internationalisation strategies of internet start-ups

Internationalisation strategies of internet start-ups

Name: Joost J. Pijl Student number: 6159907

Date of Submission: April 24, 2012 Faculty of Economics and Business

Master: Business Studies

Track: Strategy & Organisation 1st Supervisor: MSc. E. Dirksen

2nd Supervisor: Dr. R.A.L.M. Smeets

Internationalisation strategies of internet start-ups – Master Thesis Joost Pijl

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Acknowledgements

This report is the final part of my Master programme Business Studies at the Faculty

of Economics and Business (FEB), University of Amsterdam. This master thesis is a

conclusion of my specialisation in Strategy & Organisation within the masters’

programme. I would like to show my appreciation to a number of people who were

helpful in writing this thesis. First and foremost, I would like to thank my thesis

supervisor, MSc. Erik Dirksen. Mr. Dirksen has been very helpful and responsive and

always led me in the right direction. I admire his flexibility and appreciate the

freedom he gave me in doing this research. Second, I would like to thank Dr. Alan

Muller. His course International Strategic Management inspired me to research the

internationalisation strategies of internet start-ups. His insights really helped me.

Third, I would like to thank Dr. R. Smeets for being my second supervisor and taking

the time to read this thesis. Last but not least, I would like to thank my mother,

Marleen Kulle, for her unlimited support, motivation and positivism. Without her I

would not have gotten this far. I look forward to start my professional career with all

the knowledge gained at the University of Amsterdam.


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TABLE OF CONTENTS

ABSTRACT ..............................................................................................................................5

1. INTRODUCTION ................................................................................................................6

1.1 OVERVIEW ........................................................................................................................6 1.2 INTERNATIONALISATION STRATEGIES OF INTERNET START-UPS......................................6 1.3 PROBLEM DEFINITION.......................................................................................................7 1.3.1 PROBLEM STATEMENT ...................................................................................................7

1.3.2 Sub questions ............................................................................................................8 1.3.3 Delimitations.............................................................................................................9

1.4 CONTRIBUTION .................................................................................................................9 1.4.1 Theoretical contributions..........................................................................................9 1.4.2 Managerial contributions .......................................................................................10

1.5 STRUCTURE OF THE RESEARCH ......................................................................................10

2. LITERATURE REVIEW..................................................................................................11

2.1. INTERNATIONALISATION THEORIES...............................................................................11 2.1.1. Transaction cost theory .........................................................................................12 2.1.2. Internalisation theory ............................................................................................14 2.1.3. The eclectic paradigm............................................................................................15 2.1.4. Uppsala internationalisation process model .........................................................17

2.2. ONLINE BUSINESS INTERNATIONALISATION STRATEGIES .............................................20 2.3. NEW VENTURE INTERNATIONALISATION STRATEGIES ..................................................21 2.4. SMALL FIRM INTERNATIONALISATION STRATEGIES ......................................................23

2.4.1. Network relationships and small firm internationalisation ...................................25 2.5 HYPOTHESES ..................................................................................................................26

3. METHODOLOGY.............................................................................................................30

3.1. RESEARCH DESIGN.........................................................................................................30 3.2. SEMI-STRUCTURED INTERVIEWS ...................................................................................31 3.3. SAMPLE SELECTION .......................................................................................................32 3.4. DATA PROCESSING ........................................................................................................34

4. RESULTS............................................................................................................................35

4.1. INTERNATIONALISATION APPROACHES, CONSIDERATIONS AND PATTERNS (H1) .........35 4.2. THE INFLUENCE OF MANAGERIAL EXPERIENCE ON FIRM INTERNATIONALISATION (H2)..............................................................................................................................................43 4.3 INFLUENCE OF NETWORKS ON INTERNATIONALISATION (H3) .......................................46 4.4. INTERNATIONALISATION BEST PRACTICES ....................................................................52

5. CONCLUSION...................................................................................................................54

6. DISCUSSION......................................................................................................................57

FUTURE RESEARCH...............................................................................................................59

REFERENCES .......................................................................................................................61

APPENDICES ........................................................................................................................65

APPENDIX A: QUESTIONS SEMI-STRUCTURED INTERVIEWS.................................................65 APPENDIX B: INTERVIEW TRANSCRIPTS...............................................................................67

A) Repudo ........................................................................................................................67 B) Cleeng .........................................................................................................................70 C) Usabilla.......................................................................................................................75 D) Springest .....................................................................................................................81


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E) Roamler.......................................................................................................................86 F) Cloud9.........................................................................................................................89 G) Gidsy...........................................................................................................................92 H) BuddyUp .....................................................................................................................95 I) Marvia..........................................................................................................................98 J) VakantieVeilingen.nl..................................................................................................102


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Abstract We all know the stories about successful entrepreneurs that started their

entrepreneurial journey in the attic room. Empirical research proves that the internet

lowers the barriers for internationalisation. In the last couple of decades, much

research has covered the internationalisation strategies of large firms and

multinational corporations. Less academic attention has been paid to small- and

medium-sized enterprises or born-globals and start-ups. The extant literature on

internationalisation strategies is dominated by dynamic gradual models such as the

Uppsala model and the eclectic paradigm. Every company can learn a lot from

successful internationalisation efforts such as Unilever’s successful

internationalisation to India and Turkey. However, what can the entrepreneur with a

successful concept in the attic room do with these best practices or theories? Clearly,

some elements of the established theories can be helpful but will a global strategy

really work for a start-up? This is an interesting phenomenon to research especially in

the fast moving and ever-changing internet industry. Therefore, this research

investigates the internationalisation strategies of internet start-ups. By analysing

extant literature and conducting semi-structured interviews the researcher tries to

bring clarification to the internationalisation strategies of internet start-ups.

The main findings in this research are that internet start-ups do not follow the

established theoretical internationalisation models completely. In addition, the

experience and international mindset of the manager have a positive influence on the

internationalisation process of the internet start-up. It is also found in this research

that the network relationships of internet start-ups influence their internationalisation

strategy.


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1. Introduction

1.1 Overview

Much attention has been given in literature to the internationalisation processes of

large multinational enterprises (MNEs) (Johanson, 1990). The rapid rise of the

internet has given emergence to a whole new series of entrepreneurs who try their

luck in the digital spheres. Born-globals are emerging in substantial numbers

worldwide (Knight & Cavusgil, 2004). The internet has made it easier for small

companies to expand their businesses abroad and reach a larger audience. Venture

capitalists even argue there is a bubble in the number of internet start-ups (Economist,

2010). It is evident, that the internet brings people together as business partners who

would otherwise never meet. Some companies even start as born-globals and operate

on a global level since their establishment. Some researchers argue these born-globals

to follow an evolutionary process in internationalisation (Madsen & Servais, 1997).

There are many options available to small, medium and large enterprises in

expanding their activities abroad. Much research has been done, and there are many

theories on how firms can internationalise. However, the existing research focuses

mainly on large companies and less on the internationalisation of small- and medium

sized enterprises or start-ups. Dynamic models such as the Uppsala

internationalisation model (Johanson & Vahlne, 1977; Andersen 1993) and more

static models such as Dunning’s (1977) eclectic theory based on the internalisation

model have been proposed. However, consider you own a successful internet start-up,

how would you expand your successful business abroad? Do the internet start-ups use

the more mature internationalisation models or do they take on a hands-on approach?

Is the entrepreneur of critical importance? This research aims to find out how internet

start-ups internationalise.

1.2 Internationalisation strategies of internet start-ups

As mentioned, prior research on internalisation strategies and processes mainly

focuses on MNEs or small- and medium sized enterprises (SMEs). The research found

that firms often show gradual patterns in internationalising based on a strong


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establishment in the domestic market (Loane, McNaughton & Bell, 2004). On the

contrary, internet start-ups often experience tremendous growth and get snatched by

an established firm before even having considered what their domestic market

actually is. During the last decades, the literature on the internationalisation process of

SMEs has become the focus of considerable research interest. However, the literature

mainly focuses on the internationalisation process of MNEs (Bell, 1995). Some

successful internet start-ups consist of one or two employees and can hardly be

considered a SME.

Therefore, it is unclear whether internet start-ups show the same incremental

pattern in internationalising as MNEs do. Will they show a more radical

internationalisation process and which factors do they consider in expanding abroad?

The knowledge gap between large and small firms can be seen by the increasing

acquisition of start-ups by renowned companies. Start-ups do not always have such

developed resources and capabilities as MNEs. The extensive resources and

capabilities of larger firms enable them to delineate a clear internationalisation

strategy whereas smaller firms often learn by doing. Consequently, it would be

interesting and important to understand the internationalisation strategies or patterns

of internet start-ups. These, often, fragile and young companies operate in dynamic

and fast-changing environments. The internationalisation strategies of internet start-

ups should be researched since it might show that internet start-ups follow different

paths and patterns in internationalising then the larger corporations.

1.3 Problem definition

In the following section the problem addressed in this research will be discussed.

First, by defining the problem statement this research will tackle. Second, the sub

questions will be presented and third the delimitations of the research will be

presented.

1.3.1 Problem statement

As Buckley (1989) states, the research on the internationalisation strategies of large

multinational corporations is extensive. The internationalisation strategies of smaller-


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and medium-sized enterprises have gotten much less attention let alone the

internationalisation strategies of start-ups. Therefore, this study attempts to find

evidence on the internationalisation strategies of internet start-ups. The purpose of the

study is thus to answer the following question:

What are the internationalisation strategies of internet start-ups?

To get a sense of how smaller companies internationalise, the goal of this

research is to investigate the internationalisation strategies of internet start-ups. The

World Wide Web has taken its position in society and many people cannot live

without it. A new type of businesses came to life with the rise of the internet and other

rapid developments in technology.

In the United States, Silicon Valley-based companies are known for their

entrepreneurial success and it remains a byword for shared technical excellence

(Hakanson, 2003). The internet industry is one of the fastest moving industries around

and as Kim (2003) explains, internet firms make rapid progress and accelerated

internationalisation (Oviatt & McDougall, 1997). It is thus highly relevant to gain

insight in the internationalisation strategies of internet start-ups. In the vibrant online

industry, taking incremental steps as in the Uppsala model, might prove to be too time

consuming. A successful internet start-up could only have days or even hours to

decide on foreign expansion as opposed to the multinationals that have a strategic

planning department in place. Besides, the resources available to multinationals are

not to be compared to those of internet start-ups. On the practical side, it is useful to

research this phenomenon to gain insight into whether internationalisation strategies

can be generalised and to provide managers with implications.

1.3.2 Sub questions

In order to be able to answer address the problem statement several sub questions are

designed. The sub questions will be processed in the hypotheses which will be

presented after the literature review. Questions like whether the established theoretical

models of internationalisation are applicable to the internationalisation process of

internet start-ups and whether their internationalisation process is radical or


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incremental need to be answered. In addition, hypotheses are designed with regards to

the influence of managerial experience and networks on the internationalisation

process of internet start-ups.

1.3.3 Delimitations

The goal of this study is to find out what the internationalisation strategies of internet

start-ups are and if any pattern or categorisation can be found. What cannot be found

in this research is a new theory on the internationalisation strategies of internet start-

ups. By using existing internationalisation theory combined with interview data the

author aims to find out how internet start-ups realise their foreign ambitions and if any

elements of the existing literature can be recognised.

1.4 Contribution

By answering the described problem statement, this study contributes to the

understanding of the internationalisation process of small businesses or start-ups in

the internet industry. This study builds on previous work but looks further by

researching internet start-ups. Studying start-up companies means dealing with young

and entrepreneurial companies in the dynamic internet industry which contributes to

the existing literature which is focusing on large corporations.

1.4.1 Theoretical contributions

This study deals with the internationalisation process of internet start-ups. Existing

research mainly concentrates on large American corporations. However, many firms

start their international activities when they are still small (Johanson & Wiedersheim-

Paul, 1975). To some extent SMEs are discussed in the literature on firm

internationalisation. This research focuses on smaller firms because of their

importance for a nation’s economic activity, employment rates, innovativeness and

wealth creation. Internationalisation theory is often focused on large companies with

many resources and a lot of in-house knowledge. This study deals with start-ups that


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have less resources and limited knowledge. This study contributes to existing research

due to the fact that start-ups in the internet industry are researched. Many industries

have been researched in the past, the internet is a fairly young industry in which not

much research has been done regarding the internationalisation strategies of internet

start-ups. The reader of this paper will learn what the internationalisation strategies of

internet start-ups are.

1.4.2 Managerial contributions

The managerial relevance for this research is in the strategies adopted by the

interviewed start-ups. By combining existing literature with interviews this research

shows which strategies internet start-ups use and whether they are successful.

Research findings will give entrepreneurs directions on their decision

regarding internationalisation. If an entrepreneur of an internet start-up is considering

moving activities abroad then successful elements of several start-ups can be

consulted. The great importance of the internet in modern society makes it necessary

to understand the strategies chosen by internet start-ups. Moreover, the research will

give public policy makers focus by showing what is important for start-ups and which

unnecessary barriers could be removed.

1.5 Structure of the research

First, the relevant literature of internationalisation will be reviewed (Chapter 2). In

addition, the literature on the internationalisation strategies of online businesses and

start-ups will be reviewed. Second, the methodology of this research is being

discussed and the semi-structured interviews will be explained (Chapter 3). Third, the

empirical results obtained in the interviews will be presented and compared to the

earlier reviewed literature (Chapter 4) after which a conclusion will be drawn

(Chapter 5) and a discussion will be presented (Chapter 6).


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2. Literature Review

2.1. Internationalisation theories

What is internationalisation? Johanson and Vahlne (1977) believe that

“internationalisation is the product of a series of incremental decisions”. They build

on earlier studies that see firm internationalisation as a process in which the

international involvement is gradually being increased. In the last couple of decades

many researchers have studied the internationalisation phenomenon and its

surrounding factors (Cavusgil, 1980). The leading theories show that

internationalisation is largely an incremental process. In other words, a company

cannot operate in various countries as it operates in its domestic market. Some of the

most influential theories will be discussed next.

Before digging into the more established theory, Nummela, Saarenketo and

Puumalainen (2004) provide an interesting insight. Their research findings indicate

that market characteristics and managerial experience drive the global mindset, which,

in turn, is a key parameter of international performance. This suggests that experience

at the managerial level can make the difference between successful or failing

international expansion. The difference between one manager and another can

originate from cultural values. Hofstede’s (1983) research shows the influences of

national cultures on management. Besides constructing four cultural dimensions

(power distance, individualism, masculinity and uncertainty avoidance), Hofstede

(1983) concludes that activities such as management and organising are culturally

dependent. Results of research done by Harveston, Kedia and Davids (2000) even

show that “managers of born-globals had significantly (p<.05) higher global

orientation (15.53) than managers of gradual globalising firms (14.61)”.

In the light of the theories that will be discussed next it is required to mention

the resource based view (RBV). The resource-based view can be useful in that it

stresses the mix of resources and competencies of various firms (Matlay & Mitra,

2004). This theory asserts that resources are the source of competitive advantage

instead of the product. For a resource to be able to offer a competitive advantage it

needs to be valuable, rare, inimitable and non-substitutable. For example, a manager


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or management team is a firm resource with potential for generating competitive

advantage (Barney, 1991).

2.1.1. Transaction cost theory

The transaction cost approach as proposed by Williamson (1979) regards transactions

as the basic unit of economic analysis of organisations. This approach requires

transactions to be dimensionalised and applies to both exogenous and endogenous of

the firm. The transactions cost analysis is an approach to the study of organisations

based on multiple disciplines: economics, organisation theory and some aspects of

contract law. A central concept in the study of transaction costs is opportunism which

is important for economic activity involving transaction-specific investments in

human and physical capital. In addition, efficient information processing is important

in this concept and the assessment is a comparative institutional undertaking

(Williamson, 1979).

Transactions are best described in terms of three attributes: asset specificity,

frequency and uncertainty. Williamson (1979) recognises three levels of analysis at

which the transaction cost approach study organisations. First, the overall structure of

the firm. Second, the operating parts asking which activities to keep inside the firm.

Third, the way in which human assets are organised. Williamson’s (1979) transaction

cost approach relates to Coase’s (1937) view that “the boundary of the firm was a

decision variable for which an economic assessment was needed”. In addition, Coase

(1937) argues that the ability to produce end products involves assembling activities

and stage processing. By the early 1970s, it became clear that studying organisations

was mainly a comparative institutional undertaking in which both internal and

external governance structures required specific attention (Williamson, 1981).

Williamson (1981) adds that the human nature needs to be included in transaction cost

analysis by (1) recognising that human agents are subject to bounded rationality and

(2) the assumption that at least some agents are given to opportunism.

Williamson (1981) considers two organisational alternatives in finding

efficient boundaries for governance structures. A firm could either make a component

itself or buy it from an independent supplier. Mixed modes of production are thus

disregarded. The model proposed by Williamson (1981) is based on transaction cost


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reasoning. However, the trade-off between governance cost economies (advantages

shift to internal organisation) and production cost economies (market may be

presumed to enjoy certain advantages) needs to be recognised (Williamson, 1981).

According to Williamson (1981) the transaction cost model is made up of four central

points: (1) physical asset specifity is never valued by itself but only because demand

is thereby is increased in design or performance respects, (2) such effects of demand

are often realized only at greater production expense (standardized items would be

cheaper, often because scale economies could be more fully exhausted), (3) the

optimal choice of asset specificity requires that production and demand requests are

taken into account simultaneously and (4) governance costs also vary with asset

specificity. Arising from the last point is the choice between firm and market

organisation. Meaning that if assets are non-specific, markets enjoy advantages,

whereas if assets are more specific exchange is more bilateral since the markets’

aggregation benefits are reduced. In addition, Williamson (1981) argues the

transaction cost reasoning makes most sense in studying commercial organisations.

Anderson and Gatignon (1986) refined the transaction cost analysis and

provide several entry modes based on the degree of control. They argue that the

particular entry mode chosen by a company is based on the trade-off between the cost

of resource commitment and control. Simultaneously, a firm should preserve its

flexibility in making the trade-off. Anderson and Gatignon (1986) add that the

transaction cost approach is most suitable for firms already operating in foreign

markets and is useful as a way of structuring issues. However, the application of the

approach is limited by competitive, governmental and information restrictions. Most

advantageous about the transaction cost analysis is that low-resource commitment is

preferable until proven otherwise (Anderson and Gatignon, 1986).

Transaction cost economics withholds that the firm avoids market costs

resulting from exchange (Dunning & Wymbs, 2001). Clearly, the internet reduces

transaction costs and market transactions are made more efficient. Increasing trade

brings new pressures to the front and forces innovation and efficiency. Internet start-

up businesses can thus operate at lower cost while being more efficient than say a

multinational that entered cyberspace long after its initial establishment (Dunning &

Wymbs, 2001). Next, the internalisation theory is discussed which builds on the

transaction cost approach as developed by Coase (1937) and Williamson (1979).


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2.1.2. Internalisation theory

The internalisation theory depends on the assumption of profit-maximisation rather

than on perfect competition and is consistent with the transaction cost approach in

which hierarchical organisation structures replace markets (Rugman, 1986). The

theory as developed by Buckley and Casson (1976) is based on three assumptions: (1)

firms maximise profit in a world of imperfect markets, (2) when markets in

intermediate products are imperfect, there is an incentive to bypass them by creating

internal markets and (3) internalisation of markets across national boundaries

generates MNEs. The second assumption involves owning and controlling activities

which are linked by the market. In later research Buckley (1988) refined the

internalisation approach and argues that it rests on two pillars. First, firms choose the

location with the least costs involved for each activity performed. Second, firms

internalise until the benefits are outweighed by the costs. Central to the internalisation

decision are four groups of factors: (1) industry specific factors, (2) region-specific

factors, (3) nation-specific factors and (4) firm-specific factors. Industry specific

factors relate to the external market structure and the nature of the product. Region-

specific factors relate to the geographic and social characteristics of the regions linked

by the market. Nation-specific factors relate to the fiscal and political relations

between the nations concerned and firm-specific factors reflects the management’s

ability to organise an internal market (Buckley & Casson, 1976). Of main importance

to the internalisation theory are the industry-specific factors.

Internalisation can thus be summarized as being entirely confined to

ownership-specific advantages or intermediate product markets and knowledge

markets and includes all asset exploiting foreign direct investment (FDI).

Internalisation in intermediate product markets brings forth the vertically integrated

producer. Whereas, the internalisation of knowledge markets usually leads to

integration of marketing, production and R&D (Buckley & Casson, 1976). In some

markets the incentive to internalise is stronger than others. Especially in knowledge

markets, the incentives to internalise are greatest.

Whether internalisation is beneficial depends on market imperfections.

Various types of market imperfections can arise, such as: time-lags in interdependent

activities linked by the market, discriminatory pricing due to the need of efficient

exploitation of market power over an intermediate product, bilateral concentration of


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market power leading to an unstable bargaining position, inequalities between buyer

and seller concerning knowledge of the nature or value of the product and government

interventions in international markets. The advantages offered by avoiding these

market imperfections may however be offset by the costs of internalisation. Creating

an internal market can generate higher resource and communication costs. In addition,

there are costs concerned with political problems when having foreign ownership and

control. The net benefit of internalisation ultimately depends on the ability of the

management to successfully organise internalisation (Buckley & Casson, 1976).

Internalising a market is undertaken by a firm as a strategic move and to

increase profit. It can be advantageous for the internalising firm and by definition

disadvantageous to others (Buckley, 1988). The three most cited reasons for

internalising markets are asset specificity, bounded rationality and information

asymmetry. The internet allows reducing asset specificity since it permits increased

specialisation of activities along the value chain. Moreover, the internet reduces

bounded rationality since relevant information can be obtained, filtered and processed

quickly, where previously the human inability to process information played a role. At

last, the internet overcomes information asymmetry to a large extent. Thus, internet

start-ups may need less capital to produce a specialised product due to increased

specialisation of activities of the value chain and they have quick access to

information to which competition also has access. Internet businesses tend to focus

more on core competences and outsource non-core activities (Dunning & Wymbs,

2001).

2.1.3. The eclectic paradigm

The eclectic paradigm is a near relative of the internalisation approach, the latter is

entirely confined to advantages due to the ownership of specific resources. The

strongly contextual eclectic paradigm of international production rests on the

hypothesis that a firm engages in foreign value-adding activities if three interacting

conditions are being met (Dunning, 1977).

First, a firm’s ownership (O) specific advantages consist of specific

competitive advantages of the firm seeking to engage in FDI, these are always

specific to the ownership of the investing firms. The ownership advantages assert that


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the greater of a competitive advantage a firm has in comparison with others, the

higher the probability that they are able to engage in (increasing) foreign production.

Dunning (2000) recognises three main kinds of O or firm specific advantages: (i)

those advantages relating to exploitation or possession of monopoly power, these are

able create certain entry barriers, (ii) those advantages relating to the possession of a

bundle of resources and capabilities which are scarce, unique and sustainable and (iii)

those advantages relating to management competencies of firms. Productivity

differences rest on the spatially transferable intangible assets of the parent companies

(Dunning, 2001). Ownership specific advantages often consist of property right and/or

intangible asset advantages or common governance advantages (Dunning, 1977).

Second, the locational attractions (L) of alternative regions or countries for

undertaking value adding activities of MNEs. This sub-paradigm asserts that the more

the immobile, natural or created resources, which firms need to use together with their

own competitive advantages, favour presence in a foreign location over a domestic

location. The more firms will choose to invest or utilise their specific advantages by

engaging in FDI (Dunning, 2000). So the non-transferability or immobility

characteristics of an economy can explain a productivity differential (Dunning, 2001).

Location-specific variables usually benefit either home or host countries. Examples of

locational attraction are investment incentives, artificial barriers and psychic distance

(Dunning, 1977).

Third, the internalisation (I) advantages. This sub-paradigm confers that it

must be more beneficial to the firm possessing certain advantages to use them itself

rather than selling these to foreign firms. This is achieved by extending the existing

value added chains or adding new ones (Dunning, 1977). Internalisation-incentive

advantages can consist of protection against or to exploit market failure. A few

examples are, the avoidance of negotiating costs, avoid government intervention and

buyer uncertainty (Dunning, 1977).

Dunning (1977) states, the greater the O advantages of firms, the bigger the

incentive to utilise these themselves. If economics of marketing and production are

more favourable at a foreign location, the more likely the firm is to engage in FDI. In

addition, the degree to which a particular country is inclined to engage in international

activities is dependent on the extent to which domestic firms possess advantages and

locational attractions of its endowments compared with those offered by other

countries (Dunning, 1977). Dunning’s (1977) eclectic paradigm posits all


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international production forms by all countries can be explained by the OLI

conditions and offers the basis for a general explanation of international production

(Dunning, 1977). According to Dunning (1977), the eclectic paradigm gives attention

to the path dependency of firms in upgrading their core competencies. In addition, it

pays attention to a dynamic competitive environment and firm’s locational strategies.

The eclectic paradigm states that the significance of the OLI advantages and the way

they are configured is context specific and varies across industries, regions or

countries and even among firms.

When translated to the internet industry the eclectic paradigm has the potential

to remain relevant. The sub-paradigms can be applied to internet businesses.

However, the new business models and processes proposed by internet businesses will

create their own trajectories and path-dependencies. The internet allows firms to

exploit dynamic internalisation (I) advantages which could not have been done

without the internet. New entrants to the internet industry often find increasing returns

on O-specific assets. The locational (L) advantages seem to be disappearing since

information can be sited in any country with an internet server. However, it is the

connectivity to other parts of the network what gives the information value. The costs

of serving foreign markets are significantly lower in the case of internet businesses as

opposed to traditional firm expansion (Dunning & Wymbs, 2001). In addition,

beneficial government policies and assistance toward telecommunications can provide

a positive climate for start-up businesses, e.g. the US capital market is well qualified

in funding internet start-ups. For smaller firms, ownership-specific advantages consist

of knowledge and competency-based issues. However, Fillis (2001) argues that the

eclectic paradigm is biased towards MNE behaviour and is not best suited to explain

small firm internationalisation. Andersen (1993) sees both the transaction cost

approach and the eclectic paradigm as more relevant in later stages of the

internationalisation cycle.

2.1.4. Uppsala internationalisation process model

Traditional business literature argues that firms choose the optimal expansion modes

by analysing costs and risks while taking in consideration their own resources

(Johanson & Vahlne, 2009). The dynamic Uppsala internationalisation process model


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posits that firms gradually internationalise rather than making large foreign

investments. In their study on four Swedish firms, Johanson and Wiedersheim-Paul

(1975) found that they gradually develop foreign operations instead of sudden large

foreign investments. In addition, the developments made in the early stages tend to

have an influence on the following pattern. Johanson and Vahlne (1977) developed

the Uppsala internationalisation process model which focuses on “the gradual

acquisition, integration and use of knowledge about foreign markets and operations,

and on the incrementally increasing commitments to foreign markets”.

The research by Johanson and Wiedersheim-Paul (1975) is based on the

assumption that firms develop in their domestic market first. Following, the

internationalisation process is taking place by incremental decision-making. The

authors consider a lack of resources and knowledge the main barriers to

internationalisation. These barriers can be lowered through incremental decision-

making and continuous learning on foreign markets. The lack of knowledge about

unknown markets in combination with uncertainty avoidance leads to many firms

exporting their goods and services to familiar or neighbouring countries first.

Johanson and Wiedersheim-Paul (1975) distinguish between four stages of

internationalisation also referred to as the establishment chain: 1) no regular export

activities, 2) export via independent representatives, 3) sales subsidiary and 4)

production/manufacturing. The first stage means a firm has not made any resource

commitments and has no connection to the target market. In the second stage firms do

commit to the market and get their information from the market on factors influencing

sales and. The third stage means that the firm has a controlled information channel to

the market allowing them to control the information flowing to the firm. In the fourth

stage the larger resource commitment is made by actually producing in a foreign

market. It must be mentioned that the differences between the steps are exaggerated

and simplified. Moreover, some markets are not large enough for the last steps where

a higher resource commitment is demanded and jumps can be expected by

experienced firms (Johanson & Wiedersheim-Paul, 1975).

In addition to the establishment chain, the concept of psychic distance plays a

role in extending activities abroad. According to Johanson and Wiedersheim-Paul

(1975) psychic distance can be defined as “factors preventing or disturbing the flows

of information between firm and market”. The concept of psychic distance is related

to geographic distance and consists of factors such as culture, language, political


19

systems and the level of education. Psychic distance is one factor to consider when

expanding activities abroad, market size also has an influence on internationalisation

decisions. Other interesting findings in Johanson and Wiedersheim-Paul’s (1975)

research on four Swedish firms is that the firms were initially small when they started

internationalisation compared to their current sizes. In addition, they found the

internationalisation process to be going faster in firms that started latest.

The business environment has changed dramatically after 1975 and it became

more a web of relationships in which firms are linked to each other in various

patterns. In the light of these changes, Johanson and Vahlne (2009) decided to revisit

the Uppsala internationalisation model and add the importance of knowledge,

relationships, learning and networks. Their arguments are based on the two

assumptions: 1) markets are networks of relationships in which firms are linked to

each other in various patterns and 2) relationships offer a learning, trust-building and

commitment potential.

According to Johanson and Vahlne (2009), “successful internationalisation

requires a reciprocal commitment between a firm and its counterparts and trust plays

an important role in this matter”. Trust is important if a firm wants to be successful in

learning and developing new knowledge. The revisited model posits that

internationalisation is seen as an outcome of actions by businesses to strengthen their

network positions. Whereas, in the traditional model foreign entry was seen as

overcoming several barriers (Johanson & Vahlne, 2009). Nowadays, the root of

uncertainty is the liability of outsidership more than psychic distance or the liability of

foreignness. The liability of outsidership refers to the firm attempts to enter a foreign

market where it has no relevant network position.

By revisiting this framework the authors show that problems firms face are

less attributable to country-specificity and more to relationship- or network

specificity. Thus, the importance of modern network relationships is included.

However, the gradual approach remains, the revisited model applies more of a

business network view in which experiential learning is a basic mechanism. Trust and

commitment building are important success factors and firms continuously have to

work on opportunity development (Johanson & Vahlne, 2009). Andersen (1993)

discusses three limitations of the Uppsala model: “First, firms that have large

resources experience small consequences of their commitments and can take larger

internationalisation steps. Second, when market conditions are stable and


20

homogeneous, relevant market knowledge can be gained in ways other than

experience. Third, when the firm has considerable experience from markets with

similar conditions, it may be able to generalise this experience to any specific

market.” Andersen (1993) concludes that the ability of the Uppsala model to delineate

boundaries between stages is limited.

One of the underlying assumptions of the more established models discussed

so far is that firms are well established in their domestic market prior to international

expansion. However, some start-ups have no strong presence in their domestic market

prior to internationalisation. Therefore, it is relevant to look at the literature on the

internationalisation strategies of online businesses, start-ups and SMEs next.

2.2. Online business internationalisation strategies

The internationalisation of online businesses has accelerated rapidly in the last decade

or so and appears to show unique characteristics. The internet offers start-up

companies the advantage, as opposed to offline businesses, to break free from their

domestic market quite easily and compete in an environment where the geographic

barriers are relatively low (Rosson, 2004). This challenges gradual internationalisation

theories which argue that firms enter markets that are closely related socially,

politically, economically and culturally to their domestic market first. After having

entered closely related markets, firms tend to gradually explore markets with less

obvious similarities. Despite the lack of research on the internationalisation of online

businesses. Kim (2003) was one of the first to research the internationalisation

patterns of online businesses and investigated whether gradual internationalisation

theory can be applied to online businesses.

The research conducted by Kim (2003) builds on one of the two dimensions of

internationalisation theory. The first dimension is that firms use entry modes with

minimum resource commitment when starting foreign expansion and then shift to

more resource committing entry modes. The second dimension postulates that

businesses enter physically close foreign markets first and then gradually expand into

less familiar markets with a higher psychic distance. Kim’s (2003) study focuses on

the second dimension of the Uppsala internationalisation theory. The reason for this

focus is that online businesses have not yet used different entry modes but often


21

entered foreign markets by one entry mode (Kim, 2003). The study of Kim (2003)

thus tests “whether the internationalisation of internet firms follows the gradual and

sequential internationalisation of firms in the context of the order of foreign market

entry”. Psychic distance is an important determinant for the internationalisation

process of firms. Kim (2003) splits psychic distance in two indices. First, the cultural

distance index to test whether the internationalisation of online businesses follows

gradual patterns. Second, the social-cultural distance index which means that the

uncertainty and risks a firms discerns on a foreign market usually increase as the

socio-cultural distance increases (Kim, 2003). To be able to answer the research

questions Kim (2003) undertook multiple-case studies of major U.S. online businesses

(Yahoo, AOL, Lycos and AltaVista). These firms were chosen since they have

internationalised enough to be active in multiple countries and have no physical

shops.

The results of Kim’s (2003) research show that the four firms analysed tend to

form joint ventures before setting up any localised services and have shown to enter

strategically important markets first. In addition, strategic markets play an important

role as a central point of internationalisation. By entering these strategic central

markets a base is built for introducing localised services in multiple markets near the

central strategic market (Kim, 2003). Unique to online businesses compared to offline

businesses is that they mostly enter multiple markets rapidly for example by entering

several markets at a time. Both the cultural- and socio-cultural indices explain the

internationalisation of online businesses to a limited extent. Kim (2003) concludes

that the internationalisation of online businesses follows the gradual pattern of the

Uppsala internationalisation theory relatively well.

2.3. New venture internationalisation strategies

Loane, McNaughton and Bell (2004) researched the internationalisation strategies of

internet start-ups. Nowadays, the internet is not merely seen as a tool to improve

performance but more a strategic capability which should be embraced by a firms’

international strategy. In their research, Loane et al. (2004) explore the “patterns, pace

and drivers of internationalisation” of internet start-ups. In addition, they focus on the


22

relevant processes as to determine the influence the internet has on “the firms’

international activities, behaviour and overall strategy”.

The internet and related technologies offer smaller firms the opportunity to

gather information, market themselves and target new markets at relatively low

expenses. Burgel and Murray (2000) found that high-technology start-ups make a

trade-off between the available resources and the customers support requirements in

entering new markets. In addition, these smaller firms experience fewer

internationalisation barriers allowing them to operate on a global level quickly. Some

of these firms start operating internationally from the start and are referred to as

‘born-global’ firms. Although the internet offers start-ups unique opportunities, their

success is not solely attributable to technologies such as the internet. Many other

factors have their influence too, such as: management orientation, product/service

characteristics, availability of human/financial resources and the ability to leverage

external resources (Loane et al., 2004).

Born-global firms are often characterised by the management of the firm that

adopts a global focus from inception and pursues fast internationalisation. Besides the

emergence of technologies such as the internet, the development of these firms can be

explained by the increasing role of niche markets and the growth of global networks

(Loane et al., 2004).

As Loane et al. (2004) stated, management orientation influences the

internationalisation of a firm. Other research found that the global mindset of a

manager is positively associated with foreign performance (Nummela et al., 2004). If

a management team is more experienced they are more likely to form partnerships

abroad. Moreover, an experienced management team influences the speed of the first

foreign sales positively. On the contrary, new venture internationalisation is

decelerated by the resource deficiencies they face. A lack of financial- and human

resources, knowledge and management experience hampers international expansion.

Results of Loane et al.’s (2004) research on Irish start-ups shows that they

adopt a global orientation right from the start. All of the firms showed signs of quick

internationalisation and wide market spread. Five of the ten firms from their study

were global from the start onwards, the other five firms internationalised within two

years after being established. As a mode of internationalisation all of the case firms

were using direct exporting, a market entry mode accompanied by low risk and

uncertainty, although some firms were using multiple entry modes such as direct


23

exporting and franchising agreements. The data show that the case firms

internationalised rapidly, used various entry modes and that their choices were driven

by both industry and sectorial differences. None of the firms included in the study

possessed great degrees of organisation experience. However, all firms included in the

study displayed evidence of global orientation. In addition, the entrepreneurs were

regarded as very important in the internationalisation process (Loane et al., 2004).

Finance proved to be a much cited barrier to internationalisation for start-ups. Results

indicate that half of the firms successfully raised venture capital. So in general, the

firms studied did not regard a lack of funding as a barrier to internationalisation.

Having both personal and business networks is something which is regarded as

important and is demonstrated among the case firms.

As mentioned the entrepreneurs were found to have an influence on the

success of the internationalisation process. Reuber and Fischer (1997) examined the

role of managers’ international experience and their tendency to develop strategic

networks abroad. They found that more internationally experienced managers have a

greater tendency to develop a business’ strategic partners abroad and are quicker at

obtaining sales abroad after starting up. Adding, these behaviours are associated with

higher internationalisation degrees. Their findings are confirmed by Nummela et al.

(2004) who indicate that market characteristics and managerial experience drive the

global mindset, which, in turn, is a key parameter of international performance.

2.4. Small firm internationalisation strategies

Having discussed the internationalisation strategies of online businesses and internet

start-ups it is now relevant to look at the internationalisation of small firms.

According to Fillis (2001), smaller firms can coexist with larger firms through their

ability to offer tailored products and services. In addition, small firms can enhance

this flexible ability by “intuitive networking and other entrepreneurial-based

competencies”. As Johanson and Vahlne (2009) also indicated, networking has

become increasingly important for firm internationalisation. For small firms, this can

be done by building relationships in new markets and connecting to established

networks in different countries (Fillis, 2001). It is unclear whether small firm

internationalisation follows a sequential pattern (Matlay & Mitra, 2004).


24

According to Fillis (2001), the existing paradigms of internationalisation fail

to explain small firm internationalisation. Firms compete unequally in terms of

available resources, creativity, identification of opportunities and business/marketing

skills. Other models such as the marketing and entrepreneurship paradigm are thought

of to explain better the differences between large and small firms. Bell, McNaughton,

Young and Crick (2003) propose an integrative model of small firm

internationalisation. Their model recognises the existence of different

internationalisation trails.

Bell et al. (2003) found four streams of research that have challenged gradual

process models. First, the network theory and internationalisation. Second, research

into international new ventures and born-global firms where early and rapid

internationalisation by small technology firms was demonstrated. Third, the research

on the globalisation of services which argues these firms tend to internationalise

different than the traditional manufacturing firms. And fourth, internationalisation

may be influenced by eras or ‘episodes’ leading to de-internationalisation or rapid

internationalisation. In their research, Bell et al. (2003) distinguished between

knowledge-intensive and traditional firms. They found significant differences in the

pace and patterns of internationalisation between these firms. Knowledge-intensive

firms were found to be more proactive and structured in their internationalisation

approach. Their entry modes were also found to be more flexible and they

internationalised faster. The traditional firms provided evidence of incremental

internationalisation. In addition, Bell et al. (2003) found evidence of ‘episodes’

leading to a change in strategic focus. The most common ‘episode’ was when

ownership rights or firm management changed. Another common event was when one

of a firm’s existing customers internationalised and the firm decided to follow the

client abroad.

The model as proposed by Bell et al. (2003) recognises that knowledge

intensity can act as a major source of international competitive advantage. The lower

the knowledge intensity, the more likely it is that a firm expands gradually. Moreover,

the model states that firms may experience eras of rapid internationalisation or de-

internationalisation. The model incorporates both incremental and network models of

internationalisation. At last, the model argues that the focus should be on strategic

rather than operational issues.


25

In later studies Bell, Crick and Young (2004) explored the linkages between

small firms’ business strategies and their patterns, processes and pace of

internationalisation. Bell et al. (2004) found that business policies had an important

influence upon a firm’s international orientation. Moreover, ownership and

management issues proved to influence firms’ international focus. Changes in

ownership or management led to reorientation of business activities, often resulting in

rapid and dedicated internationalisation. New product development was also found to

be required to internationalisation as well as product range.

Bell et al. (2004) found exporting modes to be the most occurring entry

strategy in their research. As opposed to the psychic distance which incremental

models regard as the main factor for country choice, this was only found to be one of

several determining factors: First, global industry trends were influential together with

where the lead markets were situated. Second, following important clients was an

important factor too. Third, pre-existing contacts from prior jobs leading to export

order. Fourth, market knowledge and network connections were contributing factors

(Bell et al., 2004). According to Bell et al. (2004), networking relationships are

extremely important in internationalisation. The ultimate decision to expand abroad

incrementally or non-incrementally is thus not only based on opportunities, but also

on the available resources to the firm (Bell et al., 2004).

2.4.1. Network relationships and small firm internationalisation

By revisiting their incremental internationalisation theory, Johanson and Vahlne

(2009) showed the importance and influence of modern network relationships on firm

internationalisation. The question remains whether networks also play a role in the

internationalisation process of smaller firms. Coviello and Munro (1997) researched

the influence of network relationships on the internationalisation process of small

firms. This paper uses the definition of a network by Axelsson and Easton (1992) who

argue that a network involves “sets of two or more connected exchange relationships”.

Sharma (1993) explains the network perspective and argues that the nature of the

established relationships influences the strategic decisions and the network involves

the exchange of resources among members. The network perspective thus goes

beyond gradual internationalisation models by implying that strategy emerges as a


26

pattern of behaviour influenced by different network relationships. External

relationships can thus have a positive influence on the international development of

the firm (Coviello & Munro, 1997). Chetty (2000) found that networks can help firms

to be open to new opportunities, learn, obtain knowledge and benefit from pooled

resources.

Coviello and Munro (1997) found that small software firms go through three

stages of international activity. First, they have a domestic focus with

internationalisation intentions in the initial stage (Year 0-1). In the second stage (Year

1-3) the firms become active in their first foreign market and management considers

international opportunities. In the third stage (Year 3-onwards) the case firms showed

involvement in various markets and growth is dominated by international sales. In the

last stage the small software firms developed complex relationship structures, made

use of multiple entry modes and seemed to ignore psychic distance (Coviello &

Munro, 1997). From the above it can be concluded that network relationships

facilitate international growth. On the contrary, network relationships can constrain

the pursuance of opportunities since your reputation could be harmed. Coviello and

Munro (1997) also found support for the effect of managerial learning on increased

foreign market development. Over time, experience and success led to increased

knowledge about managing relationships. This increase in its turn, led to an increasing

commitment to international development. In addition, Coviello and Munro (1997)

found the internationalisation process of small knowledge-based software firms to

progress very rapidly, be characterised by three stages and make us of multiple entry

modes simultaneously. Coviello and Munro (1997) conclude that “network

relationships can drive market expansion and development activities, including choice

of market and entry mode. In addition, they can both facilitate and inhibit product

development and market diversification strategies”.

2.5 Hypotheses

This part explicates the hypotheses of the theory. The hypotheses are designed to

answer the research question: “What are the internationalisation strategies of

internet start-ups?”. Below, each hypothesis will be discussed briefly and supported

by the relevant literature.


27

Internet start-ups often experience tremendous growth in the early stages and

operate in an environment where geographic barriers are lowering (Rosson, 2004). In

their establishment chain, the predecessor to the Uppsala internationalisation process

model, Johanson and Wiedersheim-Paul (1975) argue that firms pass four stages in

the internationalisation process and jumps can only be expected by experienced firms.

The stages are reflected by an increase in resource commitment. For example, studies

of export behaviour have found that international activities within a company start

with irregular foreign sales. As the involvement in foreign activities increases, export

subsidiaries will be contracted and sales units will be established abroad; the final step

will be a production unit in another country (Johanson & Wiedersheim-Paul 1975;

Johanson & Vahlne 1977). Coviello and Munro (1997) challenge the number of stages

by showing that small software firms go through three stages and ignore psychic

distance, an important factor from the Uppsala internalisation process model. Other

barriers to internationalisation according to the Uppsala model are a lack of resources

and knowledge. However, the internet and related technologies offer smaller firms the

opportunity to gather information, market themselves and target new markets at

relatively low expenses. In addition, these smaller firms experience fewer

internationalisation barriers allowing them to operate on a global level quickly (Loane

et al. 2004). Andersen (1993) discusses some limitations of the Uppsala model and

argues that firms with large resources experience small consequences of their

commitments and thus can take larger internationalisation steps. Moreover, market

knowledge can be gained in other ways than experience when market conditions are

stable and homogeneous. In addition, Andersen (1993) argues that when a firm has

considerable market experience from markets with similar characteristics, it may be

able to generalise this experience to any specific market.

Kim (2003) found that internet firms make quick progress and they appeared

to be able to enter multiple markets rapidly. Although Kim (2003) found online

businesses to be following the gradual internationalisation pattern relatively well, the

patterns were found consistent with only four cases from the service industry which is

not strong enough to generalise findings. Loane et al. (2004) found evidence for quick

internationalisation and a wide market spread in a short period of time in their

research on internet start-up internationalisation, five out of the ten case firms

internationalised within two years after establishment. Fillis (2001) argues that the

existing models fail to explain small firm internationalisation. Therefore it is


28

hypothesised (H1) that internet start-ups internationalise non-gradually instead of

gradually:

H1: The internationalisation process of internet start-ups is a non-gradual, instead of

gradual process.

The World-Wide Web offers start-ups unique opportunities. Nonetheless, their

success is not solely attributable to technologies such as the internet. Many other

factors have their influence too, management orientation is one of these potential

success factors. Management orientation influences firm internationalisation (Loane et

al., 2004). Bell et al. (2004) found that a change in management often led to

organisational reorganisation. As mentioned, Reuber and Fischer (1997) examined the

role of managers’ international experience and their tendency to develop strategic

networks abroad. They found that more internationally experienced managers have a

greater tendency to develop a business’ strategic partners abroad and obtain foreign

sales more quickly after starting-up. Adding, these behaviours are associated with

higher internationalisation degrees. Nummela et al. (2004) found that managerial

experience drives the global mindset which in turn is a key parameter of performance.

Ultimately, decisions at the managerial level can make the difference between

successful or failing international expansion. Loane et al. (2004) add that management

orientation offers opportunities and contributes to a start-up’s success. For example,

born-global firms are often characterised by management adopting a global focus

from inception and constantly pursuing fast internationalisation. Johnson (2004)

found that early start-up internationalisation is dependent on the international vision

of the founders and their desire to be international market leaders. Entrepreneurs can

thus be regarded as very important in the internationalisation process. As mentioned, a

more experienced management is more likely to form partnerships abroad and

influences the speed of the first foreign sales positively. Therefore it is hypothesised

(H2) that the mindset of management influences internationalisation strategies of

internet start-ups:

H2: The international mindset of the entrepreneur(s) or management has a positive

influence on the internationalisation process of internet start-ups.


29

Bell et al. (2003) argue that network theory, born-globals, the occurrence of

internationalisation ‘episodes’ and the difference between the globalisation of services

and manufacturing firms challenges the established gradual models. By revisiting the

Uppsala internationalisation process model Johanson and Vahlne (2009) recognised

the importance of knowledge, relationships, learning and networks. They make their

argument based on two assumptions: 1) markets are networks of relationships in

which firms are interlinked in various patterns and 2) relationships offer a learning,

trust-building and commitment potential. Especially the role of trust and experiential

learning are considered important.

The importance of networks in internationalisation is also stressed by a

handful of other researchers. Coviello and Munro (1997) argue that strategy emerges

as a pattern of behaviour influenced by different network relationships. In turn, these

network relationships facilitate international growth. Kim (2003) explains that internet

firms are lured to follow business networks or partners’ potential rather than

considering market potential or psychic distance, especially early in the

internationalisation process. In their research on ten Irish internet start-ups, Loane et

al. (2004) found having both business and personal networks as very important.

Therefore it is hypothesized (H3) that network relationships influence

internationalisation strategies of internet start-ups:

H3: Network relationships influence the internationalisation strategy (choice of

foreign markets and entry modes) of internet start-ups.

To test the above hypotheses semi-structured interviews will be conducted

among a number of internet start-ups. In the next section an in-depth analysis of the

methodology of this research will be presented.


30

3. Methodology

3.1. Research design

This chapter describes the methodology of the research conducted by explaining how

the research objectives are achieved. The empirical evidence for answering the

research question will be gathered from two sources. On the one hand, findings from

the relevant academic internationalisation and business studies literature will be used.

The literature will be accessed through university access. On the other hand, semi-

structured interviews will be held with ten entrepreneurs or managers of mainly Dutch

internet start-ups. Thus, this research uses a qualitative/exploratory approach to

answer the research question: “What are the internationalisation strategies of

internet start-ups?” (Saunders, Lewis & Thornhill, 2009). According to Saunders et

al. (2009) exploratory research is a valuable means to seek new insights and to ask

questions. There are three ways to conduct exploratory research: (1) a literature

search, (2) interviewing field experts and (3) conduct a focus group interview. Two of

these three mentioned by Saunders et al. (2009) are addressed in this research. In

using multiple methods better results will be provided with regard to the research

question. By setting up a research question in advance and analysing the interview

data afterwards, a mix of the inductive and deductive approach is taken on in this

research.

The research is carried out in the Netherlands in the tertiary sector. This sector

is chosen as the majority of the internet start-ups are active in this part of the economy

since they supply businesses and consumers with their services and products. The

research population consists of entrepreneurs and managers of internet start-ups since

internet start-ups often employ a limited number of employees and management is the

only layer involved in internationalisation matters.

To sum up, in carrying out the research, a combination of a literature search

and semi-structured interviews is adopted. The interview approach allows meeting the

research objectives since ‘experts’ in the subject are interviewed. Another reason for

choosing this method is its flexible character and its adaptability to change. The

research focus is broad in the beginning and becomes narrower as research progresses


31

(Saunders et al., 2009). Next, the method of data collection, semi-structured

interviews, is elaborated upon.

3.2. Semi-structured interviews

According to Saunders et al. (2009) a semi-structured interview is a: “wide-ranging

category of interview in which the interviewer commences with a set of interview

themes but is prepared to vary the order in which questions are asked and to ask new

questions in the context of the research situation”. In this research, semi-structured

interviews will be held among a sample of ten internet start-ups by interviewing the

entrepreneurs or managers. Bell et al. (2004) state that interviews may be the only

way of obtaining information from the key decision makers, given their noted

reluctance to complete questionnaires.

Saunders et al. (2009) argue that the researcher in a semi-structured interview

has a list of themes to be covered. This means that there will be some structure in the

interview but there will be room to improvise and collect answers outside the standard

questions. The themes for the interviews are as follows:

a) Company information

b) Internationalisation degree/pattern

c) Management influence

d) Influence of networks

e) Additional information

The interviews are audio-recorded and transcribed to keep the data intact and

to be able to analyse it in later stages. On average, the duration of the interviews is

around 45 minutes. The purpose of the interview will be explained to the interviewee

in a short introduction. Permission to record the interview will be asked in advance. It

is the duty of the interviewer to get the most out of the interviewee’s answers.

Therefore, the order of the questions may be varied depending upon the conversation

(Saunders et al., 2009). The nature of the collected qualitative data has implications

for its analysis. All interviews will be conducted in Dutch if possible and translated in

a later stage.


32

Semi-structured interviews can be used in relation to an exploratory study.

According to Saunders et al. (2009) it can be very helpful to find out what is

happening and to gather new insights. In order to contrive the best results, the

interviewer will listen carefully, ask short straightforward questions and remain

neutral at all times. A full structure of the interview and the according themes can be

found in Appendix A.

3.3. Sample selection

The European Commission (EC) does not recognise start-up businesses as a separate

entity. Instead, they are clustered in the category of small- and medium-sized

enterprises (SMEs). SMEs are made up of enterprises which employ less than 250

people and have a maximum annual turnover of 50 million euro (European

Commission, 2005). Figure 1 provides information on how the SME definition is

constructed.

FIGURE 1: SME Thresholds

Source: European Commission, The New SME Definition, 2005


33

A small business is thus referred to as a business with a maximum of 50

employees and a micro business has 10 employees at a maximum. The official SME

definition of the European Commission is applied, meaning that the sample will

consist of companies with less than 250 employees and an annual turnover of less

than 50 million euro. However, the focus is on the lower segments of Figure 1, the

small- and micro businesses. Nevertheless, a business with more than fifty employees

will not be excluded from the research.

To gather ten interviewees the internet is consulted. Yearly, several awards are

distributed for the best and most promising internet start-ups. In accordance to Kim

(2003), these firms are chosen since they have already internationalised and had

online commercial presence before having physical shops. Based on these criteria ten

start-ups are randomly selected and presented in Table 1 below in alphabetical order:

TABLE 1 Ten Internet Start-ups

Company Interviewee Main market(s) Employees Founded Product

BuddyUp Diederik Bol (Founder)

Netherlands 2 2011 Platform for finding buddies to undertake activities

Cleeng Donald Res (VP Operations & Developer Communities

Netherlands, Poland, France, U.S.

8-9 2010 Content monetization tool

Cloud9 Ruben Daniels (Co-Founder)

Netherlands, Poland, Canada, Greece, U.S.

25 2010 Cloud programming

Emesa -VakantieVeilingen.nl

Marcel Beemsterboer (Founder)

Netherlands, Germany

90 2007 Online auctions

Gidsy Edial Dekker (Founder)

Netherlands, Germany, U.K, U.S.

10 2011 Marketplace for activities

Marvia Jons Janssens (Founder)

Netherlands, Several

10 2007 Print- and publishing tool

Repudo Lucas Tieleman (Founder)

Netherlands, U.K.

11-12 2011 Location-based services

Roamler Wiggert de Haan (Founder)

Netherlands, U.K.

18 2011 Location-based services

Springest Ruben Timmermans (Founder)

Netherlands, Germany, Belgium, U.K.

18-20 2007 Platform for training

Usabilla Paul Veugen (Founder)

Netherlands, U.S.

10 2009 Online usability tool


34

On average the ten case companies are 2 years and 7 months old. The average

number of employees in the ten case companies is 20,06. All of the case companies

started their business online and offer a range of different products and services. Two

out of nine companies offer location-based services based on GPS locations. Others

offer tools such as online usability testing, content-monetization, online auctions of

leisure activities and social platforms. On average the ten case companies are active in

two to three countries. Nine start-ups are Dutch and one start-up is based in Berlin,

Germany. However, two out of three managers of the German start-up are Dutch.

3.4. Data processing

The interviews will be recorded after permission from the interviewee using an audio

recorder. The data gathered during the interview will be translated, transcribed,

processed and analysed at a later stage. This means there is some time between the

interview and the time when the data is analysed to make sure this is done objectively.

The data will be stored in accordance with Article 1 of Directive 95/46/EC (Saunders

et al., 2009). The data will be transcribed in the appropriate software, NVivo 9.2, to

deduct possible patterns or categorisations. The NVivo data file is available upon

request. It may be concluded that there are no patterns or categorisations possible.

The data need to be grouped into themes before they can be meaningfully

analysed, otherwise the results may be an impressionistic view of what they mean.

The data are analysed by sorting the data using themes and locating subsets of these

data according to specified criteria of the hypotheses. In NVivo the data are coded

using nodes mostly according to the structure of semi-structured interviews. If any

other structure is recognised than other nodes will be created under which the data can

be assigned.


35

4. Results

The following section presents the results contrived from the data gathered. The order

of this section is built on the hypotheses and the basic structure of the semi-structured

interviews. Therefore, this section will start with the internationalisation approaches,

considerations and patterns displayed by the ten case firms (H1). Next, the influence

of the manager’s experience on the global mindset and internationalisation of the firm

will be presented (H2). Following, the influence of networks on internationalisation

among the ten case firms will be discussed (H3). At last, several best practices will be

shared regarding the internationalisation of internet start-ups.

4.1. Internationalisation approaches, considerations and patterns (H1)

As Rosson (2004) noted, internet start-ups often experience tremendous

growth in the early stages and face lowering geographic barriers. In their classic

establishment chain, Johanson and Wiedersheim-Paul (1975) argue that firms pass

four stages in the internationalisation process, jumps can only be expected by

experienced firms. Coviello and Munro (1997) on their hand, argue that small

software firms go through only three of these stages and ignore psychic distance.

Other barriers to internationalisation according to the Uppsala model are a lack of

resources and knowledge. Loan et al. (2004) found that smaller firms experience

fewer internationalisation barriers. In addition, they found evidence for quick

internationalisation in a short period of time in their research on internet start-up

internationalisation. Kim (2003) found that internet firms make rapid progress and

they appeared to be able to enter multiple markets rapidly. Fillis (2001) argues that the

existing models fail to explain small firm internationalisation. Therefore it is

hypothesised (H1) that internet start-ups internationalise do not internationalise

gradually nor follow the traditional internationalisation theories: The

internationalisation process of internet start-ups is a non-gradual, instead of gradual

process (H1).

The interviews show that internet start-ups have differing approaches,

considerations and patterns when it comes to internationalisation. There are also some

commonalities to be seen. Two of the nine case firms can be considered born-global


36

companies. These firms were global from inception. One firm only serves domestic

clients abroad from its Dutch office and one start-up made its first internationalisation

efforts only recently. Three firms internationalised 6 months after establishment, one

firm 18 months after establishment and two firms after being in operation for 3 years.

The firms started internationalising on average approximately 14 months after

inception. It has to be noted that many of the internet start-ups already served

customers internationally before having done any internationalisation efforts. As one

interviewee said:

The above statement shows that start-ups do not necessarily have a drive to

become successful in their domestic market before going abroad. Some start-ups have

a global focus from inception and the internet is the means to put their product or

service to global attention.

The reasons to internationalise vary widely among the ten case companies.

Some start-ups indicate that they started internationalising to test and explore foreign

markets. Other firms chase the largest market potential for example in the United

States. Other drivers to internationalise mentioned were: a drive to grow, desired

partner companies are located abroad, a web-sales strategy, greater opportunities,

more interesting and the desire to become the first global dominant player in its sector

was also mentioned. A web-sales strategy means your product can be bought online

worldwide. Therefore, by doing international sales you are internationalising too. Four

of the ten start-ups are doing business in the United States:

Each start-up has its own approach to reach its foreign target market(s). The

ten case companies were asked about the steps taken in approaching their markets

abroad. Five out of the ten case companies indicated to use press releases when

approaching markets abroad and five companies indicated to look for local partners.

Some other steps taken to approach foreign markets were to talk with (potential)

clients or to visit conferences. Press releases are thus an important means to internet

“…the ‘global’ part is in our veins. It was no discussion how we would approach

things, since the very start it was clear that our product would be a global

solution.”

“Everything is focused on serving masses and easy spread, therefore we target the

U.S. market where potential is great.”


37

start-ups in approaching foreign markets.

Johanson and Wiedersheim-Paul (1975) argue that the four sequential stages

of the establishment chain are reflected by increases in resource commitment. When

asked for increases in resource commitments one interviewee said:

Besides an increase in the spending of money no other increases in resource

commitment were mentioned by any of the case companies. One would assume that

an office or increase in foreign employees would be necessary on the long-term.

However, two start-ups mentioned that being physically present in a given market is

useful but not necessary.

The research by Johanson and Wiedersheim-Paul (1975) is based on the

assumption that firms develop in their domestic market first. When the ten case

companies were asked whether the development and growth in the domestic market

were of influence to its internationalisation 60% indicated it to have no influence.

Two start-ups indicated to focus on growth and a strong position in the Netherlands

first prior to foreign expansion.

Johanson and Wiedersheim-Paul (1975) also discuss the concept of psychic

distance which is related to geographic distance and consists of factors such as

culture, language, political systems and the level of education. Rosson (2004) argues

that internet start-ups operate in an environment where geographic barriers are

lowering. Therefore, the ten case companies were asked whether geographic location

played a role in the internationalisation process and the choice for a specific market.

Three start-ups explicitly stated that they went to a market that is geographically close

and therefore easier to approach. The other seven start-ups did not mention

geographic location as a motivation for the chosen location.

Next the case companies were asked whether psychic distance played a role in

their choice for foreign markets. Contrary to Johanson and Wiedersheim-Paul (1975),

Munro (1997) argues that small software firms ignore psychic distance. For 50% of

“If you want to go abroad you should invest to get things of the ground, that is

inherent to each other.”

“It is a deliberate choice for us to target the U.S. market first, domestic growth

has no influence.”

“We chose a market with the English language to minimise development efforts.

Geographic location was thus not really of any influence.”


38

the start-ups psychic distance plays a role in their choice for a given market. For the

majority (60%) of start-ups for which psychic distance plays a role the language is

decisive for the markets they enter or do not:

Psychic distance thus still plays a role for some internet start-ups. However, a

couple of the case companies indicate that psychic distance is not of overriding

importance in a choice for specific markets, some even see psychic distance as

challenging. The results indicate that psychic distance is not ignored by internet start-

ups as with the small software firms of Munro (1997). However, psychic distance is

not always considered as in the theory of Johanson and Wiedersheim-Paul (1975). In

general, the interviewees are aware of the cultural differences that have to be taken

into account and do so.

Other barriers that can be considered by internationalising firms are trade

barriers. Kim (2003) found that online businesses tend to enter multiple markets more

rapidly than offline businesses. Loane et al. (2004) adds that smaller firms experience

fewer internationalisation barriers allowing them to operate on a global level quickly.

Six out of the ten start-ups indicate that trade barriers are no issue or consideration in

internationalisation. Three start-ups indicate that financial transactions can cause

problems since tax regulations differ. However, only one of the three start-ups

considered this a barrier. One start-up even feels trade barriers in the domestic market

are greater. The following quotes highlight the relative importance of trade barriers:

“Most trading barriers are raised in the Netherlands. To structure your payment

handling well requires a lot of time. In the U.S. market we did not encounter any

trading barriers. Other barriers are tax related, doing business in our domestic

market Europe is harder than in the U.S. In the U.S. there is an actual ecosystem

around start-ups, this is different in the Netherlands.”

“One of the reasons we are not live in Germany is because we are not fluent in the

German language.”

“If we would have focused on Germany or France the language would have been

an issue, a German user prefers to use our tool in German.”

“The choice for the U.K. was because of the language and the small difference in

time zones.”


39

According to the Uppsala model, other barriers to internationalisation are a

lack of knowledge and resources (Johanson and Wiedersheim-Paul, 1975). When it

comes to a lack of knowledge only one start-up considers this troublesome. The start-

ups realise best practices are not always readily available and that knowledge is

acquired by experience. Other start-ups indicate that a continuous learning cycle is

part of being a start-up and do not consider it an internationalisation barrier:

Consequently, the start-ups are asked whether a shortage or lack of resources

is of any influence on the internationalisation process. Only two start-ups indicate that

their internationalisation is influenced by a lack of resources. One start-up

experienced a shortage of marketing resources but did not consider it a real lack of

resources. The interviewee said:

A shortage of resources is thus not seen as a barrier to internationalisation. Nor

did some start-ups experience a lack of resources:

For one start-up a lack of resources influences its strategy. If a large

investment is attracted one can set out an aggressive internationalisation. This start-up

is privately funded and cannot afford aggressive internationalisation strategies.

Until now we saw that the motivations to internationalise among start-ups

differ. The case companies also show that the considerations in internationalising are

differing. The Uppsala internationalisation process model argues firms undertake four

“There are no international distribution restrictions in the software market in

which we operate. Our application can be distributed internationally easily

through App stores, Google Android Market, Blackberry App World and Windows

Phone Marketplace with a few mouse clicks.”

“Constantly, but I don’t consider this a handicap. You have to gather the

knowledge yourself, test, measure, try and see how things work. Knowledge is

constantly coming my way.”

“I don’t really consider it a lack of resources, as a start-up you don’t necessarily

feel the lack of resources because you are used to it. You are used to start

somewhere with one person and do it rudimentary.”

“We had enough resources to get the knowledge needed to make a good start.”


40

sequential steps in internationalisation: 1) irregular export activities, 2) export via

independent representative, 3) a foreign sales subsidiary and 4) a foreign production

or manufacturing facility. According to the authors, jumps can only be expected by

the more experienced firms (Johanson and Wiedersheim-Paul, 1975). Therefore, the

ten case companies are asked about the mode of entry on their foreign markets. Once

again, it has to be mentioned that some of the start-ups already started having sales

abroad before having done any internationalisation efforts. The online distribution of

their product ensures it is available on a global scale since inception. The entry modes

of the ten case companies are depicted in Figure 2 below:

FIGURE 2: Entry modes of internet start-ups

Entry modes of internet start-ups (n=13)

15,4%

7,7%

38,5%

38,5%

Foreign office Sales subsidiary

Foreign partner Online marketing/sales

Figure 2 shows the percentages of entry modes used by the ten case

companies, some start-ups use multiple entry modes. The most used entry modes are a

foreign partner (38,5%) and online marketing or sales (38,5%). The online marketing

or sales is done either from the domestic market or the markets abroad. Five of the ten

case companies show no sequential pattern in internationalisation. For example, they

work with a foreign partner and open a foreign office when demand is big enough.

Other patterns are having a sales subsidiary since the very beginning, having foreign

partners and a foreign office, having a sales representative and opening an office

abroad straight away. These five cases appear to show no gradual pattern in

internationalisation. There is thus no evidence that the start-ups use entry modes with


more resource committing entry modes (Kim, 2003). The other five case companies


41

start with sales which can be linked to the first stage (irregular export) stage of the

Uppsala internationalisation process model. A freemium based business model was

mentioned twice as a step to enter a market. A freemium business model means a

company offers a simple version of its product or service for free. However, to get

access to more advanced features and functionalities the user is charged with a

premium.

Loane et al. (2004) state that the internet offers start-ups unique opportunities.

According to Loane et al. (2004), the success of internet start-ups is attributable to

technologies such as the internet but also to the ability to leverage external resources

and many other factors. Seven of the ten case companies indicate to do everything

related to internationalisation in-house. Some external resources mentioned are:

investments, public relations and lawyers. The majority of the start-ups agree that the

internet simplifies internationalisation which allows them to operate on a global level

quickly. The following quotes highlight that internationalisation became easier

because of the internet:

Some of the case companies have already served customers abroad before

having done any internationalisation efforts. As opposed to the Uppsala model of

internationalisation 60% of the case companies indicate domestic growth is no driver

for internationalisation and 20% indicates domestic growth is one of several indicators

before going abroad. The Uppsala model posits that geographic location and psychic

distance are playing an important role in the internationalisation decision. Only three

“We thought that having our own foreign office is needed to gain credibility. In a

large country like Germany you need a local office to attract suppliers and so on.

We considered other entry modes, for example to do more from the Netherlands

but to acquire customers we need a local approach.”

“We are an internet start-up and that is the essence. Our product is meant to

support the globalisation. The advantage of the internet is that you always see it.”

“It is the advantage of an internet start-up, we do not import any physical goods.”

“Simply said, you do not really need an internationalisation strategy, just push the

button.”


42

of the ten case companies explicitly stated that a market is entered because it is

geographically close and therefore easier to approach. The other seven start-ups did

not mention the geographic location of a market as a motivation to choose for a

certain market or country. However, the data indicate that psychic distance still plays

a role for some start-ups. There is evidence that psychic distance is not ignored by

internet start-ups contrary to Coviello and Munro (1997). Surprisingly, the language

in a country can be decisive for the choice to enter a given country. Unlike the theory

of Johanson and Wiedersheim-Paul (1975), psychic distance is not always

unquestionably considered by the ten start-ups. A lack of resources is only influencing

internationalisation in two cases. A lack of knowledge influences the

internationalisation efforts of only one start-up. Other start-ups do not see this as a

barrier but rather as a learning process. Contrary to the Uppsala model, a lack of

resources and knowledge are thus not seen as barriers to internationalisation by the

majority of the ten case companies. There is thus evidence for the findings of Loan et

al. (2004) that smaller firms experience fewer internationalisation barriers. The

majority of the case companies agree that the internet simplifies internationalisation

and allows them to operate on a global level quickly.

Five of the ten case companies show no gradual pattern in internationalisation

and show rapid internationalisation patterns using multiple entry modes (Coviello &

Munro, 1997). There is thus no evidence that the start-ups start with entry modes

requiring minimum resource commitment and then shift to more resource intensive

entry modes. The remaining start-ups are doing online sales which can be linked to

the first stage of the establishment chain, irregular export activities. There is no

evidence that these start-ups follow the establishment chain and thus internationalise

gradually. In accordance with Andersen (1993), the underlying assumption of the

established theoretical models is that companies are established firmly in their

domestic market first, start-ups go against this underlying assumption. Start-ups are

able to operate at lower costs while being more efficient, the internet reduces bounded

rationality and information asymmetry. Established models such as the eclectic

paradigm are more relevant in later stages of the development cycle (Andersen, 1993).

Fillis (2001) adds that the establishment chain is better suited to MNEs. Hypothesis 1:

The internationalisation process of internet start-ups is a non-gradual, instead of

gradual process is partly supported. Although start-ups do not feel a lack of resources

and knowledge is influencing internationalisation, psychic distance is not ignored.


43

The fact that psychic distance is one of the several determining factors is in line with

Bell et al. (2004). Five out of the ten start-ups show radical internationalisation

patterns, two start-ups are even born-globals. On average, the firms started

internationalising after approximately 14 months which indicates quick

internationalisation and a non-gradual progress. There is partial evidence that the

existing models fail to explain small firm internationalisation.

4.2. The influence of managerial experience on firm internationalisation (H2)

Start-ups are often managed by the founder(s) of the company. All of the ten

interviewees are (one of) the founders. In addition, some start-ups do not have a full

management team like multinational companies would have, whereas some case

companies have an internationally experienced management team. The interview

questions in this part are designed to measure the influence of the managerial

experience and mindset on start-up internationalisation.

Loane et al. (2004) argue that management orientation is one of the potential

success factors in firm internationalisation. Reuber and Fischer (1997) found that

more internationally experienced managers have a greater tendency to develop a

business’ strategic partners abroad and are able to obtain foreign sales quicker.

Adding, these behaviours are associated with the company being more international.

Nummela et al. (2004) found that managerial experience drives the global mindset

which in turn is a key parameter of performance. Harveston et al. (2000) provide

evidence that managers of born-globals had higher global orientation than managers

of gradual globalising firms. Loane et al. (2004) add that management orientation

offers opportunities and contributes to a start-up’s success. Therefore it is

hypothesised (H2) that the mindset of management influences internationalisation

strategies of internet start-ups: The international mindset of the entrepreneur(s) or

management has a positive influence on the internationalisation process of internet

start-ups.

The empirical evidence shows that the influence of the entrepreneurs or

managers is large.

“The quality of the leadership of the founders is decisive for the success of the

company and thus also for internationalisation.”


44

Only in one case a new management was attracted recently which did not lead

to a re-orientation of the internationalisation plans although processes were optimised

and professionalised. Some of the case companies are characterised by a quick

decision making style:

One of the case companies has a management with a great deal of international

experience and various cultural backgrounds. The contacts gathered in their previous

jobs were consulted for their start-up. A sign that management is able to find strategic

partners. As well as another entrepreneur who indicates to look for super-users or

‘connectors’1:

The question remains whether management and its experience drives the

global mindset and thus internationalisation of the company. Five of the ten case

companies agree that management and management experience drive the international

mindset of the company. Four of the ten case companies partly think the international

mindset and the accompanying internationalisation is due to its management and their

experience. One company indicates that they always had an international mindset

since the very beginning and this is not attributable to its management. Evidence is

thus partly found for Nummela et al.’s (2004) statement that managements’

experience drives the international mindset and internationalisation of the company:

1 One of the case companies referred to super-users or connectors. If a super-user or connector like Barack Obama becomes a customer it gives their company instant credibility in the European market. Vice versa, it does not work. If the company would get ING as a customer this will not help in the U.S.

“You decide together what you are going to do today and perform it tomorrow.”

“You look for super-users or connectors, if you invest in those you can grow

quicker.”

“All of the founding members have been in global positions before. In such an

environment you learn to have a global mindset. Everything you do is

automatically done in a global way.”

“Everything is dependent on management or the entrepreneurs,

internationalisation too.”


45

Next, the interviewees were asked whether management experience quickens

internationalisation since Reuber and Fisher (1997) argue that more experienced

managers are associated with higher internationalisation degrees. The evidence shows

that the majority of the answers to the question are in favour of this argument

(57.1%). It can therefore be assumed that management experience ensures quicker

internationalisation, although not every interviewee agrees:

To confirm the influence of the manager the interviewees are asked whether

the company is more international because of the experience of its management. Four

of the ten case companies confirm this is the case. However, on this point there is no

sufficient evidence that a start-up is more international because of its management.

The empirical evidence shows that five of the ten case companies agree that

management and their experience drive the international mindset of the company.

Four of the ten case companies think that the management experience is one of the

drivers of the international mindset and degree. One company indicates that it always

had an international mindset long before the current management was installed. There

is thus evidence that management drives the international mindset of the company and

“If you are more experienced you are better prepared for various situations.”

We did not go abroad quicker but we were better prepared. The structure was

improved which enabled us to roll out quicker internationally.”

“You grow in those kinds of things and the way you look at them.”

“As a founding team we are international already. From that view we are different

to 100% Dutch start-ups. All of the founding members have been working in

global functions before.”

“I am the person responsible for the international focus of the company. I want to

go international because I think it is interesting and because the opportunities are

greater.”

“The smaller the company, the tighter connected the international mindset of the

company is to its management.”


46

influences internationalisation. In addition, it is thought that a more experienced

management ensures quicker internationalisation. There is insufficient evidence that

start-ups are more international because of its management. Therefore, Hypothesis 2:

The international mindset of the entrepreneur(s) or management has a positive

influence on the internationalisation process of internet start-ups, is supported. In

other words, the international mindset and experience of a manager or management

team positively influences the internationalisation process of internet start-ups.

Although not everyone thinks management (experience) is the main driver for the

international mindset of the company, some see it as a part of the international

mindset. It is also thought that a more experienced management ensures quicker

internationalisation. No support was found that start-ups are more international

because of its management.

4.3 Influence of networks on internationalisation (H3)

By revisiting the Uppsala internationalisation process model Johanson and

Vahlne (2009) recognised the importance of knowledge, relationships, learning and

networks. Their argument is based on two assumptions: 1) markets are networks of

relationships in which firms are interlinked in various patterns and 2) relationships

offer a learning, trust-building and commitment potential. Coviello and Munro (1997)

argue that strategy emerges as a pattern of behaviour influenced by different network

relationships. In addition, Kim (2003) explains that internet firms are lured to follow

business networks or partners’ potential rather than considering market potential or

psychic distance, especially early in the internationalisation process. In their research

on ten Irish internet start-ups, Loane et al. (2004) found having both business and

personal networks as very important. Therefore it is hypothesized (H3) that network

relationships influence internationalisation strategies of internet start-ups: Network

relationships influence the internationalisation strategy (choice of foreign markets

and entry modes) of internet start-ups.

To measure whether networks have an influence on the internationalisation

strategy of start-ups a couple of related questions were designed. The interviewees

were asked whether personal/business networks are important, they use knowledge

from their network and learn from others in internationalising. Also the question


47

whether the network has an actual influence on the internationalisation strategy is

asked. At last it is asked whether the case companies follow their network and

partners or consider psychic distance and potential, or perhaps a mix of these as the

motivation for the choice of a given market. Firstly, the influence of networks and

degree of learning from others in internationalisation is discussed.

Of the ten case companies, 80% indicates to look for or use knowledge from

their networks in internationalisation. The evidence indicates that start-ups actively

look for and use knowledge from networks. Since every start-up is different the

required knowledge is not always found since their case is unique. One of the start-

ups actively looked for knowledge before internationalising but did not find useful

knowledge as can be read in the following quote:

In general, the start-ups seem to realise that attracting knowledge is extremely

important.

As for the knowledge sought in networks, Johanson and Vahlne (2009)

revisited the Uppsala internationalisation process model because learning became

increasingly important too. Therefore, the ten case companies are asked whether they

actively learn from others in the internationalisation process. As with the knowledge

gained from networks 80% of the start-ups indicate to pursue to learn from others in

the internationalisation process. There is enough evidence to assume that learning

from others is important to start-ups in the internationalisation process. Again, the

knowledge is not always at hand since start-ups are often unique cases:

“We looked for knowledge from networks/relations in going abroad actively with

different parties. If you look at the real advantage then you can conclude that we

did not find any party that really helped us or experienced the same.”

“Consulting our network is always step one in everything we do. Finding partners

and doing sales is important. However, the first step is gaining knowledge and to

make new connections. It would not be smart to do everything yourself. You should

be busier asking people around you for advice than trying to make up everything

yourself.”

“Absolutely, we speak with similar start-ups in the U.S. and are asked to share

knowledge with other Dutch start-ups.”


48

Some of the start-ups collected people or similar companies around them of

which they try to learn continuously or consult on a regular basis. Learning from

others can thus be regarded as an important success factor for the internationalisation

of internet start-ups. A lot of activities undertaken by start-ups are new and cannot be

found in the literature. Furthermore, the early years of start-ups prove to be a

continuous learning cycle. Therefore, it is important for start-ups to collect a web of

people and companies around them to increase the chances of internationalisation

success:

The empirical evidence clearly shows that knowledge from networks and

learning from others are important factors start-ups take in consideration in the

internationalisation process. Coviello and Munro (1997) argue that strategy emerges

as a pattern of behaviour influenced by different network relationships. Therefore, the

question remains whether the network of internet start-ups influences

internationalisation strategies. Seven out of the ten case (70%) companies indicate

that their network has an influence on the choice of foreign markets and entry mode

chosen:

“If we go abroad to any other countries then we need to increase our efforts to

find best practices and learn from others. If you could find a similar company with

similar experiences this could definitely add value.”

“Everything I have done the last 3 years was new. I collected people around me

the last couple of years on which I can build, share ideas with and get feedback

from, you need to have critical people around you from which you can learn.”

“Constantly, there is cross-fertilization to be seen with some of the start-ups.”

“It requires constant learning. You need to have critical people around you from

which you can learn. Online marketing I look for with person A, management

feedback I look for with person B. In that way you collect a group of people

around you from which you can learn. Collecting people around you is one of the

most important things to do when you want to grow quickly both personally and as

a company.”

“We are in Spain and not in Germany because I have better contacts in Spain.”


49

For two of the case companies the influence of their network is somewhat

smaller but definitely present. It can thus be stated that their network also has an

influence on the internationalisation process, be it smaller:

Two of the ten case companies (20%) indicate that their network is of no

influence on the choice of foreign markets or entry modes. These companies indicate

that they are not influenced by their network. All in all, there is enough evidence that

the networks of internet start-ups have an influence on the internationalisation

process. For some start-ups the influence is larger than others. However, the empirical

evidence provides proof that the network has an influence on the internationalisation

strategy of internet start-ups.

In their research on ten Irish internet start-ups, Loane et al. (2004) found

having both business and personal networks as very important. Therefore, the ten case

companies in this sample are asked whether personal and/or business networks are

regarded as important in the internationalisation process. Eight out of the ten (80%)

start-ups see personal and business networks as very important in the

internationalisation process. Two case companies indicate that only personal networks

are important:

“Small iterations come forth from our network, radical changes don’t.”

“You are always being influenced by your network but you keep thinking critically

yourself as well.”

“The personal networks are important, I do not believe in business networks.”

“My network is of large influence for how we do it and where we go.”

“We get a lot of feedback from people with a lot of knowledge. Sometimes we

make important decisions based on certain feedback.”

“Our chosen strategy was definitely influenced by our network. We would not

base decisions on one advice but it definitely has an influence.”

“Both the investors and our advisory board have an influence on our strategy.”


50

Since 80% of the start-ups believe both personal and business networks are

important and 20% sees personal networks as important there is enough evidence to

state that personal or business networks are important to internet start-ups. The

following quotes highlight the fact that business networks are important for start-ups:

Kim (2003) goes one step further and explains that internet firms are lured to

follow business networks or partners’ potential rather than considering market

potential or psychic distance, especially early in the internationalisation process. To

test this the case companies are asked whether they follow their partners potential and

business networks, consider psychic distance and market potential or a mix of both.

Although the majority of the start-ups indicate that networks have an influence on

their internationalisation strategy only one start-up follows partners potential and

business networks instead of considering market potential and psychic distance. Four

(40%) of the case companies indicate to follow market potential and consider psychic

distance in the first place, their network has an influence but their main consideration

is market potential. Five case companies (50%) seek a balance between partners’

potential and business networks on the one side and market potential/psychic distance

“Our colleague in the French market has a lot of contacts in the publishing

industry which is definitely important.”

“Yes, we make use of many networks. For example, networks of different start-ups

that are in the U.K. So you can and must make use of networks, we use them

intensively.”

“Networks are essential to us. You get to a market where you don’t know anyone

and have no connections at all for things such as hiring. You need a network

otherwise you will not get anywhere.”

“We also collaborate with other internationally oriented internet start-ups in a

network called STIKK. The STIKK companies all have an international focus.”

“No, it’s a personal network. The entrepreneur has a network on which he is

working actively. It should not be purely business, it should be natural to the

entrepreneur to have a large network.”


51

on the other side. There is not sufficient evidence for Kim’s (2003) statement that

internet firms are lured to follow business networks or partner’s potential rather than

considering market potential or psychic distance. However, it is clear that psychic

distance is no longer the undisputed factor as Johanson and Wiedersheim-Paul (1975)

argue. More than half of the case companies (60%) indicate that it is either a balance

between partner potential and market potential or strictly partners potential and

business networks as some of the start-up indicates:

As mentioned, for some of the case companies target market potential and the

accompanying psychic distance is still decisive and the partners’ potential or business

networks come in second or not at all:

“You follow the product of the potential and the effort it takes. China has a large

potential but the effort is too big. Therefore, we go to Germany where the

potential is big and the effort to adjust is relatively small compared to say China.”

“Both should be considered, the people in your network say something about the

potential of a country. Consequently, you make an overall analysis either implicit

or explicit. In that way you assess the opportunities of a particular market and

make the decision to go there or not. The information you get from your network

has an influence on the markets you consider besides that you look at country

figures such as potential clients, brands and geographic distance.”

“First you look at the market but also what we get back from our network.”

“We look at large industry players and approach those, with or without a

network.”

“If we would have been solely network focused we would have been stuck in the

usability expert market. We are opportunity focused, we focus on where the

market volume is. I know I need a network to reach a target.”

“There needs to be market potential in a given market. If you have a large client

with a large network that can be advantageous.”


52

The influence of business and personal networks in internationalising becomes

increasingly important. Johanson and Vahlne (2009) recognised the changing business

environment and revisited the Uppsala internationalisation process model by

incorporating the influence of knowledge, learning, networks and relationships. The

hypothesis (H2) tested in this section is split up in whether the case companies use

knowledge from networks, learn from others, let networks influence strategy and

follow partner potential and business networks over considering market potential and

psychic distance. Sufficient evidence is found for the use of knowledge from networks

(80%) in internationalisation as well as learning from others (80%). Start-ups actively

look for and use knowledge from networks. In addition, learning from others is

important to start-ups in the internationalisation process. There is also sufficient

evidence that a business or personal network influences strategy in the form of entry

mode and markets chosen. In other words, the networks of internet start-ups influence

the internationalisation process. Although the influence is larger for some start-ups

than others. No support was found for Kim’s (2003) statement that internet firms

follow business networks or partner potential rather than considering market potential

and psychic distance. However, the evidence clearly indicates that market potential

and psychic distance are no longer the undisputed factors in internationalisation as

Johanson and Wiedersheim-Paul (1975) argued. The hypotheses (H2): Network

relationships influence the internationalisation strategy (choice of foreign markets

and entry modes) of internet start-ups, is thus supported. The network relationships

of start-ups influence their internationalisation strategy.

4.4. Internationalisation best practices

All of the case companies are asked to share their best practices regarding

internationalisation of internet start-ups. First and foremost it is important to be

enthusiastic as an entrepreneur and do not see internationalisation as an issue. Believe

in your product. Preparation is key, talk to clients, have regular feedback sessions, set

clear rules, specify your wishes and leave nothing open to doubt. Be sure your

motivation to go to a particular country is valid and that you have good reasons to

internationalise. One entrepreneur advises to start off small so that it does not hurt to

withdraw from the market when business does not go as planned. Learn by doing and


53

along the way look for similar start-ups to share experiences and knowledge. It might

differ per start-up but it can be helpful to establish yourself in the target market or

geographically close to it. One of the case companies even set up an international roll-

out team that is responsible for all international efforts of the firm and collects all

learning experiences and knowledge. At last, do not go abroad without a good reason.

It depends very much on your business model and the kind of business whether

internationalisation is part of your strategy or not.


54

5. Conclusion

Buckley (1989) argues there is plenty of research available on the internationalisation

strategies of large multinational corporations. However, the internationalisation

strategies of smaller- and medium-sized enterprises has gotten much less attention, let

alone the internationalisation strategies of internet start-ups. Fillis (2001) even argues

that the existing theoretical models fail to explain small firm internationalisation.

Therefore, this study investigates the internationalisation strategies of internet start-

ups. The purpose of the study is thus to answer the research question: What are the

internationalisation strategies of internet start-ups? To be able to answer the

research question they are split up in sub questions and three corresponding

hypotheses are set up.

The empirical evidence in this research is gathered from two sources. On the

one hand, findings from the relevant academic internationalisation and business

studies literature are used. On the other hand, semi-structured interviews are held with

ten entrepreneurs or managers of internet start-ups. This research uses a(n)

qualitative/exploratory approach. Next, the three hypotheses and its conclusions will

be presented.

First, Andersen (1993) found that the underlying assumption of the established

theoretical models is that companies are established firmly in their domestic market

first, internet start-ups go against this underlying assumption. The evidence highlights

that start-ups do not necessarily have a drive to become successful in their domestic

market before expanding abroad, some start-ups even have a global focus from

inception. In addition, no evidence is found for an important underlying assumption of

the Uppsala internationalisation process model, that start-ups use entry modes with


more resource committing entry modes. There is also evidence for the findings of

Loan et al. (2004) that smaller firms experience fewer internationalisation barriers.

The majority of the case companies agrees that the internet simplifies

internationalisation and allows them to operate on a global level quickly. No evidence

of gradual internationalisation patterns is found, some start-ups even use multiple

entry modes (Coviello & Munro, 1997). Hypothesis 1: The internationalisation

process of internet start-ups is a non-gradual, instead of gradual process is thus


55

partly supported. Although start-ups do not feel that a lack of resources and

knowledge is influencing internationalisation, psychic distance is not completely

ignored. The fact that psychic distance is one of the several determining factors is in

line with Bell et al. (2004). On average, the firms started internationalising after

approximately 14 months which indicates quick internationalisation and a non-gradual

progress.

Second, the established theoretical models regard factors such as resources,

transactions costs or the threat of new entrants as decisive for firm

internationalisation. Start-ups often have a limited number of employees and can be

characterised by a quick decision-making style. Loane et al. (2004) argue that

management orientation is one of the potential success factors in firm

internationalisation. Insufficient evidence is found in this research that start-ups are

more international because of its management. Generally, the start-ups argue that their

company would not have been more international with a different management team.

However, evidence is found that management or the entrepreneur(s) drive the

international mindset of the start-up and consequently influences internationalisation.

In addition, the evidence suggests that a more experienced entrepreneur or manager

ensures quicker and better internationalisation. Hypothesis 2: The international

mindset of the entrepreneur(s) or management has a positive influence on the

internationalisation process of internet start-ups, is thus supported. The international

mindset and experience of a manager or management team positively influences the

internationalisation process of internet start-ups.

Third, the influence of business and personal networks in internationalisation

is investigated. The literature suggests networks became increasingly important in the

recent years (Johanson and Vahlne, 2009). Sufficient evidence is found for the use of

knowledge from networks (80%) in internationalisation as well as learning from

others (80%) in the process. There is also sufficient evidence that business or personal

networks have an influence on strategy in the form of entry mode and markets chosen.

No support was found for Kim’s (2003) statement that internet firms follow business

networks or partner potential rather than considering market potential and psychic

distance. However, the evidence clearly indicates that market potential and psychic

distance are no longer the undisputed considerations in internationalisation as

Johanson and Wiedersheim-Paul (1975) argued. Therefore, hypotheses (H3):

Network relationships influence the internationalisation strategy (choice of foreign


56

markets and entry modes) of internet start-ups, is supported. The network

relationships of internet start-ups influence their internationalisation strategy.

In conclusion, we have seen that start-ups internationalise on average 14

months after being established which indicates quick internationalisation and a non-

gradual progress. Jumps can thus not only be expected by experienced firms. Contrary

to the established theoretical models start-ups do not feel they need a strong domestic

position prior to internationalisation. Internet start-ups do not feel a lack of resources

and knowledge in internationalising. Psychic distance is still a consideration for some

start-ups. Moreover, internet start-ups often operate at lower cost and greater

efficiency than MNEs. The internet simplifies internationalisation and allows start-ups

to operate on a global level quickly since it reduces bounded rationality and

information asymmetry. Established theoretical models such as the eclectic paradigm

are more relevant in later stages of the development cycle and better suited to MNEs

(Andersen, 1993; Fillis, 2001). The international mindset and experience of a manager

or management team positively influences the internationalisation process of internet

start-ups. The network relationships of internet start-ups influence their

internationalisation strategy. Market potential and psychic distance are no longer the

undisputed considerations in internationalisation. This research makes clear that

internet start-up internationalisation challenges the established gradual models and fail

to explain small firm internationalisation. It can be concluded that there are many and

various possible internationalisation patterns. Internationalisation takes place quickly

after a firm is being established and the manager and the surrounding networks have

their influence on the internationalisation process.


57

6. Discussion

In the introduction the following questions are raised: How would you expand your

successful business abroad? Do the internet start-ups use the more mature

internationalisation models or do they take on a hands-on approach? Is the

entrepreneur of critical importance and so on.

The main findings in this research are that internet start-ups do not follow the

established theoretical internationalisation models completely. In addition, the

experience and international mindset of the manager have a positive influence on the

internationalisation process of the internet start-up. It is also found in this research

that the network relationships of internet start-ups influence their internationalisation

strategy.

As mentioned earlier, the data in this research are collected by using academic

literature and semi-structured interviews. The research carries an exploratory

character by using these two data collection methods. Possible shortcomings of semi-

structured are that it can be costly due to its time-intensive nature and they can be

subject to bias if not carefully conducted. In addition, trading secrets among the

interviewees should be accounted for. Herewith, the generalizability of the results

might be affected. However, the results are generalizable for the population since

various patterns were found in which the population will fit. The generalizability is

further extended by a relatively large sample size and the semi-structured interviews.

This research also has a high degree of validity, random variation is overcome by the

sample size. Moreover, the data are processed in NVivo to avoid a bias in analysis.

The sample is representative for the population so there is no selection bias either.

However, the findings in this research are satisfactory since this research is

exploratory and further research is needed in an explanatory manner.

Until today, academic researchers gave much attention to the

internationalisation processes of large MNEs and largely ignored the emergence of

smaller- and medium-sized enterprises in the global environment. Established

theoretical models such as the resource-based view, the transaction cost theory, the

internalisation theory, Dunning’s (1977) eclectic paradigm and the Uppsala

internationalisation process model explain firm internationalisation as a gradual

process and only possible after firms enjoy a strong position in the domestic market.


58

This research shows that internet start-ups do not necessarily aspire after a strong

position in the domestic market prior to internationalisation. Internet start-ups are

typified by a quick decision-making style where the influence of the manager or

entrepreneur is large and network relationships have an influence on the

internationalisation process. Internet start-ups operate at lower costs and are more

efficient than MNEs. Moreover, the internet lowers bounded rationality and reduces

information asymmetry, the internet made it easier to access relevant information

(Dunning & Wymbs, 2001). Internet start-ups operate in an environment where

geographic barriers are lowering (Rosson, 2004) and psychic distance is no longer the

most important factor. Theoretical models such as the eclectic paradigm are better

suited to MNEs and more relevant in later stages of the development cycle (Andersen,

1993; Fillis, 2001). This research proves, contrary to Johanson and Wiedersheim-Paul

(1975), that jumps in the Uppsala establishment chain can also be expected by less

experienced firms such as internet start-ups. The influence of the management

experience on the internationalisation of internet start-ups supports the literature of

Nummela et al. (2004), Harveston et al. (2000) and Loane et al. (2004). In addition,

the evidence found regarding the influence of network relationships on

internationalisation supports the available literature by Coviello and Munro (1997)

and Kim (2003) as well.

An unexpected finding was that not enough evidence was found for radical

start-up internationalisation. The evidence suggests that internet start-ups make jumps

in the establishment chain. However, some of the start-ups are only doing online sales

abroad and therefore no conclusion can be drawn whether they internationalise

gradually or radically. Another unexpected finding was that the business ecosystem

influences the choice of certain markets. For example, the U.S. market is very fertile

for internet start-ups which makes it a popular market. Furthermore, the use of

freemium strategies and press releases was substantial.

The results and conclusions of this research are important because they show

that explanatory research is needed in the field of (internet) start-up

internationalisation. Categorisations or a preliminary model should be created based

on the internationalisation of internet start-ups and the corresponding factors they

consider. This research adds to our knowledge that start-ups do not necessarily follow

the established theoretical internationalisation models. Moreover, we learned that

start-up internationalisation is influenced by the experience and the international


59

mindset of the manager or entrepreneur. In addition, we learned that network

relationships have an influence on the internationalisation of start-ups. This research

adds to our knowledge that start-up internationalisation differs from that of MNEs.

This research teaches us that start-ups can take different factors in

consideration when internationalising. The decision to internationalise should be well

motivated and considered. The influence of the manager is large, management should

realise that internationalisation can stand or fall on their decisions. The influence of

networks is of course up to every start-up to control. This research indicates that start-

ups can and should learn a great deal from their network as well as contriving

knowledge from it. On the other side, we have the governments and business

ecosystem stimulating entrepreneurship to certain degrees. This research learned that

the U.S. ecosystem is better prepared for internet start-ups than for example the

business ecosystem in the Netherlands.

Future research

The research conducted has been mainly exploratory and qualitative. During the

research a couple of directions for future research arose. First of all, it is suggested to

conduct quantitative research in the future and create preliminary models for internet

start-up internationalisation. In quantitative research all the internationalisation factors

considered by internet start-ups could also be quantified, organised and tested.

Second, research on the influence of the business ecosystem on the

internationalisation of internet start-ups and its success would be valuable. Some of

the start-ups deliberately focus on the U.S. because the business ecosystem for start-

ups is more fertile than anywhere else. Locations such as Silicon Valley are well

known for the amount of successful internet start-ups it has brought forth. Investors in

the U.S. also seem more willing to invest in start-ups whereas in the Netherlands

firms usually need a proven track record first. It would be interesting to compare for

example Dutch and American start-up performances to see the differences and define

the environmental success factors.

Third, it would be valuable to research the freemium strategy which was

mentioned by some of the case companies. Freemium means a company offers its

service free of charge. When customers want to use more advanced features they will


60

have to pay a premium. For internet start-ups such a strategy is relatively low cost and

easy to roll out in foreign markets. The efficiency and use of freemium expansion

strategies would be an interesting topic to research.

All in all, there is plenty of research to do around the internationalisation of

internet start-ups since it became clear that their strategies differ to those of

multinational corporations.


61

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Appendices

Appendix A: Questions semi-structured interviews

The questions below are aimed at analysing the internationalisation strategies of

internet start-ups. The goal is to find out whether these start-ups follow the established

internationalisation process models or show more radical patterns. In addition, these

questions are aimed at analysing whether the internalisation process of internet start-

ups is driven by the mindset of the manager. At last, it is analysed whether network

relationships have a large influence on the internationalisation strategies of internet

start-ups. The following serves as a basic structure for the interview:

Introduce interviewer, explain interview purpose, ask permission to record and take

notes, explain confidentiality, length of interview.

1. Company information – No. of employees, years in existence,

product/service, no. of countries?

2. Internationalisation - What time after establishment did you expand abroad

and why? Steps taken e.g. foreign sales, export, foreign subsidiary? Increasing

resource commitment?

3. Internationalisation - Influence of domestic growth, trade/geographic

barriers? Psychic distance plays a role?

4. Internationalisation - Lack of resources or knowledge influenced

internationalisation? Simplified by internet? Incremental or radical? Entry

mode? Use of external resources?

5. Management influence – Orientation or re-orientation? Change?

6. Management influence – Management experience led to quicker

internationalisation? More able to develop strategic business partners? Higher

internationalisation degrees?

7. Management influence – Managerial experience drives the global mindset of

the firm?

8. Influence of networks – Knowledge? Relationships? Learning?

Business/personal networks, important?


66

9. Influence of networks – Does strategy emerge as a pattern of behaviour

influenced by different network relationships?

10. Influence of networks – Do you follow business partners/networks or market

potential/psychic distance?

11. Additional – Do you have best practices to share when going abroad?

Round off interview, show appreciation and say goodbye.


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Appendix B: Interview transcripts

A) Repudo

Interviewee: Lucas Tieleman Company: Repudo Date: 02/02/2012 – 15.00-15.45

How many employees does Repudo have?

Repudo has 11-12 employees. When was Repudo established?

Repudo was established one year ago. What is Repudo?

Repudo is about virtual objects in the real world, a piece of content can be dropped on a specific GPS location and others pick it up with their smart phone. For example, Lady Gaga performs in the Amsterdam Arena and drops an acoustic version of ‘Pokerface’ with Repudo. If you pass the GPS location with your smart phone you can pick up the song and take it with you. You are being used internationally, have you gone international with your

business or do you only have customers internationally?

There are no international distribution restrictions in the software market in which we operate. Our application can be distributed internationally easily through App store, Google Android Market, Blackberry App World and Windows Phone Marketplace with a mouse click. Everything is available internationally. Simply said, you do not really need an internationalisation strategy, just push the button. So by issuing press releases we can build awareness abroad, but it has not been our core focus the last year to grow abroad. First we focus on growth in the Netherlands in the right product and market combinations so to be able to copy our ‘trick’. In addition, we are officially live in the United Kingdom. In a couple of weeks we launch a Spanish version in Spain. Do you think you have to be in the country in which you operate physically?

Yes, you always have to be there physically. Let me say that I have a lot of Air Miles. Is there a gradual growth in resource commitment when internationalising? E.g.

core personnel, resources.

If it costs money? When you want to internationalise it will cost you money you can call that resources. We at Repudo call it ‘expensive’. If you want to go abroad you should invest to get things off the ground, that is inherent to each other.


68

Are there any geographical barriers in going abroad? E.g. a market that is close

or a market with more potential.

You should choose a market that you know or is close geographically or where you know people with market knowledge. To go to the United States and say you are the new market leader is something I do not believe in. You should go to a market where you know people to have the first introductions to the market. To start without any connections in a new market is almost important. So you believe in a network out of which you take your chances?

Yes. Can you dig a little deeper into the networks, are they business or personal

networks?

The personal networks are important, I do not believe in business networks. The efficiency of business networks should be investigated, I believe those are not efficient. Every form of trade is to grant someone your funds or investment. You need to have a good idea but you also need to be a nice guy. You need to think: “let’s try it with this guy”. It’s valid on all levels of business, I think the CEO of Shell does not do much business with people he does not like. Does the psychic distance have an influence on the choice of foreign markets?

Psychic distance is a challenging. Although I would not go to North Korea. Do you think the influence of managers plays a big role in internationalisation?

Start-ups do not really have management. You decide together what you are going today and perform it tomorrow. For example if you want to go to the United Kingdom someone that has a contact in the U.K. makes a phone call. The next day we will be on the plane to the U.K. This is my third start-up. Most companies with our size and form do not really have a long-term strategy. It’s easier in our case, we have a plan of what to do and just perform it. However, everything is dependent on management or the entrepreneurs, internationalisation too. Do you think management experience has led to quicker/slower

internationalization?

Yes, that is very important. You need to have experience. Of course, it is useful to know the English language well. In addition, you need to understand cultural differences. In the Netherlands you can close a deal within a month, in the United Kingdom this might take seven months. Why? Because in the latter case everyone wants to talk with each other longer. That is something you learn. If you are more experienced you are better prepared for such situations. An experienced manager is thus a driving force for successful

internationalization?


69

Yes, I think so. We are not selling shampoo. Everyone in the world needs shampoo. Most internet start-ups do something new. That is not shampoo. So no one knows that require it. The person selling it thus needs to be very enthusiastic so people think they might need it. The product needs to be attractive to use so people will start using it. But it is not shampoo, you cannot send away sales people to sell shampoo. Shampoo can be bought by everyone. Same like washing machines, you only buy one when you need one. In other words, everyone can sell a washing machine. However, the number of people capable of selling an internet start-up is limited. The reason for that is because people are not sure whether the product/service you offer is needed. As an entrepreneur you need to be enthusiastic about your product and willing to sell it. Do you think the network of your employees and your company have an

influence on the international expansion?

Yes, we are in Spain and not in Germany because I have better contacts in Germany. So you follow partners instead of market potential or is it weighed?

It needs to be balanced. Perhaps I know someone in North Korea but they do not have smart phones in that market. However, in most European countries the situation is quite similar. Especially in the mobile phone market the differences are small. Smart phones are the new personal computers. In economically less fortunate European countries people do not buy a computer, instead they buy a smart phone. What is the mode of entry you used for foreign markets?

At the moment we work with partners that know the market well. For example, they receive a fixed fee for every client attracted. If the demand becomes big enough and the costs and profits weigh off than we would open an office there. The investment you received recently, is that used for internationalisation?

You attract an investment so to be able to spend money you do not have and you can keep investing. Part of our investments is abroad, that is also a part for which we use the capital. Do you have any best practices or any other comments?

Just do it. Internationalisation in our organisation is mostly organic.


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B) Cleeng

Interviewee: Donald Res

Company: Cleeng Date: 03/02/2012 – 15.00-16.00

As a founding team we are international already. From that view, Cleeng is

different to real Dutch start-ups.

How many employees does Cleeng have?

Depends on which way you view it. We work with different offices. We have a development team of four employees in Poland. Besides that we have the four founders of Cleeng and one sales person. How many years does Cleeng exist?

Cleeng exists since August 2010. At that moment we started with the four founders and the development team in Poland. Last year February we launched the application officially. At this moment we are on the market with our product for one year. So you have two offices, one in Poland and one in the Netherlands?

We indeed have two offices and our sales representative has a small office in Paris. In the U.S. we have a partner office. A third party found us and we were interesting to them. The partner office is focusing on sales. Are you a born-global in that sense?

In that sense it is important to understand our backgrounds. All of the founding members have been working in global functions before. Giles was head Online Global within Philips. I was in his team; my function was head of Strategy and Planning over 52 countries and 37 languages. We did all of our online activities there. In such an environment you learn to have a global view. Everything you do, you automatically do it in a global way. One of the other founders who lives in Paris had a start-up that became big in 22 countries. So it can be concluded that the ‘global’ part is in our veins. It was no discussion how we would approach things, it was clear that our product would be a global solution. In the end that is where the power lies, the question was more on which markets we would focus initially. How did the four founding members meet each other?

Giles used to be the head of European Online Shops of Apple where Nicolas worked on his team. He runs the sales office in Paris. Before they worked at Apple, they both worked at Packard Bell. At Packard Bell they both met Benedict, the other founder. What is Cleeng?

We are building some sort of iTunes for every website to offer on its website. What you see currently is that a lot of companies struggle with how to make money online. Until now it is based on advertising income. However, advertising incomes are not sufficient to offer the same journalist quality as is there in the offline world. What you see often online now is a contract-based earnings model. That is normally the ultimate goal, but as a consumer you don’t want to commit to a contract before you know the exact quality of what you are going to get. We have built a toolset for publishers, from broadcasters to newspapers or companies organising concerts and events. Our tool


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allows them to sell their content in a simple manner. The goal is to take the end-user as a starting point and make it as easy as possible for them. A problem in the market is that every company tries to build its own system. As a consumer you have to log in separately for example for the Consumentenbond, NRC, FD, Volkskrant and RTL websites. However, as a consumer you do not want that. You would like to log in on all those websites with one login and pay through one account. As mentioned we have a complete toolset. When you have paid once at RTL and you visit the Volkskrant website, your details are saved and known. Those things make it easier for the consumer to pay and get access to various websites. After establishing Cleeng became international or was it already from the start?

We started with the English language and focused on WordPress in the United States to get to know the market. What is needed to do things correctly? Quickly after we made a French version because of the market potential. The Dutch version is not our focus. However, we do have a large Belgian customer which makes sure our Dutch platform is maintained. So if I understand correctly, you have gone to the United States first to test the

product, then to France?

It depends what you mean with going to a certain country. The advantage of the internet is that you always see it. So what we have done since day one is talking with a lot of publishing companies in the French market. Somewhat later we launched the French version of our product. Going abroad is thus not very strict, ‘we first do this and then that’. It is a process, if we get a large client in another country we can roll out our product quite quickly. The U.S. market was initially a test market, but is also a market with great potential. Have you entered the U.S. market with export, or an agent?

The U.S. market was mainly entered from our office in the Netherlands. Partially also from some contacts we had previously. In the meanwhile we do business with several video platforms. However, in the beginning we dealt with one of the largest video platforms called Brightcove. It is a platform you can use as a publisher to host and broadcast your videos. In our previous jobs we had contact with Brightcove. From that contact, we have set up a partnership with Brightcove since the very beginning of Cleeng. What was the influence of domestic growth on your internationalisation?

Domestic growth was not of any influence to us. When entering foreign markets, did you consider trade barriers?

There were some challenges for us. Since we are in a kind of market where financial transactions take place we have to consider different VAT for different countries and set this up correctly. One could say that we have spent a fair amount of money on legal issues. However, we don’t consider this a barrier. Another barrier could be the languages that we support. We simply cannot support all languages. Customers do transactions and expect certain support. One of the reasons we are not live in Germany because we are not fluent in German. So we decided that for this very moment we do not need to support the German language.


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Could it be that when a large German client shows up that you decide to offer

German support?

Then we are quick to adapt. We go where the potential is. In other words, where the commercial deals are made we start our business. We are open to everything. On the one side, one could say that this is weak because you need to focus. On the other hand, in our case, it does not matter because we focus on large international customers, which we are doing successfully now. For those larger customers we have a good solution which works well in several countries. We prefer this over serving several smaller markets. Do you think internationalisation is made easier because of the internet?

Absolutely, no doubt. Because we are an internet start-up that is the essence. Our solution is meant to support the globalisation, as a publisher in the U.K. you want to make your content available to U.S. customers in U.S. dollars as well. A publisher cannot make the investment to sell his content in a good way worldwide. We, because we combine all the power, can deliver this solution and everyone can take advantage of that. What about entry modes, how do you enter a foreign market?

Foreign entry is mainly marketing. What we did, is simplistic, we put the idea in place. There is a worldwide trend, large parties work on offering paid content. From day one, we were interesting to the market players. They were wondering what we were doing. A press release was received quite okay. It was picked up less well than we expected but still. What we discovered ourselves, we came from large industries. If you say something in the press, it will be picked up everywhere. We almost got used to the fact that whatever we said was picked up. We got so used to it, that you would expect if you start your own company that the press picks up your releases equally as well as before but this is not the case. You are not interesting to the press as a start-up. In other words, you are not being heard. However, we invested quite a lot in a movie. That creates a good buzz and some credibility. We considered hiring a PR agency but in the end did not do that because of budget restrictions and our own experience. That were the most used ‘entry modes’. Next to that, we used the two platforms WordPress and Brightcove. Through them we automatically entered certain markets. Within WordPress you can work with plug-ins. By being present in the database of WordPress with your plug-in you are being found and thus you have a market. So the entry mode was mainly investing in marketing. Because of the French roots among the founders, a French office was there from the start onwards. Besides that, we also consider other modes of foreign entry such as licensing. You look at your options, if someone abroad is interested in your product you consider to go to that market and adjust your business model accordingly. The influence of the international mindset of the founders seems large?

The only consideration we have with our international background is for example if we should focus more on the large opportunities arising in France and how we can account for them. However, in fact we do not need a lot of sales. A lot of our business is online and goes through APIs or plug-ins. There is a lot of automation in our company. So it is more a question of which languages and currencies we want to support and in which countries we want to take risks. By nature we are a global solution.


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The experience of management contributed to quicker internationalisation?

Yes, definitely. On a personal note, when I was young, I sold cakes in our street. Then I started programming and did some work for our neighbourhood. Then I started studying and the Netherlands became my market. When I started at Philips I dealt with a worldwide market. You grow in those kinds of things and the way you look at them. You always need to be conscious whether you undertake something locally, regionally or globally? Is the experience of the managers the driving force of the international mindset

of the company?

Completely. We all have experience at a multinational which is not common among start-ups. Because of our experience, we automatically have an international mindset. You indicated to follow market potential, or do you follow business/personal

networks as well?

It is not that black and white. When we started, we focused solely on the news publishing companies. We are good at pivoting, meaning to switch focus with the same people and technologies to take new opportunities. We see the publishers market is having hard times. Management of publishing companies is scratching their heads, but they keep scratching instead of taking action. The publishing market is known for its slow style of doing business. In the beginning we thought we could work our way through it and close deals quickly, despite warnings from our environment. But it takes long, they will come in the end and they will realise which way they have to go. Besides that, the consumer also has to get used to these new ways of getting content. While there is a lot of other content on the web that is more easily being sold. Not only that those companies decide quicker, implementation is much more efficient and the consumer is much more willing to pay for say online video. Live events are attracted to our product for example. You learn to know the different market segments. You need to understand different markets to know what is relevant to one segment and is not to the other. Our platform can easily be configured to different market segments. Is it also the case with WordPress that you pivoted?

Yes. But we accounted for it by keeping it general from the start onwards. For example, as a publisher you want to hear that we are a solution for the press industry to make money with their website and not a content monetization solution. You need to adjust your story to the specific segment. Are personal networks regarded as important in Cleeng?

Our colleague in the French market has a lot of contacts in the publishing industry which is definitely important. However, I am not the person pushing sales in the Netherlands. We are all relatively good in building a network. For example, there are no barriers to get in touch with a Dutch newspaper. It simply has no priority since we have more important things to do. So the personal networks are not leading over potential?

Exactly, we look at the large players in the industry and approach those, with or without a network. However, if an opportunity comes up from a contact we will most likely grab it. What we did in the beginning, we took world lists of websites and filtered websites for which our solution could be interesting looking mainly U.S. and French websites. Shoot high.


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Do you have any best practices or lessons learned to share?

It is difficult put things in a general sense. It depends strongly on what you are doing. At Philips I was working with international teams. I learned to coordinate international projects in web development. Most people in the Netherlands argue outsourcing is difficult because foreign people do not understand your wishes. That is correct, they don’t understand because you don’t explain it correctly. You need to specify carefully what you want. The experiences of international coordination you take along with these kinds of situations. I know very well how to work with an international team. How do you make sure people do not have difficulties with different time zones? We did projects with the U.S. where the time zone differences can raise problems; you need to set clear rules to avoid that. Make sure you leave nothing open to any doubt. It also has to do with understanding cultures?

Yes, absolutely. It is clear that your previous experience was decisive for your performances?

Yes, also how we appointed our team in Poland. We consulted our network instead of browsing a website. We decided to let the applicants do a test before recruiting them.


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C) Usabilla

Interviewee: Paul Veugen Company: Usabilla Date: 13/02/2012 – 13.30-14.30

Could you tell something about the company Usabilla in general, the number of

employees, years in existence etc.?

Usabilla started 3 years ago next to my studies. I studied Corporate Communication and Digital Media at the University of Tilburg. I was looking for a quick concept to collect feedback quickly from a large group of users. One of the methods I got to know there was the plus and minus method for text evaluations which is done on paper. You give a large group of users a certain concept and let them put plus and minus signs on it and then evaluate why they put the plus or minus on that particular spot. We translated that to a web concept, the first year we mainly built a prototype. In the second year, we involved customers and got the first user cases and introduced a payment model. From there on we grew steadily, last year around this time we got an investment to grow and develop further. Last year around this time we were with 2 employees, currently we employ 10 people. We are a nice mix of development and marketing. I’m mainly busy with design UX, Mark the CTO is busy with development cycles and we have two marketers building networks around our products. Most customers are in the U.S., 70% of the paid accounts are from the U.S. We have 40.000 free accounts those are scattered. Approximately, 50% from the free accounts is from the U.S. and the rest is from all over the world. The revenues come in by focusing strongly on the United States. Can you briefly explain what Usabilla does?

We offer visual services. If you want to know what people think of your website you can show your website or a concept to a large group of users. We make screenshots of your web pages and ask in-depth questions about it to the users. The questions are answered using dots and notes on the computer screen. For example, we ask users to click on the most important elements of this website. That is the first product we built, we call it visual services which is about design feedback by website users. It is a quick way to test how the users regard the design of your website. You indicated most customers come from the U.S., to which extent are you

present on that market?

We operate mainly from the Netherlands; however, I visited the U.S. frequently the last year. Almost all customers we have come in through online marketing campaigns. We don’t do any hard sales; there is almost no face-to-face contact. Usabilla spreads online; in general users come in with a free account. Once the product has proven itself they apply for a paid account which costs between $50 and $200. They payments are not too big, in that way the threshold is not too big. We don’t do any sales contracts with large enterprise accounts. We do everything online, customer service is online, and we do e-mail support and live chat. We do not offer telephone support. Everything is focused on serving masses and an easy spread.

Why are most of the users from the U.S.?

For me it’s a clear strategy. I have always said that we would conquer the U.S. It’s relatively easy for us to localise the U.S. market since it is much bigger. When we


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would do the same in Europe it would be different. It is in your tone of voice, your pricing model, your branding and how you accept payments, dollars or euros, which payments methods you offer. It is all those small things that ensure that we are most attractive in the U.S. market. If I get Barack Obama as a customer it gives credibility in the European market. Vice versa, it does not work. If we get ING as a customer this will not help in the U.S. That makes our choice to target the U.S. market first a deliberate choice. Is it from the start on that you decided to focus on the U.S. market?

Yes, actually we focused solely on the U.S. Everything we did, the tone of voice, marketing efforts and so on. That ensures we set foot on U.S. ground earlier than in the domestic market in the Netherlands, customer wise. If we would have focused on the Netherlands, Germany or France then the language will be an issue. If German user sets up a test case and wants the case in the German language. Possibly they also want a German administrator where they create the test cases. So we chose the English language, if we had to localise everything for different European countries that we cost a lot of efforts in development. That same energy we can use to obtain 1 million customers in the U.S instead of picking countries one at a time in Europe. You target the U.S. market with online marketing, do you think you need to be

present in the future and invest more resources in to grow further?

I don’t think it is necessary to be present in the U.S. market. Nine out of ten things work through a network effect. You can see when you look at start-ups in Silicon Valley in the U.S., the way they can settle partnerships, participate in joint deals and obtain the right customers, that helps a lot. It is not so much about sales efforts but about customer development. So if I attract the large companies and make sure they become active on our platform, that will help to increase the network effect. So you look for connectors or super-users, if you invest energy in those you can grow quicker. So being physically present in a market helps, it is not necessary, but it will not slow down growth. That is the reason why I am in the U.S. more often nowadays. So until now you focus mainly on online marketing?

On a large scale yes, we try to strengthen the effect by picking the right people and make them some sort of ambassadors. That helps to attract other large accounts. Did you encounter any trading barriers in entering the U.S. market?

Not really, most trading barriers are raised in the Netherlands. Accepting online payments for example. If you are starting a business now, and you have the idea to sell something in 12 months you should start with the handling of your payments now. To structure your payment handling well takes a long time, you need to be accepted and have no credit history at all. Like I said, the barriers are mainly from the Dutch environment than from the U.S. market. In the U.S. market we did not encounter any issues. Payments are in U.S. dollars, do you have any registered company there?

No, with U.S. investments this can be a hassle. If an American investor is interested or another American company wants to do business with you a legal entity could be useful. Until now, we did not encounter any problems. However, there are some issues of which you have to be aware, we have some customers from the public sector in Australia and Canada where privacy is a sensitive issue. However, we do not save


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any information which can be traced down to a specific person. On the other hand, those issues are present in the Dutch market as well. It is the advantage of an internet start-up, we do not import any physical goods. Other barriers are tax related. For example, in the European Union we can shift the VAT to the customer. It has to be mentioned on the invoice specifically. We have to collect our customers’ VAT numbers, if we would collect those in the signup process we would have no conversion. Those kinds of issues make it harder to operate in Europe than we would only do business in the U.S. Of course, we don’t want to lose our European customers since they are income too. The example shows that doing business in our domestic market Europe is harder than in the U.S. The same goes for payment providers, working with them is easier in the U.S. than in Europe. Thus psychic distance plays a role but the other way around if I understand

correctly?

You have to be aware of cultural differences. It is in the small things, the customer service we accept in the Netherlands is different to the level they are used to in the U.S. So you have to adjust your service and communication to the U.S. market standards. In the Netherlands we are used to curt customer service, in the U.S. customer service cannot be friendly enough. If you do not deal with customers well this might come back to you one day. You do not have a telephone desk, Americans do not consider this an issue?

Never received any complaints. If you have enough other channels on which they can react. It is easier for both if we offer chat, e-mail support and so on. Have you ever thought you missed knowledge to do business in the U.S.?

Constantly, but I don’t consider this a handicap. Everything I have done the last 3 years was new. If it is about financial, legal or marketing issues everything is new. I don’t think many best practices can be found in the Netherlands on those issues especially on a scalable way. There are not many businesses in the Netherlands that focus on scalability like we do, one million relatively small transactions. You have to gather the knowledge yourself, test, , measure, try and see how things work. Knowledge is constantly coming my way but I don’t consider this a barrier. So continuous learning is important?

That is a requirement to work here. You need to work with a certain curiosity. Nobody coming in here knows how things work exactly. For example with marketing, you can have a degree and experience, but it can be more of a handicap than helpful. Do you think internationalisation has become easier of the internet?

Yes absolutely. Otherwise we couldn’t have built a company like Usabilla. You can build a network and a customer base so quickly on social media like Twitter. Without the internet we could not have started our business. We are a 99% internet company. There is almost no face-to-face contact. We are building on the viral effects, otherwise we could reach a scale of 1 million customers. Do you use external resources to do business on the U.S. market?

Yes, for example an American PR lady. She works in Amsterdam and San Francisco and does a lot with content. We write the content and she controls and distributes the content to the right media channels. Our hosting is done externally as well at Amazon.


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Did you experience a lack of resources slowing down internationalisation? For

example, without the investment you received one year ago.

When you look at the business ecosystem in the U.S. and compare it to Europe the differences are big. When you talk with a bank in the U.S. they will ask questions about your business plan and understands what you are doing. In the Netherlands, the bank will possibly not understand what you are doing. In the U.S., there is an actual ecosystem around start-ups. A lawyer will be able to introduce you to twenty investors. In the Netherlands there are not even twenty investors, let alone that there is a lawyer that knows about internet start-ups. The ecosystems are thus very different. It can be hard for Europeans to get access to the U.S. ecosystem. They are open, but as a European company it is hard to get in the ecosystem. Preferably Americans don’t invest in European start-ups, some people don’t trust anything they don’t know. It is complex, there may be a friend that has bad experiences with European companies. If you show up with the right legal entity than it is easier, they have standard documents which can be signed straight away. Those things can be harder for European companies. In the future, that might mean we set up an entity in the U.S. but it is not an issue now. It is a handicap to join the U.S. ecosystem completely as a European company, but doing business does not give much problems. To what extent is the manager/entrepreneur responsible for the international

focus of Usabilla?

I am the person responsible for the international focus of Usabilla. There are two reasons why I want to go international. First, because I think it is more interesting. Second, because I think the opportunities are greater abroad and those we pursue. Of course, we could build a successful company in Europe of the Netherlands, but that is not my ambition. It is my ambition to build a large international company doing business mainly in the U.S. The smaller the company, the tighter connected the international focus of the company is to its management. It automatically flows through the rest of the organisation. If I say, “Let’s find 10 Dutch clients this week” than it would largely influence our business. At this moment, the ambitions of Usabilla are strongly interwoven with my personal ambitions. Where does your international mindset come from?

Before I started with Usabilla I worked for a local SME during my studies. Our clients were local SMEs. I found it frustrating to work for these local clients and think small since you offer them services they are only interested in after 5 years. That is why I decided to do things differently with Usabilla, it is do or die. So it comes forth from the chances you recognise and your career?

Yes, and getting the maximum from things. Do you think things have gone faster when you would have been more

experienced?

Maybe slower, I have no idea. If I could do the same thing again it would go quicker because of the things I learned. The way we built up our business is typical for our generation. I doubt if a person 20 years older and with 20 years of experience could perpetrate marketing in the same manner like we do and is tech savvy enough to measure, build and develop things and have insight in what works and what doesn’t. It is strongly connected to my generation, I started building stuff when I was young and


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started using a lot of social media. That ensures you get a certain feeling which a more experienced manager might not have, since they are from a different generation. Management experience can be of use in any case. At this moment, a lack of management experience is not an issue for Usabilla. Those more experienced people I have working around me such as investors. They have the experience that I don’t have which can be very useful. Do you use knowledge from your network to internationalise?

Absolutely, constantly. Everything I have done the last 3 years was new. If I don’t do anything new for some time it becomes boring. So it requires constant learning. I collected people around me the last couple of years on which I can build, share ideas with and get feedback from. You need to have critical people around you from which you can learn. Online marketing I look for with person A, management feedback I look for with person B. In that way you collect a group of people around you from which you can learn. An interview like this is also important because you never know. The insights you might get or the questions asked might give new thoughts. Collecting people around you is one of the most important things to do when you want to grow quickly both personally and as a company. So networks are very important at Usabilla?

Yes, we are very open. We share as much as possible. The way we launch products, how we attract new customers. The way we start betas and how we spread those. The way we do our marketing, pick up messages and let people spread those, the way we organise events here at the office where we invite a design community to brainstorm on certain topics. Is there a business network in this building with several internet start-ups?

Not really. A friend of mine is at the end of the hallway and we often share ideas. We exchange employees for a day sometimes to get fresh insights. Their company is a little bit ahead of us, so we go through some cycles which they have already passed. So there is a lot of interaction with them. You can see it in the building. In our previous offices we rented some desks where other start-ups were located as well and aimed at networking and meeting people. Constantly, there is cross-fertilization to be seen with some of the start-ups. Do you follow a network or market potential in internationalising?

Mainly potential, we have approached the market with usability experts successfully. That market is not extremely big. There is a clear difference since usability experts focus on optimising web pages by focusing on behaviour. Our product has always focused on emotion, what do people feel and think? So we are slowly converging to design. If we would have been solely network focused we would have been stuck in the usability expert market. Now, we focus more on design and emotion with a suitable product and broke free from the usability expert market. So we are opportunity focused, we focus on where the market volume is. If we want to obtain 1 million accounts with the accompanying paid accounts, it needs to be a large group of potential customers. If there are only 50.000 usability experts worldwide you are not going to reach your target. So we focus on where the growth is and the network is a result of following that growth. I know I need a network to reach a target. In the case of a small product switch I need to build a new network partly. Again, there is cross-fertilization and there is some overlap. Ultimately, you need to look for new contacts


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and strengthen the network in different directions. The network supports the potential, you build the network around the potential. That is the only way you can innovate radically. So the strategy you follow doesn’t come forth from your network?

Partly. Small iterations come forth from our network, radical changes don’t. For example, we have a survey and a new product offering continuous feedback. If we listen to our network, we would improve surveys continuously. If you want to approach a new market and do something different, you need to leave behind what you have and start over. From there on, you start listening to your network again by offering closed betas. That network we use to broaden our network. We are not afraid to change networks and to start over with both product and network. The small steps you take thrive on your network and the people around you. To reach our targeted volume we use network effects such as social media, a viral effect. The viral effects are necessary to do something, that is highly network driven. Possibly it is not a network like described in the literature, but it is a true viral network. To get a good network effect you need a personality. Do you have any best practices regarding internationalisation?

I have never seen internationalisation as an issue. Almost everyone in my environment gets the advice to start in the Netherlands or Europe first, I don’t believe in that. If you really want to do it, just do it, go for the U.S. Focus all your efforts on the market you wish to target and don’t see it as a restriction. I have never seen countries as an issue, language and cultural differences of course can be an issue. So, if you think you can achieve success on the Dutch market you need to make calculations. If there are only 500 usability experts in the Netherlands you are not going to make it. In the Netherlands I would probably had to offer consulting services next to our online product. Some start-ups that have started in the Netherlands have difficulties going abroad. They are successful in the domestic market. But the actual step to go international is bigger since all communication is in Dutch. From day one you were active in the U.S. market?

Yes.


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D) Springest

Interviewee: Ruben Timmerman Company: Springest Date: 17/02/2012 – 09.15-10.00

Number of employees, number of years in existence, number of countries?

We have 18 full time employees and 2 part-time employees. We started with the idea in 2007 and launched the service in September 2008. We are active in four countries: the Netherlands, U.K., Germany and Belgium. In 2 weeks we will also launch in Russia. What is Springest?

It is a place where you go to learn. We connect the people that want to learn to every way you can possibly learn. We used to be a website to compare trainings and courses. We noticed it was hard to retain people. Often people are allowed to do one training/course per year, next year you have possibly forgotten about us. It is expensive to attract these people every year. So we started offering more learning methods and means. We ask ourselves, how do people want to learn? Internally we call ourselves, the Amazon of learning. Amazon is a logistics provider where merchants can place their products. We want to be the same but than for everything related to learning. Examples are trainings, courses and education, find, compare and reviewing. In addition, you can do tests; find books, articles, experts, (free) events, online tools and question/answer modules. We want to guide people in their lives to learn. Our business model is 80% lead generation. If you like a particular course, you can ask for a brochure. We forward the customers’ details to a learning institute and they pay us for the lead. Can you tell when you went abroad?

We went abroad to the U.K. at the end of 2010 as a first test. Shortly after, we went to Belgium since Flanders is an extension of the Netherlands. September 2011 we went beta in Germany. What is the reason you started in the Netherlands first and then went abroad?

First of all, because we are Dutch. Second, education is a very local product. Customers don’t travel far for a training or course. Trainings are very local. Literally, none of the education institutes are active internationally. So you have to approach it per country and that is why we started in the Netherlands first. We did not have the idea at the start that we would go international. For us it was interesting to see if we would get things off the ground in the first place. Which steps did you take to enter foreign markets?

We went to the U.K. because everyone speaks English so it is a relatively simple extension. We tried to find a native speaker for doing sales. You always have to start with sales. We financed the expansion with our own resources from the Netherlands. We have always been a profitable business until a few months ago when we started expanding aggressively in Germany. But before that we were profitable and financing our U.K. activities with the revenues gained in the Netherlands. The Netherlands is the only country where we make profits currently, in the other markets we are still


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building up. So no external financing. In the end we hired someone for doing sales in the U.K., not a native English speaker but she is doing sales. Does the sales representative for the U.K. operate from the Netherlands or the

U.K.?

Yes, that is a specific strategy we chose to follow and also a test if we could handle things from the Netherlands or do we have to open a small office in the U.K.? Therefore, we tested our service in the U.K. market and it was a positive test. Our sales representative convinced the institutes by telephone to join our platform. Once every two months she went to the U.K. for some appointments and convinced the education institutes. For us that was a confirmation that it could work the way we did it. Why we want people in our office in the Netherlands? We believe our product wins, we have the best product. To maintain that, the person in touch with the customers should be close to the product and the development cycle. Do you think you it is necessary to have foreign offices in the future?

Yes, the chance of having foreign offices in the future is big. But you have to be of such a size that you have people a number of, for example, German people working in the Netherlands and you have a base in Germany. That can grow if needed. But they have to be here first to understand the culture and are in the field. Did you internationalise because of domestic growth?

Yes, but also because we thought that what built is too cool to offer only in the Netherlands. It is a good system with good scalability and works fast. We saw that some markets abroad showed the same market characteristics partially. Those markets were also fragmented with a need to list the available education. In the U.K. we saw a lot of comparable websites but we realised we were better. So we thought we could do it, and we still think that way. However, it is not easy to enter such a market because of the competition, they are bad, but they have been there for many years already. That is the tough part. In entering the U.K. did you face any trade barriers?

No, there were no big problems. Of course we had our doubts prior to expansion and asked for advice. Should we start a local limited corporation or not? How do we take care of payments? Should we have a foreign bank account? It caused no problems. We could take payments by using PayPal but also via bank accounts. Rabobank offered us to open a pound bank account. We would only do that to be able to choose be able to choose at which exchange rates we want to exchange pounds. We have limited turnover in the U.K so it is not needed yet to open foreign accounts. That is something we will consider when we grow bigger in the U.K., if Springest does not work out in the U.K. it will save us time withdrawing from the market. There is no reason to do things differently than we used to do so far. In the U.K. we don’t have a virtual office but we bought a U.K. phone number. In Germany we have a mail address. In addition, we have local websites for the different markets. Was psychic distance of any influence to your choice of markets?

The choice of the U.K. was because of the language and the small difference between the time zones. We could go to the U.S. but you have to be present in that market due to the different time zones. In the U.K., we can give support from the Netherlands and call from here. If we become active in different time zones we have to be physically


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present there. Or we would have to work in two shifts here in the Netherlands. By the way, we planned to go to Germany first. An acquaintance owning a large hotel website advised us not to go to Germany. The language differences were thought to cause problems. An advice we got, is that the German market is less common to the Dutch market than the U.K. market, this proved untrue. The U.K. culture is different. However, the business market is similar to the Dutch market, how people make decisions is quite similar. The interaction between people is really different; they are more polite and less direct. That caused problems in the beginning since we were too direct. Often we thought people were interested, but they were just being polite. Those clichés you experience sometimes but were not causing major problems. While doing business with the people in the U.K. we did not experience barriers. The people we work with within education institutes are marketers; they are already used to buying stuff online via Google AdWords for example. Start-ups often lack knowledge/resources; do you think that influenced

internationalisation?

Yes, the idea was that we would start with one employee doing sales to build up business. Later on, we planned to involve a marketer to attract more traffic to the website to please the institutes. Our business is a two-sided platform. On one side, you have the education institutes. On the other side, you have customers that want to learn. You need them both and you have to please them both. If you only have one of them, you do not have a business. That can be difficult because it are two different ballgames. The idea was thus to start with sales and later involve a marketer. Looking back, we started looking for a marketer to late because it took a long time to find someone. That was not a shortage of money but a shortage of marketing resources. Next to that, we did not have the money to hire a freelance marketer. So there we experienced a lack of resources. As a result, we pulled back from the U.K. market because business did not go well. We decided to focus on 100% Germany instead. However, I don’t consider this is lack of resources. As a start-up you don’t feel a lack of resources because you are used to it. You are used to start somewhere with only one person and do it rudimentary. You expand abroad using sales; do you use other entry modes?

It is mainly sales by which we enter new markets. We have learned from the U.K. to start marketing efforts earlier in the process. Sales is in fact acquisition in the beginning, pull in customers by working hard and convincing people. However, then you still have nothing to offer. We work performance-based; the institutes pay if we give them leads. If we do not deliver leads we don’t earn money. More important, the institutes lose their trust in us. Thus, we need to start up marketing efforts earlier to prove what we sell. For some institutes in the U.K. this was a problem. They joined our platform but did not see much happening in the first 2 or 3 months. We had calculated for that, but in sales negotiations this might be imagined differently. We have to start with sales; otherwise you don’t have a platform for people to go to. We know now that we will switch to marketing quicker because it works well if institutes see you in the market and new institutes will approach you. After 3-6 months we stop doing sales, the institutes have to find us through our marketing efforts. So we switch quicker to marketing. In Germany, we have 3 people working on marketing and one on sales. Do you use external resources?


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Only Google AdWords. We buy advertisements locally and hire some local translators which are freelancers. We do not have any other external resources, we do everything in-house. Often we hire foreign people already living in the Netherlands. Does the experience of the manager/entrepreneur influence the


Sure, everyone has their own perspectives. My drive to internationalise resulted from my personal ambition and not my background because I saw the opportunity to make Springest big. My personal ambition drove the internationalisation and Springest serves as the mean to do so. Internationalisation is mainly driven by practical motives. We see an opportunity and do it and see where it ends. Together with objective research about the target market and what are its commonalities with the Dutch market and are we better than the competitors. Is the entrepreneur the driving force for the international mindset of Springest?

You could say that. However, I would not give all credits to me as a person. I don’t have an intrinsic drive to go to the U.K. I have an intrinsic drive to grow; the U.K. is a logical means to that. Internationalisation was never a goal, growth is the goal. We wanted to continue growing like we did in the Netherlands, 100% a year. In the Netherlands that was impossible because a recession hit the country so that was a driver. We had almost complete market coverage in the Dutch market and lower traffic increases. So it was more a consideration of where to get our growth from. We considered including other products like holiday houses or something else. In the end, we decided to go international and try how fast that would go. So our internationalisation is really driven by our drive to grow continuously. What is the influence of networks on the internationalisation of Springest?

For me it is the number one thing to do. The first thing we did when we went to the U.K. and Germany is tell everyone that we were planning to do so. Consulting our network is always step one in everything we do. Whether we look for an advisor or want to try something new, we tell everyone and at some time someone will get back to you. When we planned to go abroad I consulted our network and said we want to go to the U.K., France and Germany. What do you think? Two of them said the U.K. and we followed their advice. The choice for the U.K. was driven by advice from my network. So you use your network for both sales and advice?

Yes, knowledge is the most important. Finding partners and sales is also important. However, the first step is gaining knowledge and make new connections. By accident, we got to know someone who will run our business in Russia because of our network not because I wanted to go to Russia. It is because we mentioned we had international ambitions. In Russia you will work with a representative?

Yes, a local partner will do everything. We give them the technical platform; they will translate everything and approach the market. In true start-up style we did not close a deal, there is no contract. We make sure everything is ready for our partner to start and we support them. They do the marketing and the sales and they get all income for half a year. After half a year we will evaluate and see how we continue, whether we license them, form a joint venture or do it ourselves. We will see. Russia we would


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not have approached ourselves, the market is too different, the language is difficult. Google is not the main search engine in Russia and so on. Are internationalisation choices driven by your network?

Enormously, for a good entrepreneur that is always the most important. As an entrepreneur you realise that the biggest growth has yet to come say the first 20 years of your career. There are always people that have already done what you are planning to do. It would not be smart to do everything yourself. You should be busier asking people around you for advice than trying to make up everything yourself. My network is of large influence for how we do it and where we go. Personal network/business network?

No it’s a personal network. The entrepreneur has a network on which he is working actively. It should not be purely business, it should be natural for the entrepreneur to have a large network. Networking is something important on its own. Networking is in my nature and I am trying to build it constantly. Therefore, I try to be visible to others. I know if I have a broad network and a lot of people know me if will improve my business. One of my employees has a large network, which was even a reason to employ her. Do you follow potential or your network?

You follow the product of the potential and the effort it takes. China has a large potential but the effort is too big. Therefore, we go to Germany, the potential is and relatively small efforts to adjust. Scandinavia is close to our market, but a small potential thus we don’t go there. So potential and the network always go together, it’s the product of the two. Belgium has a small potential but it easy to approach, therefore we approached it. If Russia works we are interested to go to Turkey. If Turkey works we will apply the same model more often then it goes quicker. The factor ‘effort’ has then significantly decreased, so the factor ‘potential’ will weigh stronger. Then China comes closer, if we meet a Chinese then we might just go there. Do you have any best practices concerning internationalisation?

One is like we did in the U.K. Start off small, so in case it does not work it does not hurt to withdraw from the market. That was very important to us. Our stability is mainly in our flexibility. We have small risks, not because of the investments, but we can stop tomorrow with investing. Our sales representative for the U.K. could be transferred easily to German sales in one day. That is the way we designed our company, we have many people speaking multiple languages. It is important to us to learn quickly and move on. Another best practice is that we are product-driven, the product has to do it, the product is the marketing and marketing is in fact sales. We believe by offering the best product, we have the best marketing, the best sales and therefore we will win.


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E) Roamler

Interviewee: Wiggert de Haan Company: Roamler Date: 22/02/2012 – 15.00-15.30 Number of employees, years in existence and product/service in a few words?

Roamler started with the idea in February 2011 and we started accelerating our business in April. In July 2011 we went live with our service/application so we are active in the Dutch market for more than half a year now. Things are going quite well, a lot of Roamlers (users) and clients. We work with approximately 18 employees. We have some developers, employees offering Roamler support for both the Dutch and U.K. market and we have some people doing sales. Roamler offers a solution for two parties. On the one side, the companies requiring information about their retail business. On the other side, we offer an enrichment of the daily experience for our Roamlers. Roamlers are being rewarded with point and money. Simply put, you can earn money with your iPhone. Are you active in any other markets than the U.K. and the Netherlands?

Yes and no. We have dedicated Roamlers. This means you can implement Roamler for your own employees. They use our application but are not real Roamler users since they use it only internally. The application is used in 23 markets by dedicated Roamlers. However, the focus is strongly on the U.K. and the Dutch market, those are our primary markets. Are you active on the U.K. market since the very beginning of Roamler?

Since December 2011 we started in the U.K. We wanted to see first if Roamler would work in the Netherlands and then expand abroad. Which steps did you take to approach the U.K. market?

I go there myself every now and then but we do most things from the Netherlands. Most of our customers have an international focus. So we ask our Dutch customers if they have any colleagues in the U.K. that would be interested in our product. That is our first strategy to get a foot in the U.K. market. On the other side, we also do cold calls and we have a test policy. So you approach the U.K. market primarily from the Netherlands?

Everything is done from the Netherlands currently. Do you expect to increase resource commitment in the U.K. market?

We don’t know yet. We don’t have any concrete ideas about that. We are building our market in the U.K. now. If there is a certain volume or there are signals from the market that more resource commitment is needed than we will do so.

Is the choice for the U.K. motivated by domestic growth?

The choice for the U.K. was opportunity-driven. We won a prize for a contest by PepsiCo in the U.K. giving us a budget for us to start with in the U.K. market with pilots and clients. So we started in the U.K. because of that opportunity.


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Did you consider the psychic distance a barrier for the U.K. market?

You could think about that very long. Because of the prize from PepsiCo we just started and see what we’ll encounter. Do you experience a lack of resources/knowledge in internationalising?

You can look at other best practices and talk with colleagues that have already entered the U.K. market. However, the knowledge we need is mainly acquired by experience. If you don’t succeed you have to keep trying. Is this resembled in the culture of the company?

Don’t be stupid, think with what you do. Everyone can make mistakes. As a start-up you learn most by doing and if you do nothing you don’t learn anything. You try to think everything over thoroughly but at some time you have to take certain steps. For the expansion to the U.K. it felt good so we just did it. Do you use external resources?

No. Everything is done in-house. Experience of the manager decisive in internationalisation?

Internationally we have our experience. I have tried to start a business in New York, which is very hard to do. I have had my learning experiences there so I have a lot of experience with that. Did your international experience lead to quicker internationalisation?

Not completely. Of course you experience the same problems and situations every now and then. But it remains hard work to get your contacts and start up. Knowing that, I stepped into this start-up differently. In New York we started our business and it ran for half a year, so we know what we can expect in some situations. Is the management experience the driving force of the international mindset of

Roamler?

Yes, partly for sure. Do you use networks intensively when internationalising?

Yes, we make use of many networks. For example, networks of different start-ups that are in the U.K. Next week I’ll be in London and have a beer with someone from the embassy. In London you also have Techhub, which is a start-up facility, with which we have talks next weeks. So you can and must make use of different networks. We use them intensively. Both personal and business networks?

Yes, both. Is strategy influenced by people from your network?

You are always being influenced but you keep thinking critically yourself as well. Do you follow network or market potential?

Both should be considered, people in your network say something about the potential of a country. Then you make an overall analysis, either implicit or explicit. In that way you assess the opportunities of a particular market and make the decision to go


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there or not. The information you get from your network influence the markets you consider, next to that you consider the figures of particular markets, how many potential clients are there, how many brands, is it easy to travel there etc.? If I leave home at 6.00 I’ll be in London at 7.30 which is a fast connection allowing it to do business more easily. Do you have any best practices concerning start-up internationalisation?

It depends on your needs and in which scene you are in. We are in the start-up scene. We want to find a lot of Roamlers. So look for contacts which are complementary to you. For example, look for a U.K. business that wants to go to the Netherlands. You can help them and they can help you preferably a similar kind of business. In every company there is some kind of partner that can help you without harming each other’s business. So as a best practice, look for a similar start-up abroad that wants to go the Netherlands and see if you can help each other.


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F) Cloud9

Interviewee: Ruben Daniels Company: Cloud 9 Date: 24/02/2012 – 20.00-20.40 No. of employees, no. of years in existence and product/service?

We have 25 employees. We are in existence for 2 years, since January 1st 2012. We are Google Docs for software development. Google put Microsoft Office online; we did the same but for software development tools. You have offices in the Netherlands and in the United States, but you also have

employees across Europe?

Yes and also in the Northern American continent.

So you are active in more countries than the Netherlands and the U.S.A.?

You could say that yes. Could you tell in more detail which countries Cloud9 is working in?

Canada, Poland and Greece. We had employees across Europe such as Spain, Romania and Scotland. In the end we try to get them to our office. Europe is made up of small countries; you need the whole area to find the right and good people. The U.S. is bigger of course; our office is in San Francisco. However, we have employees in L.A. and Texas for example. In 2010 you went live with Cloud9. Were you only present in the Netherlands

physically with your office?

Yes, with our office we were. But we had several employees in various countries already. So how long after establishing did you go to the U.S. market?

What do you mean with ‘going’ to the U.S. market? We have always seen the U.S. as an important market, perhaps even the most important market. That is the reason we collected money in the U.S. and set up an office there. In July 2011 we received the investment and in September 2011 we had our first employee in our office in the U.S. The investment made it possible for us to open an office in the U.S. What were your steps prior to the investment in approaching the U.S. market?

Our business is done online, which makes things easier. There are a few news outlets on which we focus. Some of them are oriented on the U.S and are also being read in Europe and the U.S. We went to the right conferences. In 2010 and 2011 we went to conferences in the U.S. maybe 8 or 9 times a year. Since the beginning we also looked for partners in the U.S to collaborate with. Most companies we would like to partner up with were based in the U.S. What do you mean with partners?

Partners are companies with which we collaborate with such as Microsoft, Neroku or Mozilla. We integrate their solutions in our application. We allow developers to use for example Microsoft Azure in our application. This goes alongside with marketing


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actions. You do something together which is in the interest of both and usually contains quite a lot of marketing around it. Was domestic growth of any influence to your international expansion?

The Netherlands was never on our map. Only as a part of Europe. The open-source version was launched in Berlin and spread globally in the days after. The real launch was done in L.A. The Netherlands is a small market but we have some Dutch visitors. Monthly we have 100.000 to 150.000 unique visitors, 2000 or 3000 are from the Netherlands. So the Netherlands was never a first step for Cloud9?

No, for us this was not the case. Did you experience trade barriers in entering the U.S. market?

It is useful if you are present in the U.S. market and have a visa. The more visa stamps you collect the more suspicious you are to customs officers. We got our visa relatively easy because we received a U.S. investment. With an investment you can get an E2 visa which is an investor visa because you imported value to the U.S. If you don’t have any added value or don’t bring an investment it will definitely be harder. Did you experience legal barriers in entering the U.S. market?

Things are different here of course. You need a good lawyer. Going abroad is always difficult. People work differently and you have different cultures to deal with. As a founder or manager you have to be present in the market. It means that people will be taken away from their domestic environment which has personal consequences. This is something which you need to be able to deal with; this could be seen as barriers. So you need to be present on the foreign market?

Definitely as a start-up. For multinationals this may be different. If you want to enter a market say Europe, then you can operate from the Netherlands. Of course it depends on the product. But if you want to establish yourself in a foreign market than you need to be on that market.

Did you use external resources in entering the U.S. market?

We spoke with the consulate and have a good relationship with them. That can be seen as a resource. We also use networks. Did management experience lead to quicker internationalisation?

Maybe. Companies that don’t internationalise quickly do well in their own country or Europe. On the long-term they are beaten or lose market share to companies with international experience. From the United States you can deal with the rest of the world. The quality of leadership of the founders is decisive for the success of the company and thus also for internationalisation. You need good reasons to internationalise since it is ‘painful’ and costs a lot of money. Were networks important in entering the U.S. market?

Networks are essential to us. You go to a market where you don’t know anyone and have no connections at all also for things such as hiring. For example, I just received an e-mail from a partner which I told we need someone for marketing, they introduced me to someone. Those kinds of things you need otherwise you will not get anywhere.


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Do you also use networks for acquiring knowledge?

Absolutely, for example we speak with Dutch people that are already present in the U.S. market. That is very important, we are also asked to share knowledge with other Dutch start-ups about funding and so on. It depends also on how you enter the market. We hit the ground running and built a network quickly. Internationalisation always painful and costly, but there is a good way and a bad way of doing it. Do you follow networks or market potential?

Market potential. Could you base a choice for a market on your network or a large client requiring

your service?

If there is one large client in that country there is no need of going there. There needs to be market potential. And if you have a large client with a large network that can be of advantage.

Do you have any best practices to share concerning internationalisation?

Many things would be troublesome in other countries, for example the language we already spoke. The English language is easy to implement in the rest of the company. If you go to China or France this is different. It is obvious for us but language is really important, if you speak the language it makes things easier. The most important is your motivation/reason to go to a certain country. That is number one. You need to have a network, you need to be present in the market and hire natives.


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G) Gidsy

Interviewee: Edial Dekker Company: Gidsy Date: 28/02/2012 – 10.00-10.45 No. of employees, no. of years in existence and product/service?

We started with Gidsy 9 months ago with 3 founders. With Floris my brother he is CPO and does design stuff, and Phil he is the CTO. I do community- and business development matters. So we started 9 months ago working on a prototype, after 4 months we finished the prototype. With the prototype we went to potential investors and we also found investors. Two months ago we received investments. About 3 months ago we went live in Berlin and Amsterdam. Then we went to other cities such as San Francisco and NY. The 29th of February we will go live in Los Angeles as well. We currently have 10 employees which helps us to grow internationally. So if I understand correctly you are active in four countries currently?

Yes, that is correct. What is Gidsy?

Gidsy is a place for activities. Everyone can offer something and everyone can book something. For example we have someone in Amsterdam offering a tour through the Red Light District. We try to keep it simple. We offer safe transactions to our customers and offer services such as cancellation policies and so on. How Dutch is Gidsy?

My brother and I are Dutch. Phil is from Austria. The business started in Germany. So you started in Berlin and then?

We started in Berlin. Then we went to New York and later on to Amsterdam. Amsterdam was a logical step because we are from Amsterdam. Which steps did you take to enter foreign markets like the U.S.?

We chose different strategies for different markets because we thought we had the freedom to do so. We had the resources such as money to try different strategies. We need to learn as much as possible in the shortest possible time period. In New York we hired someone who worked for us for a couple of months. That person met a lot of people and worked on press relations. We noticed it was very hard to have someone working there and managing that person from our home base. In the end we did not go on working that way. In Amsterdam we worked differently because many our friends are situated there. The differences between those two strategies were a great learning experience. In Amsterdam it went better because the people were closer to you?

Yes, I think it is important to have a critical mass with people that are interested in your product. For example your friends use it and they like to use it than you are off to a better start.

So how did you enter New York after the first try?


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We are working on that now. We focus on the press now. The U.S. is a very important market for us on which we focus more and more. It is very important to be there physically, we are working on a good way to realise that now. It is possible to do so in many ways. People in our network advise us to get an American person to our office for a couple of months and send him/her back so he/she can get acquainted with our culture and way of doing business. Gidsy is a very young company where a lot of quick decision-making is done, it is hard to do that well while working in different time zones. Is domestic growth of influence on your decision to internationalise?

The longer you are somewhere the more popular you become. I am sure you need a certain mass and I think we have that mass currently. After time, things get more popular. We are in the phase of becoming increasingly popular. We look a lot at metrics currently. Who is booking where? Where are the bookings? We try to learn from that now. Did you experience trading barriers in internationalisation?

There are a few barriers like payments. In the U.S. everyone is comfortable with paying by credit card. In Europe this is different. If we have to pay organisers that is very complicated at this moment. We use PayPal for that now which is a barrier for some potential customers. There are better ways of doing this than through PayPal. Of course we want to use payment methods like iDeal, but in Germany they use different payment methods. Payments methods are a barrier for us. The U.S. market wants creditcard payments, if you offer that than you already have 90% of the payment needs covered. Is a lack of knowledge/resources constraining internationalisation?

I don’t think so. Every website is different and no one can tell you exactly how things work for your initiative. Neither is it knowledge you can find in the form of best practices. It is very helpful to gather good people around you like friends and relatives. We did that from the beginning for example, Etsy which is an online marketplace for handcrafted goods with 250 employees in New York. We know them really well and can ask for help any time. We don’t have to reinvent the wheel. But a lot of things are unique to Gidsy. Do you take other steps in entering foreign markets?

We do everything from our headquarters.

Do you use external resources in entering foreign markets?

No. Did management experience contribute to quicker internationalisation?

As a start-up you want to be quick with everything and it is important to focus on that. We did that from the beginning. We knew how to start a German company, a lot of our friends had start-ups so they knew how to attract investors and we gathered the right people around us. We already had an office and computers. I think it is important to focus on speed. If you had more start-ups, then investors are also more willing to invest in you. So investors are more willing to invest in more experienced people?


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Yes, definitely. Is Gidsy internationally oriented?

Yes, we are with 10 employees here. But the 3000 people related to Gidsy are scattered across the globe. Are business/personal networks important to you in internationalisation?

Yes, very important. Everyone at Gidsy has a personal friend. We are very active on the internet and that is very helpful especially in the beginning. For example with simple things like investors. They will look for people you both know and call them. Is strategy influenced by your network?

Yes, sure. We get a lot feedback from people with a lot of knowledge. Sometimes we make big decisions about which we thought based on certain feedback. Do you follow your network or market potential in internationalisation?

Both. First you look at the market. But we also look at what we get back from our network. Where do we get attention and visitors? Do you have best practices concerning internationalisation?

We are in a learning period at this moment so I can’t really share best practices. You are going live in L.A. tomorrow, is that coordinated from HQ?

Mainly yes, we have some enthusiasts helping us out in L.A. But business is mainly done in our headquarters.


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H) BuddyUp

Interviewee: Diederik Bol Company: BuddyUp Date: 29/02/2012 – 10.00-10.45 No. of employees, no. of years in existence?

We started preparations in the first quarter of 2011. We are with 2 founders since the beginning. We started brainstorming in December 2010. In October 2011 we went live with our website. Between January and October we created our website and dealt with administration matters for setting up our business. The people who have developed our website were fellow students. Three people helped us creating and building the website. We are still with 2 employees and talking with a potential third employee for IT-matters. What is BuddyUp?

We started brainstorming and ended up with this idea. We realised there are a lot of websites for dating and finding a partner. What we missed is a platform to do nice things for people older than 30. So the idea is not to get a date but more to get people out of their houses and do nice things. For example, someone who is divorced or just moved elsewhere can just do nice things with other people without any dating intentions. We have six main categories and six sub-categories. Creating a profile is very easy.

BuddyUp is active in all of the Netherlands?

Yes, across the country. We would like to divide it in regions, for that we need more content. With 100.000 users it is easier to find likeminded people. What is the exact target group?

We aim at people of 30 years and older. We try to keep it as broad as possible. For example not only for singles but also couples. What is the business model?

Currently we use an advertising model. In the near future, we would like to enable advertisers to advertise directly on their target group. For example, someone that is looking for a tennis buddy can see advertisements of tennis ball manufacturers. Is BuddyUp aiming at going abroad?

Yes that is definitely our ambition, in all the larger European countries we claimed domain names such as .de, .fr and .eu. The categories of our website can easily be modified to different countries and translating is not the hardest part. International expansion is definitely a goal. However, for the coming half year our target is to break-even and realise steady growth. Which steps do you take to approach a foreign market?

Creating and obtaining knowledge is never harmful. Going somewhere and taste the market, talk with people, go to a conference, get to know how people think and if people are open to our platform is not a bad thing. One step is going to a foreign market and talk with people. The internet can be very helpful for example to do preliminary research.


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What is a reason to expand abroad?

Domestic growth, I think if growth in the Netherlands slows down this is a sign to expand abroad. Translating and going abroad can be easier than trying to find a new business model to serve your domestic market profitably. Does psychic distance play an important role in a choice for foreign markets?

A choice for a certain market needs to be carefully considered. In our case, if we go to France we would talk with some French students. In choosing a foreign market you need to discover what people think about your product. For example, Facebook is not really adjusting their product to markets except for the language. Did you experience trading barriers?

No. For example, the Terms of Service we wrote ourselves and were checked by a lawyer before going live. If you do good market research you can account for most barriers. Did you experience a lack of knowledge?

Yes, our IT knowledge was/is insufficient. Both of the founders have no idea how to do programming. Therefore, we worked with some fellow students that developed the website. This proved to be time-consuming and with more knowledge I could have been more involved in this process. Therefore, we need someone that thinks alike and is able to do programming. In going abroad a clear conscience and thorough market research can bring you quite far. Is internationalisation easier because of the internet?

Yes, definitely. Especially when you don’t have a product like us. A website can easily be offered abroad. Do you use external resources?

Yes, besides a lawyer we have monthly brainstorm for which we invite external people and look for partner opportunities. How do you approach foreign customers?

We don’t have much money so you have to be creative. For that reason we use press releases and think of less costly actions. Do both of you have an international mindset?

We both have an international mindset. Do you think that the international mindset contributes to quicker


We always had the idea to go abroad. It is more in our personality to think bigger than just the Netherlands. We love to think big since we both travelled a lot and learnt a lot from this. Do you think networks are important and use it for expansion?

Yes, we go to drinks and start-up events to meet new people and show ourselves.


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So you use networking for gaining knowledge and get acquainted in the world of

start-ups?

Yes. Networking is important. Is strategy influenced by your network?

The chosen strategy in the beginning was definitely influenced by our network. In going abroad we consider advice from our network. Of course, we would not base decisions on one advice but it definitely has an influence. Do you have best practices concerning internationalisation?

Success is in the preparation. Look at the norms and values in a country on don’t go unprepared. Things that are normal in the Netherlands don’t have to be the same in a neighbouring country.


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I) Marvia

Interviewee: Jons Janssens Company: Marvia Date: 02/03/2012 – 10.00-10.45 No. of employees, no. of years in existence?

We started four years ago when Arnoud and I were still studying. Before that, during our studies, we already had our own company. With this company we built PCs that looked like Mac computers. From there on we got a lot of web projects and with the third founder, who was building our websites already, we started Marvia together. Marvia is a pure software company. We work on one product and do nothing project-based. We have one platform on which we work with the team. The platform is offered based on the SaaS model; we thus offer software as a service on a contract-based model. Our users pay a fixed fee per month per user. That fee is equal to one hour of DTP. DTP is short for desktop publishing. A person responsible for DTP is creating advertising, posters, flyers and all other print-related stuff. Basically it is a graphic designer but then doing mainly repetitive work. We thought this was a slow process because of many corrections and e-mails and thus created an online tool which is Marvia. Marvia is an online tool with which companies can create and edit print media in their own corporate style. Nowadays, they can also distribute the media and publish it in for example newspapers. We currently work with 9 employees and 1 freelancer. Arnoud and I focus on commercial work together with the freelancer. The other employees mainly focus on the technical part. That is how we work for the last 3,5 years, before that it was mainly a development phase. Are you active in more markets than the Netherlands?

From day one we chose a deliberate strategy. Because our service is web-based it does not really matter in which country you operate. The only things you need are a web browser and an internet connection. However, we are strategically aware that many companies make by going abroad too fast only because it is possible. We follow another strategy, we are active abroad but that is because we follow our clients abroad. We grow abroad alongside with clients that have their headquarters in the Netherlands like Schindler Elevators, which is active in approximately 25 countries. Marvia is available in 5 languages. However, we are not acquiring sales abroad actively. We have a potential strategy for online signups where foreign people can create a profile. Because of our strong focus we have not put that strategy in effect yet. A person responsible for DTP is working in the client organisation or in an

advertising agency?

It differs, mostly it is people working for advertising agencies. An advertising agency develops your corporate identity, if you need new advertisements the person responsible for DTP creates your ads. DTP is mainly copy and paste work. So we thought we could automate the DTP function with our service. That is what we are working on now. Our payoff is therefore, DTP becomes ABC. DTP is not a creative function, the DTP-person cuts and pastes in Adobe InDesign. Marvia is based on Adobe InDesign. With your tool every employee in an organisation can do DTP?


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Most DTPs are working for advertising agencies. Larger organisations have their own DTPs. They can fire that person now when they start using our software. You indicated you have a strategy in place to acquire foreign accounts, so all

current accounts started in the Netherlands?

Roughly we have three strategies to acquire new customers. One is direct sales by knocking on peoples doors. This strategy is not suitable for internationalisation because it is too costly. The second option is through partners which is possibility. By setting up contracts with implementation partners using and selling your software. Third, is web sales meaning selling accounts online. So through the website you can create an account and start working. The latter two are potential internationalisation strategies, partners- and web-sales. Telephone sales is also possible but is more close to direct sales. Until now in the Netherlands we did everything through direct sales. The deal size is then often bigger and you go abroad because those companies are active abroad. If we internationalise we do it through partners or/and web-sales. With ‘partners’ you mean you will license your software?

Yes, companies like Adobe or Microsoft do it as well. Adobe creates a product. Across the globe they have partners like technical implementation companies or software resellers, in our case advertising agencies, they get a certain percentage in return. In which countries is Marvia active currently?

In Europe mostly. We offer 5 languages: English, Dutch, German, French and Spanish. And we are active in the corresponding countries including Belgium. You approached those markets by following your clients?

Yes, we consider that healthy first steps. If you collect a large investment you can set out an aggressive internationalisation strategy. We are privately funded so that is not on our roadmap. In internationalising, do you experience increasing resource commitment?

No not really. If you want to do intensive sales, then you have to invest. However, our platform is ready. We built our application in a way that it is text-based. It is relatively easy to add new languages. Since the beginning we accounted for that that you need to build it technically easy in that way. If you really want to set foot on ground on a certain market you need to focus on it have someone in the field or have certain knowledge of foreign markets. We did not do that on purpose until now. We definitely have expansion strategies ready. Is domestic growth a driver for internationalisation?

People say that the Netherlands is too small as a market. We think that the Netherlands is a good market to start. It is a relatively rich country and has a good ecosystem for start-ups. If you are a business-to-business company like us, it is a good market and large enough. If you have a business-to-consumer business like Facebook you need to go abroad quicker because you need as many users as possible to make money. We have enough business to do here in the Netherlands. The Netherlands isn’t too small so that we are forced to go abroad. Many companies face crucial moments after 3-7 years. We passed the first 3 years, often after 7 years the Netherlands proves to be too small for certain companies. For Marvia the latter is not the case yet.


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Foreign markets are entered via online sales or partners, is that easier because of

the internet?

Yes. Steven, Arnoud and you are the founders, are you also the day-to-day managers?

Yes, the three of us are the managers. In early stages we attracted an advisory board which is more American consisting of experienced entrepreneurs. We use their experience for questions like if we should go abroad or not. Besides that we have two informal investors, they have their influence too. Those two groups have an influence on strategy. You won the White Bull Awards recently and said this could serve as a

jumpstart for your international expansion and reputation, is this a deliberate

strategy?

If you follow the web-sales strategy we discussed earlier than you need that kind of free PR. It is credibility for your product and people start writing about it which is a good strategy to follow. Last year April we participated in the Next Web awards and won an award for the best business model. After that you could see an increase in foreign traffic on Marvia. We chose not to roll out that strategy abroad yet. We look at Germany to do more business there. The web-sales or freemium strategy is very scalable. From the free account people can pay for more features. Such a strategy requires a strong focus which is not done until now. Awards are definitely something to stress when going abroad in such a way. You indicated it is a deliberate strategy to focus on the domestic market first, is

that the common thought within Marvia?

Yes, definitely. Resources play an important role. You can go abroad quickly if you’d like but other things will suffer from that. At a certain point in time you need to make a choice whether you go abroad or not and you need to make the switch. For our product it is not needed since there is enough market share to gain in the Netherlands. You should not only go abroad because it is cool, you need a good reason. Our team is too limited for internationalisation. The ambition to internationalise is there but realistic considerations lead to our domestic focus. Is there an international mindset among management?

The international mindset has always been there since our product is developed with an international vision. Market considerations made us do business differently until now. Do you follow a network-based approach by following clients abroad?

Yes, I definitely believe in that. A partner channel can be a network strategy. For example, here in the Netherlands we have a deal with a network of smaller printing companies that have a kind of purchasing agreement. We sold our product to their network and all printing companies within that network use our software now. That would be a good way to go abroad too so that you join a larger partner network for example. On the one side, you have a network from your own client-base. On the other side, from existing network which you can join and grow along. What we also do is collaborate with other internationally oriented start-ups creating real products, we are in a network called STIKK. We do a lot together and learn from each other.


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So on one side you use your network to obtain sales and on the other side to gain

knowledge?

Mainly knowledge-sharing. On the international side the knowledge in the Netherlands is limited because many companies have an internal focus. The STIKK companies all have an international focus. Do relations in your network influence your strategy?

Yes, definitely. The knowledge you gain from your network is influencing your strategy. For example, the web-sales strategy through a freemium-model is done by another start-up Usabilla. We can exchange knowledge and practices and that is not something learned in the books. I once gave a lecture at the university and students did not know what I was talking about when discussing a freemium strategy. In the U.S. this is part of education. Do you follow networks over market potential?

Yes, I think we follow networks over market potential. We sell our service to marketing managers, globally there are many marketing managers. But it is hard to reach them. Therefore, we focus on the Netherlands until now because we have a network here. Do you have any best practices regarding internationalisation?

If your business model is based on a freemium model than you should consider how you want to grow, maybe not even launch it in the Netherlands. Gidsy for example, many Dutch people do not even know it exists in the Netherlands. Layar is another start-up of which people don’t know that it is a Dutch initiative. The investment climate in the U.S. is very different. In the U.S. you can collect money with a business plan. In the Netherlands you need to show that your concept works before investors are convinced. Usabilla is very internationally-focused, but a lot of Dutch visitors come to the website. It depends very much on your business model and what kind of business you have whether internationalisation is a part of you or not. It is in our personality to look around in the environment. We go for world domination!


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J) VakantieVeilingen.nl

Interviewee: Marcel Beemsterboer Company: Emesa – VakantieVeilingen.nl Date: 16/03/2012 – 13.00-13.45 No. of employees, no. of years in existence?

We have around 90 employees dedicated to VakantieVeilingen.nl in the Netherlands. VakantieVeilingen.nl is active in the Netherlands and Germany, how long after

establishment did you go abroad?

With the auctions we started in 2005 integrated on another website Inpakkenenwegwezen.nl. VakantieVeilingen.nl became a separate label end of 2007 or beginning of 2008. If you take that as a starting point, we were active for 3 years in the Netherlands when we started to look abroad. We asked ourselves whether the concept would be attractive internationally. We created a strategy for that still under the old shareholder structure where the 3 founders were the shareholders. In the internationalisation plan two shareholders disagreed because they thought it was too risky. So we needed a new partner to roll out our international strategy and found an English investor willing to invest in our internationalisation. What was the exact strategy you had in mind to internationalise?

We looked at what the strengths of the auction concept were. We saw it was not a strength that could be attributed to the Dutch market only, it proved to be a universal concept. The concept is based on an English auction where a consumer can use our mechanism to get to a price. In every established market where leisure and spare time play a role, the VakantieVeilingen.nl concept could be present and have its position. Currently we do not see any other party which is active on a global scale. The market is open so we can become a global player. We thus started in Europe, with the knowledge we gain in Europe we will create strategies for other countries. Until now we do everything ourselves and internally regarding internationalisation. We think we need to gain experience ourselves to roll out our concept in more countries. We try to create a roadmap or playbook in which we document our experiences. Ultimately, it needs to become a playbook-based roll out. How do you set up our concept, how do you implement it and so on. Relative outsiders need to be able to set up the concept relatively easy in the foreseeable future based on the playbook. You need to document it so well that intrinsic knowledge of the concept is not really needed. What do you mean that you do everything yourselves and internally regarding


We use our own people and our own organisation. Internationalisation is managed in a department in our organisation. We discussed the option of having an office abroad before internationalisation. We thought that having our own foreign office was needed for your credibility. The credibility we definitely need with this concept since it is built on trust and loyalty. In a large country like Germany you need a local office to attract suppliers and so on. We do customers service and marketing locally. In our European service centre we do finance and IT services.


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Is management also centrally located?

We look for an entrepreneur in the countries we want to operate or are operating. Not a manager but more of an entrepreneur. A foreign office is quite autonomous. There are some given structures but it is up to the entrepreneur how he is going to conquer the market. Did you consider other entry modes?

We considered other entry modes. For example, to do even more from the Netherlands. However, for your customer acquisition strategy you need local knowledge of the negotiation terms, local partners you need supported by experts from the Dutch organisation. They get their time to share their expertise with colleagues abroad. Is the internationalisation decision driven by domestic growth in the

Netherlands?

We did not say: “growth in the Netherlands is slowing down, let’s go abroad”. For the time being we are not finished with our growth in the Netherlands and we see no limits in growth. The most important reason to internationalise was because with these kinds of concepts you only get one chance to become a global player. If your concept works you need to roll it out as quickly as possible. So that was a motivation for us to dominate the international market before some copycat is ahead of us. It is still a threat that a copycat might become an international player since we are only active in one country besides the Netherlands. The choice to start in the EU, was it because of geographic motivations?

We chose for a country which is close to the Netherlands when looking at (market) structure. We chose for this because it would be easier to adapt to a market which is close to the Netherlands and which would allow us to focus on the strategy and its rollout. Did trade barriers play a role in choice for foreign markets?

We did not look into it that deep. We checked broadband penetration for some countries. This was a requirement, that broadband penetration would be high. What is also important is that a relatively high amount of national income is spent on leisure. Does psychic distance play a role in the choice for foreign markets?

Secondary maybe. If for example Scandinavia would have had a better connection for our concept than we would have gone for that market. So it was not the most important consideration.

Were as shortage of knowledge/resources of influence to your


I don’t really think so. We had enough resources to get the knowledge needed to make a good start. However, the pressure we put on ourselves with the tight schedules and planning ensured that we did not have much time to learn. Next time we would leave more space and time for learning. And also launch it later to let people get used to your product. Is internationalisation easier because of the internet?


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Definitely, for example Cheaptickets.nl can go live in new countries quickly. We may be an exception to the rule because we want to approach the consumer and supplier locally. So our process may be a little more labour-intensive. What were the steps prior to opening your office abroad?

Half a year prior to internationalisation we created a roll out team internally. Their project was to prepare our internationalisation. A multidisciplinary team did the preparations for example to prepare sales channels and so on, all from the Netherlands. Did you use external resources?

In Germany we had one external project manager. However, from the beginning we said that the internal roll out team would be 100% dedicated to the internationalisation. The launch dates we set prior to our internationalisation were all met. We had one month of soft launch now, in the next market I would plan 3 months for the soft launch. (Re)orientation of management of influence to internationalisation?

The new management was partly attracted due to the internationalisation plan. The CFO already had international work experience the same goes for the CTO and CEO. They were all from a level where they were used to doing business on an international scale. The roll out strategy was already there as a blueprint before they were hired. The new management made sure that processes were optimised. Does management experience lead to quicker internationalisation?

We did not go abroad quicker but the organisation was better prepared. The structure was changed and made better which enables us to roll out internationally more easily. For example, our international service centres were set up because of management experience. We have a holding and subsidiaries; the latter buy their services at the holding. Are you more international due to management experience?

If we would have attracted middle-management and gave them responsibility we would probably have been less far at this moment. Is the experience of the management the driving force of the international

mindset of the company?

I don’t think that is the case. If I look at myself and my entrepreneurial role, I always had the desire to go abroad. Without the new management our internationalisation strategy could not have been implemented. The strategy remained the same, the implementation became more professional. In 2006, we went abroad once with one of our comparison websites. At the start of Emesa as a company we already had an international mindset, which was represented in the rest of the company. Do you use knowledge of networks/relations in going abroad?

We looked for knowledge from networks/relations in going abroad actively with different parties such as the German and Dutch Chamber of Commerce, your LinkedIn network and various business networks. If you really look at if we got any advantage than you can conclude that we did not find any party that really helped us or experienced the same. If we go abroad to any other countries then we need to


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increase our efforts to find best practices and learn from others. If we open in a second country we will also have knowledge from our German adventures. If you could find a similar company with similar experiences this could definitely add value. Until now you haven’t got the chance to learn a lot from others in going abroad?

No, it could be so because of us. I have been looking for potential companies to learn from myself but did not really find suitable companies. Personal and business networks are thus important?

Yes, definitely. It would be great to have access to internationalisation experiences if they are available. Is strategy influenced by your network?

Since the start of Emesa we thought, if we have something good you need to have the guts to roll it out internationally. In that way we are not really influenced by our network. So you follow market potential over your network?

Yes. However, we tested our strategy with consultants from Jungle Minds for example. We concluded that we have to focus our international roll out with our strongest products. Do you have any best practices regarding internationalisation?

If you internationalise, gather a team of the best employees in your organisation and give them the freedom to prepare the international rollout. Get into touch with your future clients very early. Personally I prefer Pretotyping, where you can create something easily and show it to people abroad to check whether they like it. As a last advice, take enough time to have sessions with people abroad and get feedback from natives. This can speed things up significantly.

internationalisation strategies of internet start-ups

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