audience. I am excited to share the 10 tips for global expansion that Mr. Murakami proposes. This blog article includes my perspectives as well, I hope you find it enjoyable and insightful.

Introduction

I am a Japanese entrepreneur who initially founded a startup in Japan, serving as its director for over four years. This company has since gone public on the Japanese stock exchange. Currently, I am exploring the possibility of launching a new, global startup as a next challenge. My interest in global business expansion was sparked when I stumbled upon this insightful article during my research.

Ten Tips for Expanding Globally

In his article about forming successful global startups, the Japanese entrepreneur Mr. Murakami shares his insights on key strategies for building an international company. He summarizes these to ten tips for global startup success. 

1. Facing the three markets of capital, labor, and consumption

2. Building a global startup takes time

3. Founding members are key for success

4. Engineering teams are also crucial

5. Diversity is an essential investment

6. Deciding what not to do, and the right timing for actions

7. Ensure local recognition of your business

8. Trust is a global value that is often underestimated

9. Be aware that 100% product-driven is not possible

10. Successful globalization requires thorough localization

Let’s have a deeper look into some of these 10 tips for building a successful global startup.

What does it mean to face the three markets of capital, labor, and consumption?

The following is what Mr. Murakami said in his original article. All global companies must face the capital market, the labor market, and the consumer market in order to be successful. Disregarding any of them in your business strategy will form an obstacle to growth at some point.

In business terms, the capital market is the finance strategy (financial capital), the labor market is the recruitment and human resource strategy (human capital), and the consumer market is the business strategy (value added for the nation and users).

• The capital market refers to financing strategies (financial capital) and where the funds are raised from

• The labor market refers to the recruitment and human resource strategy (human capital) and refers to the nationality and attributes of employees.

• The consumer market refers to the business strategy (value-added for nations and users) and refers to the countries in which the services are deployed and the attributes of the users.

Certainly, the perspective of globalization of capital, labor, and consumption in a company seems obvious when it is said, but we feel that very few global companies are actually able to implement it.

If a company conducts all sales in one country, hires its employees from the same country, and all its investors are from the same country as well, then all markets can be considered local.

In order to expand globally and achieve sustainable growth, all these aspects must be globalized. It is crucial to recognize this and actively work on globalizing all three markets in order to achieve long lasting international business success. 

For local startups, it is not easy to be valued highly by global investors in the capital markets. Even with the global boom in startups, you still need to have a certain scale and track record. It is also not easy to acquire globally competitive human resources. And, of course, it is not easy to generate sales in the global marketplace. 

It is essential to constantly confront the three interrelated aspects and gradually raise the adaptability of our products and services for the global marketplace.

Mr. Murakami's talk is centered on the case studies of three Japanese startups: GOJO & Co., MUJIN, and Astroscale.

GOJO & Co., MUJIN, and Astroscale are all globalizing the three markets in order to grow internationally in the long run. GOJO & Co. is involved in the e-commerce industry, focusing on second-hand and reused goods, promoting sustainable consumption. MUJIN is a robotics company that develops advanced automation solutions, particularly for industrial applications, helping to optimize labor efficiency. Astroscale specializes in space sustainability, particularly in the removal of space debris, which addresses growing global concerns about space environment management. Each company is navigating these three crucial markets to secure long-term international growth.

The Difficulty of Globalizing All Three Elements

Taking on the challenge of globalization requires a lot of effort and time. It is more of a marathon than a sprint, and it typically takes at least five years for startups to reach a situation of full-fledged growth.

In Japan, many of the local startups which take on the challenge of global expansion eventually give up on it, not achieving globalization of any of the discussed three markets.

Since it is overwhelmingly easier and more likely to produce short-term results locally in Japan, the majority of startups tend to focus on establishing a track record in that market first.

As a result, sales (i.e., consumer market) are in Japan, investors and financial institutions are local to Japan, and employees are Japanese, resulting in the three markets remaining local and becoming increasingly distant from the global market. 

Persistence is vital for a company's survival, requiring a strong business model and long-term financial strategy. Instead of aiming for fast-growing startups, there is a trend towards building stable ventures that aim for significant growth while generating immediate sales and profit, providing a firm foundation for the business.

When you focus on building a business locally to create a stable foundation, before you know it, all three elements are optimized locally, which in turn can hinder globalization in the long run.

I found Mr. Murakami’s article is immensely valuable in understanding how to prevent your business being stuck locally in one country, and build a solid venture on a global basis.

Do we need foreign members for the core founding members?

The following is what Mr. Murakami said in his original article.

"All three companies, GOJO & Company, MUJIN, and Astroscale, have strong foreign partners who are either founding members or in an equivalent stage. When the companies were still in their founding stage, there was a powerful foreign partner who was equal to the founder.

In fact, Gosei & Co. is a company with 100% overseas sales, but they are still at the core of our business, and without these members, our business would not have been launched, so they are indispensable. And since we have been able to acquire even more powerful human resources within our foreign human resource network, we would never have grown without the nucleus of the snowball in the first place.

Both MUJIN and AstroScale have foreign human resources in specialized fields. Without them, we would not have been able to expand our business overseas and acquire human resources, which I believe is indispensable.

It is also important that the initial core foreign members have not retired and continue to be the core of the company. I believe that whether or not members with that much fit and ability join the company at the founder or equivalent stage will greatly affect the company's subsequent growth."

After all, there seem to be many cases where foreign partners have participated as board members since the early days of the company. By having foreign members take charge of the core aspects of the business, such as local business development methods and acquisition of human resources, you have succeeded in global expansion. It is true that the methods of sales and marketing activities in the U.S. and Japan are very different, isn't it? In addition, it is very reassuring to have non-Japanese members who are familiar with the local market, including understanding of local employment laws and face-to-face recruiting activities.

The challenge, however, is how to acquire members from overseas who can be entrusted with these core responsibilities. First of all, we need to create opportunities to meet and talk with excellent engineers and salespeople from overseas. I am currently trying to create opportunities for such conversations by utilizing Ycombinator's Co-FounderMatching and participating in the global community on Discord. I recommend this because it is relatively easy to create opportunities for conversation, and in some cases, find talented founding members.

YC co-founder matching: https://www.ycombinator.com/cofounder-matching

A team of engineers to ensure the quality of services and products

"The importance of engineering varies from domain to domain, but this is especially important in areas where engineering is critical. In a broader sense, I would say that the people who determine the quality of services and products are important.

Even for a startup aiming at the domestic market, you can imagine cases where different product quality and design are required as the startup expands its customer segment, and for B2B, different requirements are required when expanding from the SMB segment to the large enterprise segment. And in the global marketplace, there may be different standards required depending on the country and the segment you are targeting. It is important to first understand these standards, and then you will need an engineering and product team that can meet these requirements."

As this article says, it is tough to create globally competitive products and services unless you can produce top-class output in-house from the start. As I mentioned in the previous chapter regarding the importance of founding members, it is necessary to have both a development team capable of producing top-class output in addition to the core members who will play a central role in overseas expansion.

Recently, an increasing number of startups are hiring CHROs from the early stages of their business and focusing on team building.

Understand that communication costs are a necessary expense when building a diverse team

"The importance of diversity has been gradually gaining recognition among Japanese startups in recent years. However, to be honest, I am still very skeptical that they understand the essential necessity of diversity. Even startups that have achieved rapid growth in Japan do not have a diversity-oriented organizational structure, and although it may be necessary, I think it is sometimes difficult to imagine that it is indispensable.

GOJO & Company, MUJIN, and Astroscale all accept diversity as a matter of course, simply to "attract talented people who can compete in the global marketplace.

As a result, diversity reduces the efficiency of communication, requires organizational systems, and increases the amount of hassle. There is therefore the aspect of increased time and consequently increased costs.

However, this is a "necessary expense" that all global companies pay. Just as business travel expenses are necessary, we must accept the costs of diversity in order to globalize.

After being prepared to do so, it is necessary to generate a return from the diversity organization that is greater than the cost. If we remain in the Japanese mindset of how to reduce costs from the perspective of the same return, the value of diversity will not be understood, nor will its evolution be demonstrated.

As a result, a company that does not make this "upfront and necessary investment" in diversity is not investing sufficiently, and as a result, as a global company, it will not be competitive enough or achieve sufficient growth. “The process of growth is nothing other than acquiring diversity in the three markets. It is more difficult to gain diversity from a situation where there is no diversity at all, and the longer the situation continues, the greater the cost of change will be."

It's a simple story: if you are going to create a global product, you should create the optimal team to deliver it.

The reality is that we hire people who are easy to hire. It is easier to onboard if you hire within your own country, and you are more familiar with employment contracts and laws.

But that makes you less competitive when competing with truly global companies. The best global teams attract such people, and local teams attract local people.

It is very difficult to rebuild a team with focus on diversity in retrospect. Therefore, once you have a vision of the company to some extent, I think it is a good idea to actively create opportunities to communicate with global human resources. I hold online events and actively set up 1-on-1 video calls.

About "GlobalDeal"

We are now operating "GlobalDeal", a company providing services related to global business expansion. If you are considering entering a foreign market, there are many aspects to clarify and take into account in order to succeed. From appropriate product localization to partnering with relevant businesses in your target market and navigating the regulatory landscape. At GlobalDeal, we are specialized in these kinds of challenges. Reach out to us for a free consultation, and we can see how our services can boost your business expansion efforts.