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I’m in the early planning phase of a funding round for a startup in NYC as a second office for a software company that is headquartered in Germany (ca. 50 employees). For a presentation I’m trying to get a good list of benefits and drawbacks of going international. The following is a rough draft:

Benefits

  • Generate synergies
  • Generate cultural diversity
  • Benefit of exchange rate USD / EUR
  • Reduce the risks being affected by national crisis
  • Better positioned for international customers
    • Time difference can ease hours of remote support
  • In comparison to Germany ease of minimizing and maximizing your workforce (Hire & Fire)
  • Increase the market for product sales
    Population: Europe 731 mil (Germany 82 mil); USA 308 mil
  • Possible financial write-off during the startup phase
  • Increase likelihood of hiring the best of the best
  • Sexiness of office in NYC
    • For customers
    • For employees of the headquarters

Drawbacks

  • Risk of investment
  • Risk of exchange rate EUR / USD
  • Time difference
  • Increased amount of paperwork
  • Cultural miscommunications

What are the fields I'm missing? Any additional input is most appreciated.

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3 Answers

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Seems you already have most them ironed out. May I suggest a few things (you may already be taking care of them) :

  1. Try 'linking' your benefits (i.e., a chain) Start point being "create overseas office" and ask yourself so-what at every stage. You can have multiple 'branches' or move sequentially. Doesn't matter. Keep asking yourself 'so-what' till you think you've nailed it. That should tell you how the benefits actually link together and if there are others that you've missed (formally known as the results chain or benefits chain technique :)
  2. You need to capture some assumptions and be able to quantify/track them over time. For example in this case "having an office in NY will indeed generate synergy and having a USD/EUR exchange rate factored in will be profitable (or beneficial)...?" - These assumptions will require some sort of feasibility evidence to some degree.
  3. For each of the benefits you laid out (and/or the chain in 1) think of all the initiatives that need to be undertaken to realize those benefits. They'll give you some additional dimensions on which to base the business case
  4. For each of the initiatives see if you can say who will be responsible for them - they should throw light on the stakeholders (can identify new ones if you missed out some). But it's a good thing to consider the 'who' dimension

Once you have this 'model' you can actually navigate through it and see where your risks lie, what assumptions are 'risky' and where might you need 'more' (or less) than what you initially thought.

This should give you (and the investors) a more comprehensive view of what is involved and whether there is value in the undertaking and what it is it and how it could be articulated/quantified/tracked.

Hope this helps!

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Under risks I would add the increased amount of paperwork. Even if you're only filing taxes in one country, you still will need to provide information to the other country. If you need a lawyer to complete a trademark for you, that would now have to be done in two countries, by two sets of lawyers.

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Thanks! That's a good point. I'm going to add it to my list. – Martin Buberl Feb 28 '11 at 15:32
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If you have common development in multiple physical location, make sure those who manage the effort are master communicators. I've seen first hand how projects between the U.S. and another country go sour due to cultural differences. The people in the remote office were given a task, they claimed it was understood and it was really not. they went off on a tangent for weeks before it's picked up by the U.S. office and by then, a huge chunk of useless work had to be simply thrown out. Asking for help, or admitting things were not clear were considered "shame" in that culture.

U.S. and Germany are more similar than the U.S. and that country, but still, something to consider when you have international teams sharing a codebase.

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I don't think it's a big drawback, but it can be a risk. I totally agree that controlling and communication is a key factor for success here. Good point! – Martin Buberl Feb 28 '11 at 16:26
Didn't mean it's a drawback. It won't put a dent in the benefits, but it's definitely something to watch for. If you don't, it may come back to bite you. – ron M. Feb 28 '11 at 17:09

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