When we started Daily.co, we thought we were only targeting the US market. Our plan was to get traction at home and then later think about growing internationally. But we got orders from international customers on day one, and these days, half our users are outside the US.
This will probably be the case for your startup, too, unless your business model is specifically geographical. The Internet is global! So it’s worth thinking fairly early on about what it means to have international customers, partners, employees, and offices, and what kinds of international growth and infrastructure to invest in.
Daily.co is my third startup, and as it happens both my first two startups did a lot of stuff internationally (customers and partners in something like 50 countries, and offices in half a dozen), so I’ve accumulated some lessons and rules of thumb over the years.
Here are five things that come up in many of the conversations I have with other startup founders about international issues.
1. Fulfilling international orders is still surprisingly complicated and expensive
It’s easy to process orders from international customers. It’s a lot harder to fulfill those orders.
We ship stuff every day, and we’ve learned that we can’t reliably tell a customer what duties they will be charged when they take delivery of our packages. This is true even of Canada!
Shipping physical things is still expensive, too. It costs about $45 to ship our little hardware video conferencing appliance to Canada, and about $70 to Europe. (That’s not including import duties, which also vary by country.) There are even a few places we can’t ship to at all, because “video calling equipment” is covered by very specific export or import restrictions.
If you’re doing a crowdfunding campaign, we highly recommend paying someone who understands fulfillment at a deep level. You’ll save a lot of time, frustration, and money. Our friends at BackerKit are really good at this, and have a whole set of shipping integrations and features.
Most of my experience is shipping items from the US to other countries. But shipping to the US is just as complicated. For example, let’s say you’ve done a great job with a Kickstarter campaign for a cool new kind of flashlight, you are based outside the US, and you want to ship to US customers. You can look up the duties your US customers will have to pay at the United States International Trade Commission website. In most cases, the answer is 12.5%. But if you’re shipping from Canada, Mexico, Israel, Morocco, and a few other countries, there are no duties. For Korea (South), the duties are 3.7%. For Korea (North) and several other countries, the duties are 35%! Often it can be a little hard to figure out which category best fits your product. It takes work to figure all this stuff out, and it’s a good idea to figure it out before you have a large number of orders coming in!
If you are shipping bigger items, you have, well, bigger challenges! Ask me sometime over beer about air-shipping a dozen pallets of high-end graphics hardware and installation gear to a customer in Saudi Arabia. Those crates took a long time to clear customs.
UPS and FedEx both have international shipping departments that will gladly take your money, but over the years I’ve consistently had better service from DHL.
When you make hardware, you order things from China. In large quantities, ocean freight is very affordable. But like most things in life, when you want something fast, you pay more. Just as a data point for new hardware entrepreneurs: last time we made a relatively small order for a part we were running short of, shipping via ocean freight was quoted at $350 and would have taken about five weeks, and air freight was quoted as $1500 and would have taken about a week. (The differential here varies a lot based on size, weight, and quantities, of course.)
2. If you’re opening an office in a new country, put someone who already knows your company well in charge of that process
It turns out that the job of opening and running a new office involves doing a lot of translating between your company’s norms and the specific local environment. A surprising number of decisions have to get made. New employees will want to fit in with how you already do things. The new office should be an extension of your company, not a completely new culture all its own!
You can definitely hire someone local to manage the new office. (And often that’s the best approach.) But bring your local hire to work alongside you at HQ for at least a few weeks before starting the process of opening the new office.
Companies that hit growth stage and plan to open several new offices usually split the work of opening up a new office into two roles: the person responsible for initially setting up the office and the person responsible for running it long term. The setup person develops a repeatable plan for opening additional offices and does this job multiple times. The person who will run each new office works closely with the setup person, but only worries about the one office that they’re responsible for.
3. Anywhere you have employees, you need an accountant and a lawyer
This one surprised me. But it makes sense. Startups use lawyers and accountants in the US to file incorporation paperwork and do taxes. Every country has somewhat different corporate law and business tax structures, so you probably need local lawyers and accountants.
If you only have part-time contractors in a country, you might not need local lawyers and accountants. But as soon as you’re paying people for full-time work, or have local revenues, or have your signature on a lease, you’ll need to get help filing the right paperwork, adhering to local banking and accounting regulations, and handling tax payments correctly.
4. Work visas are complicated, expensive, and stressful
Just like shipping physical goods, moving people around the world hasn’t changed very much in the Internet era. Getting permission to work in a country you don’t have citizenship in is often confusing and always time-consuming.
US startups can often hire global engineers and executives through the H-1B visa program. The requirements are complex, but here’s a short summary:
- Skilled workers with a university degree are eligible for H-1B visas
- The worker must be sponsored by a company with the financial resources to pay a competitive salary and must not be directly replacing a US citizen in the same job
- The visas are valid for approximately three years and can usually be extended (in fact, the visa-holder can often start the process of applying for a “green card,” permanent residency)
- There is an annual cap on the number of new H-1B visas that are issued, and when that cap is reached, no more H-1Bs are available until the next January
I’ve hired many engineers over the years as H-1B workers. The main challenge is the cost and time that the paperwork takes, and waiting for the visa to be approved. (This often means applying, then waiting for the next calendar year.) While waiting for the visa, it’s often possible for the engineer to work as a contractor from her home country.
You definitely want to get a lawyer who specializes in immigration work to prepare and submit the H-1B application. This saves you a lot of time and greatly increases the chances that the visa will (eventually) be approved. Phyllis Jewell, of Jewell, Stewart & Pratt, has been hugely helpful to me many times.
Recently, the H-1B program has become a political football. It’s not clear whether the program will continue in its current form. I hope it does.
There are other options besides H-1B visas, including the O-1 Visa for people with “extraordinary abilities.” Unfortunately, the new “startup visa” for entrepreneurs, which was supposed to go into effect last year, has been indefinitely put on hold by the Trump administration.
The rules about hiring people and getting them work and residency permits are different in every country. In the EU, for example, it’s very easy to hire people from any other EU country — which is great. But it’s typically very difficult to hire citizens of any non-EU country (including the US).
5. You’re going to need to get on an airplane sometimes
Finally, I’ll note that if you start down the road of working with international customers, partners, and employees, I bet you’ll spend a lot more time on airplanes than you expect.
I’m a big believer in remote work — my company makes video conferencing products, after all! Collaboration tools have gotten so good that it’s now completely possible for a startup team to be distributed all around the world.
But actually sitting together in person can be critical. When building a team, or setting up a manufacturing operation, or closing a sale, sometimes you just have to be there. Which means you have to get on an airplane.
For example, all the entrepreneurs I know who have successfully shipped a physical product manufactured in China have at some point gotten on an airplane and spent multiple weeks on the ground working with their manufacturing partners. Every CEO who sells enterprise tech gets on airplanes to help her sales team close big deals. If you have a remote office, you’ve got to go spend time in that office.
Talent is everywhere, and talent is always a critical resource for a startup. Also, some places have real advantages over the US in some arenas (like China, right now, in high quality electronics manufacturing). And customers all over the world want the best products.
So don’t be afraid to be an international company even when you’re small. Just make sure you do a little bit of up front planning to account for the extra overhead that comes with travel, coordination across time zones, and dealing with multiple government agencies.