Silicon Valley address not required

Venture capitalist Jennifer Fonstad says newly emerging regions around the world may well spawn the next great wave of Internet companies.

5 min read
Start-ups launching today can crop up anywhere in the world, as the Internet has created international opportunities for entrepreneurism. And with potential customers, competitors and partners at almost any address, young companies need a global strategy from the outset to make it.

Make no mistake, Silicon Valley was the first place to create an ecosystem for the start-up life form to thrive. The area hosts a unique set of variables critical for a young company's life support. Yet, while the first of its kind, local versions of that ecosystem are now emerging around the United States and the world, potentially creating the next Yahoo, Nokia or SAP. For those start-ups looking to build their Internet business into the dominant player, it cannot be just a domestic party, particularly in today's economic climate.

The numbers on the international opportunity are compelling. Nearly half of all Internet traffic comes from foreign domain accounts, with over 42 percent of the online population being non-English speakers (over 100 million Internet users). By 2003, the European online population will exceed that in the United States, according to IDC. By 2005, the United States will represent only 30 percent of the global online community.

Entrepreneurs around the world are paying attention to those numbers. Out of every region, start-ups are emerging. They are thriving because these regions have many of the variables critical to development of an ecosystem: an educated, technical work force; early success stories from local heroes; and financial catalysts willing to take risks on entrepreneurs.

In Tel Aviv, Israel, start-ups draw from a deep talent pool of local universities and the military, both steeped in sophisticated technical expertise.

Early successes, like ICQ, inspire other would-be entrepreneurs to take a chance, while an extensive angel and venture network provides the financial catalyst. Start-ups out of Israel will continue to play a larger role on the world stage, so don't be surprised if your next partner, customer or competitor comes from there.

Or Stockholm. Or London. Tokyo, or Hong Kong.

Many of these areas come with unique predispositions that may make their start-ups early leaders in a category. For example, the next great wireless applications and infrastructure may well emerge from Stockholm, London or Tokyo, where the penetration of WAP-enabled phones is higher than anywhere else in the world, even higher than PCs in the United States.

Nokia emerged out of the extensive wireless infrastructure and support available in their native Finland. Companies like Quios see their viral technology spreading rapidly over Europe and Asia, positioning them well as the wireless messaging system of choice as the United States and other markets develop.

What does all this mean for an emerging start-up today?

Get global fast
Traditionally, businesses grew to dominance in their domestic markets and then turned to new markets for growth. Businesses shied away from new markets due to the complexity of entry language barriers, legal infrastructure, and the information void that made it difficult to identify and work with potential partners in those markets.

The Internet, as a platform, enables businesses to potentially play in multiple markets much more quickly, partnering with strategic players around the globe and locking up those markets much earlier in the game.

Many start-ups are playing their strategy on a global basis very early in their life cycle. Companies like Vignette, Kana and Global Sight launched extensive international efforts virtually right away, recognizing that their success depended upon use of their products and services around the world. It's more than a revenue game (though all of these companies are riding steep revenue growth curves); it is fundamentally strategic to the companies' long-term success.

For every start-up that recognized the importance of going global fast, there are those that failed to early enough and are dealing with the consequences.

Just ask Meg Whitman. When asked at a conference about all of the emerging auction sites in countries around the globe, Whitman claimed her one regret was not moving into new markets fast enough. eBay has had to deal with formidable, established auction players in each major market around the globe.

It may be impossible to own multiple territories right out of the box, but partners can provide a lot of initial leverage. Companies like Kana, Global Sight and Vignette partnered with Protege in Europe to launch their businesses, with tremendous early success. In Asia, new global players like Access in Japan and Tech Pacific in Hong Kong are dominating their markets and providing critical leverage to business partners entering their regions.

At Draper Fisher Jurvetson, we see several thousand non-U.S. business plans per year; less than five years ago, non-U.S. plans numbered in the low three digits. Entrepreneurs from around the world seek the financial and business-building support that Silicon Valley-style investors provide. We recently launched an international fund to meet the demand, opening local offices in many of these emerging ecosystems. As we've played a critical role in facilitating partnerships for our companies in the United States, we are doing the same across the globe as we see global partnerships critical to our start-ups' success.

International plan
The need for a global strategy touches every business, large or small. As large organizations move to establish their online presence across the globe, they struggle with language barriers, "brand drift" and infrastructure constraints. To the extent possible, build your business from the beginning around a global deployment strategy.

Think Unicode (and if that's not a familiar term, get help fast). It's easier now than a few years ago, as a number of companies have emerged to assist. Global Sight's software enables Web businesses to manage their Internet services in multiple languages and has seen tremendous demand for their globalization services from companies around the world. Forrester Research found that customers were three times as likely to buy if a site was in their native language. Businesses moving rapidly to provide that service are winning around the globe. It is increasingly critical that start-ups create global solutions from the beginning.

We are at the cusp of a global explosion of entrepreneurship. This offers start-ups huge opportunities to work with global partners and own multiple markets early. It also highlights threats that may come from regions hard to find on your map.

While the Silicon Valley ecosystem may still provide start-ups the most comprehensive support, that world is rapidly changing. Newly emerging regions around the world show signs of nascent ecosystems that may provide the next great Internet companies. We all need to pay attention.