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Internationalization of start-ups

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Diana Vassileva

on 11 March 2015

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Transcript of Internationalization of start-ups

Internationalization of start-ups
A great moment in time for global innovation.
Global pace of innovation can be in danger..
Opportunities and Solutions
How to fix the problem
More financing available every year
Less costly to start a business: US$150 - US$65k
Good initiatives are being turned down as not aligned with investment cycles
1000+ start-ups penniless in 2013
67%+ start-ups each year do not receive funding after seed round
$1B of initial funding gets wasted with 0 ROI
3. The level of Series A activity is holding steady, but the number of seed deals have exploded!

AS A RESULT OF THE DISBALANCE
More companies are being founded, fighting for less series A funds
REALITY CONCLUSIONS
Innovative start-ups get acquired asap by predators due to lack of follow-on funding, along with booming Acqui-Hire practices
Innovative start-ups do not get proper visibility and traction
UNSUSTAINABLE venture capital system that endangers innovation
Support the early internationalization of start-ups to assure their visibility, traction, market share, revenue and employees growth and the building of a more robust business, unlikely to get acquired for a minimum value
ABOUT THE RESEARCH
To empirically prove the correlation between international expansion and start-ups' long-term, billion-$ success
RESEARCH PURPOSE:

10 industries
3 regions – Europe; Asia; USA
1300+ start-ups
Founded 2000-2014
Data sources: Fortune, Inc., Fast Company, CBInsights, Business Insider, Crunchbase, Mattermark, etc.
All international ; in all stages of development
ABOUT THE RESEARCH
Data points used to measure start-up success
# international branch offices
# Twitter followers
# Facebook followers
% Customer base growth
% Revenue growth
% Increase in employees base
Total VC funding received
VC funding received after 1st expansion

Quantitative data + interviews
ABOUT THE RESEARCH
Major research takeaways
Think globally right from the start
Expand as soon as MVP is ready
Parallel rather than sequential expansion process
Internationalization promotes innovation, R&D
Early internationalization grabs VC's attention & money
Majority of ''Unicorn companies'' expand from 0-4 years after founding
Outline common internationalization challenges

CASE STUDIES
US - Cloud Computing
How
WIC Group could support start-up success

Building trust and strategic networking during its many, high-executive level, global events!
Provide adequate professional business development consulting services!
Dedicated capital to innovative start-up initiatives in any sector
Know-how and invaluable advice from a global executive network
NEXT RESEARCH
STEPS
1. Gather data for Europe, Asia
2. Conduct interviews
3. Structure report
4. Select distribution model

A correlation between moment of expansion and performance
The majority of ''unicorns'' in Big Data expanded in 3-5 years since founding
CASE STUDIES
US - Ecommerce
A new
historic
record!
Reality check
Innovation funding is big business — and is getting bigger. And it’s moving fast. It has momentum.
Here is why...
HOWEVER
1. VCs prefer industries with fast route to returns and invest in start-ups in later stages, due to short 3-5 years funding cycles
2. Only 27% of incubator-funded start-ups were able to find follow-on venture funding after 1 year and only 36% since 2005
More great news for global innovation & entrepreneurship...
Increase in global start-up incubators and angel investors
Angel participation rose from 13% to 25.5% between 2007 - 2013
Angels and VCs are working together, crowdfunding is building up and governments start to play crucial roles
Global pace of innovation can be in danger..
Software and Consumer IT Services = 70% of total deals in US, Israel and Canada (2013) and more than US$12b investment
Uneven venture market - during booms periods, unjustified exuberance rules. ''Money chasing deals''
Global pace of innovation can be in danger..
RISK OF 'SERIES A' CRUNCH
4. VCs invest more capital than they managed to fundraise
As VCs complete fewer deals, but larger amounts, in later stages, there is an increasing funding gap forming
Global paste of innovation can be in danger..
5. Angel investments grow, but involvement in the revenue generating and profitable stages of start-ups are in single digits in 2013
6. Access to equity is difficult for investment-intensive and truly innovative sectors, such as CleanTech, Healthcare.
With less than US$5m funding, R&D is impossible
In 2014, VC investment in CleanTech was only US$2b (an average of US$9m per round) for 202 deals
In 2014, VC investment in Mobile was more than $US7b (an average of US$6m per round) for 1000+ deals
In 2013, there are only 45 newsworthy biotech startups that received more than 10$m in first-round funding
Revenue generation = 10% of all angel rounds
Profitable = 5.3%
Startup development = 25.5%
Product development = 17.5%
In 2013, angel investment by stages
Wall Street also wants piece of the pie - now a direct player
CASE STUDIES
US - Ecommerce
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Companies that went international faster in the time range of a year to 3 years period demonstrate enormous growth (10,000%+)
Full transcript