Startups Stack Exchange Archive

What are multi national startup problems?

What are the problems startups face when they have offices in 2 or more countries? (eg. engineering in Europe, sales in USA etc..) And what are the solutions if applicable?

(Note: Couldn’t find the right tag for this.)

Answer 3162

Ran a software development center in another country and sales and marketing in another country in order to take advantage of low cost development in the first country.

Some of the problems are:

  1. Manpower - You are going to need operations at each of your sites. That increases your manpower requirements. Also the operations management in the distant site have to be very reliable. You need to do recruitment in multiple countries and having someone who knows the lay of the land might be helpful.
  2. Legal and tax - Some countries have a requirement that a local has to be a partner. Most are easing this in order to draw foreign investment. You need to file taxes in each of the countries and the tax laws are likely to be different. You are going to need to tax adviser in the ones you are not familiar with. Labor laws may be different and you may have to have wage structures, benefits and working hours for different locations. Import and export duty may or may not apply when you move finished goods from one location for sales into the other. If you need to import parts for making the goods before you export finished goods, look for duty free zones.
  3. Coordination and control - Even without distant offices, coordinating sales and marketing activities and feedback into product development and support is hard. Distant offices increase this complexity. Budget suitably for overseas communication. Keep time zones in mind.
  4. Tourist traps - Foreign investing businesses can get caught in tourist traps set by governments to draw in foreign investors - from techno parks that don’t have reliable supporting infrastructure to consultants who specialize in helping foreign businesses get setup and shady government officials who require special incentives. You end up paying a lot more than a local would. Usually these things you learn with experience. Rather than follow what everybody else is doing, visit the country you are interested in, meet other foreign run businesses, see and draw conclusions for yourself. Several countries have programs to attract investments and some of these programs have attractive benefits such as tax breaks or real estate depending on how much you are investing. So ask around for them. On the other hand, some govts may be trying to nationalize a particular industry and maybe dissuading foreign investors from entering into a particular industry.

Weigh the cost and benefits carefully and make sure that the advantage clearly stands out when compared with the alternative despite disadvantages.

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