Kyle-Ellicott

Where are the Risks and Rewards for Tech Startups?

You’ve had your own company, ReadWrite, go global, and watch other companies do the same, so you’re well positioned to talk about how companies expand in foreign markets. Looking at the world now, what are the biggest opportunities for tech companies in foreign markets in 2017?

 

We saw huge growth in previous years, and 2017 will be a great year for companies going global. In terms of opportunities, I think you’ll see several countries welcoming tech companies with open arms. Companies of all sizes should realize entering a new country is scary, but it doesn’t have to be. However, companies shouldn’t do it alone and think they’re going to take the country by storm. Instead they should understand the process and look for government resources and partner with corporations that are supportive of startups. In terms of where to expand internationally, Asia, and in particular China with its growing middle class will provide tremendous opportunities. Somewhat surprisingly, South America is also experiencing a great deal of growth due to economic development. Both China and South America have excellent resources for startups and corporations.

“We’re going to run accelerator programs in six different cities this year, which are focused on region-specific verticals”

 

What do you mean specifically when you talk about government and corporate resources?

On the government resources side, I’ve had great success with Invest Hong Kong (InvestHK). They are part of the Hong Kong government and have excellent resources for companies looking to enter the market. They can provide an entire team to help tailor a business plan to make your company successful in Hong Kong. They help with everything from finding office space to providing introductions to the corporate community. The value of these kinds of agencies cannot be overstated. There are also government grants and funding streams that are relatively unknown and in the US alone there are billions in grants available. Other countries are creating venture funds that will match invested funds in order to spur development by foreign entities. A new company should quickly identify its competitors in a country or region, as startups with fresh ideas make attractive business partners. A startup with an innovation team can make contact with a larger corporation with something as simple as an email or LinkedIn request. Once this contact has been made, there will be a ripple effect where you’ll be able to learn how to do business in the region, in addition to making connections with useful communities and groups more quickly than you otherwise would.

 

These are things you have done with your own companies. As an established member of the San Francisco startup community, how often do you meet people in the Bay Area who understand these kinds of resources?

We learned from a combination of guidance and trial and error. When we first went into Hong Kong, we were fortunate enough to know a few people and investors there, so they pointed us in the direction of some helpful organizations. I think the Bay Area is unique because so many governments, corporations, and economic development groups have offices here, so companies looking to expand on a global scale have all kinds of resources available to them. There are several groups from Asia, South America, Europe and Australia that visit San Francisco just to meet people, make connections and learn more. There are meetups happening in town, like the GetGlobal Conference, that are a tremendous resource for companies looking to expand internationally.

 

I’m constantly amazed how much some companies will pay consultants without talking to these kinds of groups.

Consultants have done their due diligence, and they generally have great experience, but there are so many resources available for free. When I started my first company in Michigan, the city created a small entrepreneurial group that was essentially a resource center. There were resources upon resources and dedicated professionals, and everything was free. And no one seemed to know about it. We all have so many resources available to us, and so much knowledge to share, that the value of person-to-person communication simply cannot be overstated. I wish more people took advantage of that. It can be as simple as asking a question on Quora or Reddit, or reaching out within your own network.

“There were resources upon resources and dedicated professionals, and everything was free”

What are the biggest risks for technology companies in foreign markets in 2017?

Things are moving a little too fast. If you try to enter a country without the proper knowledge, you end up making mistakes that cost a lot of money, and ultimately risk failure. We’ve got an entrepreneur in residence (EIR) who is talking with startups and corporations about the potential costs of moving too quickly and not being prepared. It is important to do your research and make sure that the risk/reward is favorable. On the technology side, it’s all about execution. Locking down IP is essential if at all possible. When you go into new countries, understanding IP and trademark laws is crucial. If you go into South Africa, for example, and someone there steals your idea, you’re out of luck. Make sure you consult with lawyers, government groups, and other relevant stakeholders to ensure your IP is protected. Outside of that, it’s also important to use technologies that are functional and reliable.

 

Do you see any more temporal risks in 2017 in terms of new technologies and products like drones and artificial intelligence (AI) that don’t yet have an established regulatory environment?

Regulations generally come out because they are proven to be necessary. When you see people flying drones onto the White House lawn or into airfields or the top of a building, there needs to be some guidance and restrictions. In 2017, I think you’ll see heavier regulation in areas like drones. Virtual reality (VR) security is another area where this is likely. We all heard about the Internet of Things (IoT) breach that happened in late 2016, and how insecure some things were. I think you’re going to start seeing a push for protection and security in 2017, and regulation is obviously part of that. This won’t necessarily hinder technological growth, but rather level the playing field. It is going to be an interesting year with a lot of changes in the United States and around the world.

 

It sounds like the outlook is fairly positive for the tech sector. What is your estimation of the state of the foreign pool talent in the tech world?

There are so many brilliant people around the world. When you enter a new region with an exclusively foreign team, it is much harder to understand the local culture and business environment. I recommend bringing a few team members along into a new market, and then hiring some of these brilliant people in your new market so you can hit the ground running. Universities outside the US are grooming waves of talented and innovative people. It is important to bring along core team members so that corporate culture is maintained and communicated to new team. Eventually this will evolve into a cohesive global team, which was what happened with ReadWrite. We kept our team in San Francisco, and slowly started placing people in Asia, and then hiring local people who knew the local culture and supported our vision.

 

What categories are taking off the most within your domain? Is it smart cities? Health? Transportation technology?

Smart cities are certainly one. Cities big and small are trying to attract people and become more efficient and innovative. Cities are businesses, and they want to attract and keep customers. Midwestern cities in the US like Columbus, Pittsburgh, and Detroit are making strides in this area, as are larger cities like San Francisco, San Jose, New York, Los Angeles, and Dallas. Globally, most cities in Asia have made this a top priority. Hong Kong, Shanghai, Singapore have all done this. India is also a real champion for smart cities, along with parts of Europe that are trying to revitalize out of date or long-established infrastructure. Transportation and smart living dovetail nicely with this idea. As consumers, we’re becoming increasingly comfortable with technology in our lives. You can really see a growth spurt in smart home and smart living. This is a no brainer for the automotive and transportation sectors. Every auto manufacturer and ride-sharing company is trying to figure out how make individuals more efficient on the road.

 

What are priorities for ReadWrite and the wearable IoT world’s priorities in 2017?

We’re going to run accelerator programs in six different cities this year, which are focused on region-specific verticals. If someone is looking to get into smart cities or automotive, or even IoT in general, we will be there to help advise and guide you through it, including fundraising support. We’re going global just like everybody else, and we want people to come with us. We’ll have some big announcements coming up in the next few months, and I can’t wait to share them.

Julian Leuthold

Julian is the founder and CEO of GetGlobal. Follow him on Twitter at @julianleuthold

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