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Enter new markets and embrace a distributed workforce to grow during a pandemic

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Many companies will not see the uncertainty of a global pandemic as the perfect moment to go international, but for others (particularly in healthcare, online communications, and workplace mobility) the market is stronger than ever and companies are having to respond quickly internationally to both service existing clients and take advantage of the growth in demand.

We and our team at Taylor Wessing advise 50 to 75 venture-backed North American companies each year on setting up in Europe or Asia. We’ve helped companies such as TaskRabbit, Lime, Glossier, InVision and many others translate their domestic success to new jurisdictions and cultures and to thrive as global businesses.

This is a practical guide to international expansion with the challenges of the current time in mind. It’s a quick-read providing some practical tips and sharing best practices from peer companies to help you come out of the pandemic with a strong international presence. A great deal of this advice is evergreen and will serve you well whatever the circumstances may be.

In particular, we’ll cover the rise (and risks) of distributed workforces — a way for CEOs to hire the best talent anywhere in the world. This has taken on new significance with the boom in remote working as one of several options for CEOs looking for strategic growth during and after COVID.

Is this the right time to expand overseas?

Ten years ago, the timing question was much simpler. Founders would first of all focus on developing a product and winning over their domestic market, funded through their Series A and B rounds, and then go on to raise their Series C round, which investors would expect to be used to push into new markets.

Since then, with the age of the smartphone in full swing and international direct ordering ubiquitous, opportunities to sell into new markets appeared far earlier in a company’s growth and there is no longer a canned strategy for timing your international expansion.

The current circumstances have exaggerated this trend. There are many challenges in traditional sectors, but also many new market opportunities quickly appearing in healthcare and other technology sectors with founders wanting to move quickly into new markets.

Although it may be tempting to just get a few sales people on the ground to go for it, we would still recommend laying some groundwork and making some key decisions before diving in. For example: ensuring management can give sufficient time and attention to the new market; tweaking your product to comply with local regulations; reworking your sales approach.

If you are early-stage, tread carefully. Our belief is that the Series B round is still the earliest a founder or board should consider international expansion.

If you are early-stage, tread carefully. Our belief is that the Series B round is still the earliest a founder or board should consider international expansion. The companies we’ve worked with who have moved earlier than the B round will generally end up realizing it’s too early. They’ll end up pressing pause, or making a full strategic exit, tail between legs.

International expansion is a matter of focus, as well as financial resources. Once you’re selling into a new market, everyone in the business needs to be thinking internationally, including the CEO, CFO, general counsel, the board, engineers and staff. It can stretch everyone before there are the necessary resources in place to cope.

Decision made: How do you get going quickly?

Even in the best of times our advice would be to not experiment or push the boundaries when it comes to your international strategy, do that elsewhere in your business. You should follow the path most travelled at this stage. This is especially true in the current climate. If you’re thinking of doing something new, something your peers haven’t done before, we should have a conversation first.

Whichever market you’ve chosen, there are some universal first steps (although they might vary slightly between jurisdictions). For example:

  • If you have a permanent establishment for tax purposes (i.e., the local tax authorities consider you established enough to be paying income tax and corporation tax), work on the basis that you’ll need to incorporate a company or register a local branch.
  • Consider flexible options when it comes to taking on people (more on this below). Remember that in all cases local employment contracts will be needed (subject to the use of PEOs – see below).
  • Perhaps most importantly, local agreements transferring IP ownership will be needed (see next chapter).
  • There will also be some local filings (e.g., tax, corporate, payroll) where you will need a local service provider such as an accountant and payroll provider.

Common international expansion traps … and how to avoid them

Lyron Foster is a Hawaii based African American Musician, Author, Actor, Blogger, Filmmaker, Philanthropist and Multinational Serial Tech Entrepreneur.

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Backed by Blossom, Creandum and Index, grocery delivery and dark store startup Dija launches in London

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Dija, the London-based grocery delivery startup, is officially launching today and confirming that it raised £20 million in seed funding in December — a round that we first reported was partially closed the previous month.

Backing the company is Blossom Capital, Creandum and Index Ventures, with Dija seemingly able to raise pre-launch. In fact, there are already rumours swirling around London’s venture capital community that the upstart may be out raising again already — a figure up to £100 million was mooted by one source — as the race to become the early European leader in the burgeoning “dark” grocery store space heats up.

Image Credits: Dija

Over the last few months, a host of European startups have launched with the promise of delivering grocery and other convenience store items within 10-15 minutes of ordering. They do this by building out their own hyper-local, delivery-only fulfilment centres — so-called “dark stores” — and recruiting their own delivery personnel. This full-stack or vertical approach and the visibility it provides is then supposed to produce enough supply chain and logistics efficiency to make the unit economics work, although that part is far from proven.

Earlier this week, Berlin-based Flink announced that it had raised $52 million in seed financing in a mixture of equity and debt. The company didn’t break out the equity-debt split, though one source told me the equity component was roughly half and half.

Others in the space include Berlin’s Gorillas, London’s Jiffy and Weezy, and France’s Cajoo, all of which also claim to focus on fresh food and groceries. There’s also the likes of Zapp, which is still in stealth and more focused on a potentially higher-margin convenience store offering similar to U.S. unicorn goPuff. Related: goPuff itself is also looking to expand into Europe and is currently in talks to acquire or invest in the U.K.’s Fancy, which some have dubbed a mini goPuff.

However, let’s get back to Dija. Founded by Alberto Menolascina and Yusuf Saban, who both spent a number of years at Deliveroo in senior positions, the company has opened up shop in central London and promises to let you order groceries and other convenience products within 10 minutes. It has hubs in South Kensington, Fulham and Hackney, and says it plans to open 20 further hubs, covering central London and Zone 2, by the summer. Each hub carries around 2,000 products, claiming to be sold at “recommended retail prices”. A flat delivery fee of £1.99 is charged per order.

“The only competitors that we are focused on are the large supermarket chains who dominate a global $12 trillion industry,” Dija’s Menolascina tells me when I ask about competitors. “What really sets us apart from them, besides our speed and technology, is our team, who all have a background in growing and disrupting this industry, including myself and Yusuf, who built and scaled Deliveroo from the ground up”.

Menolascina was previously director of Corporate Strategy and Development at the takeout delivery behemoth and held several positions before that. He also co-founded Everli (formerly Supermercato24), the Instacart-styled grocery delivery company in Italy, and also worked at Just Eat. Saban is the former chief of staff to CEO at Deliveroo and also worked at investment bank Morgan Stanley.

During Dija’s soft-launch, Menolascina says that typical customers have been doing their weekly food shop using the app, and also fulfilling other needs, such as last minute emergencies or late night cravings. “The pain points Dija is helping to solve are universal and we built Dija to be accessible to everyone,” he says. “It’s why we offer products at retail prices, available in 10 minutes – combining value and convenience. Already, Dija is becoming a key service for parents who are pressed for time working from home and homeschooling, as one example”.

Despite the millions of dollars being pumped into the space, a number of VCs I’ve spoken to privately are sceptical that fresh groceries with near instant delivery can be made to work. The thinking is that fresh food perishes, margins are lower, and basket sizes won’t be large enough to cover the costs of delivery.

“This might be the case for other companies, but almost everyone at Dija comes from this industry and knows exactly what they are doing, from buying and merchandising to data and marketing,” Menolascina says, pushing back. “It’s also worth pointing out that we are a full-stack model, so we’re not sharing our margin with other parties. In terms of the average basket size, it varies depending on the customer’s need. On one hand, we have customers who do their entire grocery shop through Dija, while on the other hand, our customers depend on us for emergency purchases e.g. nappies, batteries etc.”

On pricing, he says that, like any retail business, Dija buys products at wholesale prices and sells them at recommended retail prices. “Going forward, we have a clear roadmap on how we generate additional revenue, including strategic partnerships, supply chain optimisation and technology enhancements,” adds Menolascina.

Dija testing on Deliveroo

Image Credits: TechCrunch

Meanwhile, TechCrunch has learned that prior to launching its own app, Dija ran a number of experiments on takeout marketplace Deliveroo, including selling various convenience store items, such as potato chips and over-the-counter pharmaceuticals. If you’ve ever ordered toiletry products from “Baby & Me Pharmacy” or purchased chocolate sweets from “Valentine’s Vows,” you have likely and unknowingly shopped at Dija. Those brands, and a number of others, all delivered from the same address in South Kensington.

“Going direct to consumer without properly testing pick & pack is a big risk,” Menolascina told me in a WhatsApp message a few weeks ago, confirming the Deliveroo tests. “We created disposable virtual brands purely to learn what to sell and how to replenish, pick & pack, and deliver”.

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Daily Crunch: Square acquires Tidal

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Square buys a majority stake in Jay-Z’s Tidal, WhatsApp improves its desktop app and Hopin raises even more funding. This is your Daily Crunch for March 4, 2021.

The big story: Square acquires Tidal

Square announced this morning that it has purchased a majority stake in Tidal, the music streaming service founded by Jay-Z. It sounds like an odd fit at first, which Square CEO Jack Dorsey acknowledged in a tweet asking, “Why would a music streaming company and a financial services company join forces?!”

His answer: “It comes down to a simple idea: finding new ways for artists to support their work. New ideas are found at the intersections, and we believe there’s a compelling one between music and the economy. Making the economy work for artists is similar to what Square has done for sellers.”

Square is paying $297 million in cash and stock for the deal, which will result in Jay-Z joining Square’s board.

The tech giants

WhatsApp adds voice and video calling to desktop app — This should provide relief to countless people sitting in front of computers who have had to reach for their phone every time WhatsApp rang.

Apple’s App Store is now also under antitrust scrutiny in the UK — The U.K.’s Competition and Markets Authority announced that it’s opened an investigation following a number of complaints from developers alleging unfair terms.

Google speeds up its release cycle for Chrome — Mozilla also moved to a four-week cycle for Firefox last year.

Startups, funding and venture capital

Hopin confirms $400M raise at $5.65B valuation — For Hopin, the round is another rapid-fire funding event.

Coursera is planning to file to go public tomorrow — The company has been talking to underwriters since last year, but tomorrow could mark its first legal step in the process to IPO.

Luxury air travel startup Aero raises $20M — The startup describes its offering as “semi-private” air travel.

Advice and analysis from Extra Crunch

As activist investors loom, what’s next for Box? — A company with plenty of potential is mired in slowing growth.

Unraveling ThredUp’s IPO filing: Slow growth, but a shifting business model — ThredUp is a used-goods marketplace approaching the public markets in the wake of Poshmark’s own strong debut.

(Extra Crunch is our membership program, which helps founders and startup teams get ahead. You can sign up here.)

Everything else

SITA says its airline passenger system was hit by a data breach — Global air transport data giant SITA has confirmed a data breach involving passenger data.

How to successfully dance the creator-brand tango — What makes creators succeed, and how should brands work with them?

Announcing the Early Stage Pitch-Off Judges — On April 2, TechCrunch will feature 10 top startups across the globe at the Early Stage Pitch Off.

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 3pm Pacific, you can subscribe here.

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Making sense of the $6.5B Okta-Auth0 deal

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When Okta announced that it was acquiring Auth0 yesterday for $6.5 billion, the deal raised eyebrows. After all, it’s a substantial amount of money for one identity and access management (IAM) company to pay to buy another, similar entity. But the deal ultimately brings together two companies that come at identity from different sides of the market — and as such could be the beginning of a beautiful identity friendship.

The deal ultimately brings together two companies that come at identity from different sides of the market — and as such could be the beginning of a beautiful identity friendship.

On a simple level, Okta delivers identity and access management (IAM) to companies who use the service to provide single-sign-on access for employees to a variety of cloud services — think Gmail, Salesforce, Slack and Workday.

Meanwhile, Auth0 is a developer tool providing coders with easy API access to single-sign-on functionality. With just a couple of lines of code, the developer can deliver IAM tooling without having to build it themselves. It’s a similar value proposition to what Twilio offers for communications or Stripe for payments.

The thing about IAM is that it’s not exciting, but it is essential. That could explain why such a large number of dollars are exchanging hands. As Auth0 co-founder and CEO Eugenio Pace told TechCrunch’s Zack Whittacker in 2019, “Nobody cares about authentication, but everybody needs it.”

Putting the two companies together generates a fairly comprehensive approach to IAM covering back end to front end. We’re going to look at why this deal matters from an identity market perspective, and if it was worth the substantial price Okta paid to get Auth0.

Halt! Who goes there?

When you think about identity and access management, it’s about making sure you are who you say you are, and that you have the right to enter and access a set of applications. That’s why it’s a key part of any company’s security strategy.

Gartner found that IAM was a $12 billion business last year with projected growth to over $13.5 billion in 2021. To give you a sense of where Okta and Auth0 fit, Okta just closed FY2021 with over $800 million in revenue. Meanwhile Auth0 is projected to close this year with $200 million in annual recurring revenue.

Identity and access management market numbers from Gartner.

Image Credits: Gartner

Among the top players in this market according to Gartner’s November 2020 Magic Quadrant market analysis are Ping Identity, Microsoft and Okta in that order. Meanwhile Gartner listed Auth0 as a key challenger in their market grid.

Michael Kelly, a Gartner analyst, told TechCrunch that Okta and Auth0 are both gaining something from the deal.

“For Okta, while they have a very good product, they have marketing muscle and adoption rates that are not available to smaller vendors like Auth0. When having [IAM] conversations with clients, Okta is almost always on the short list. Auth0 will immediately benefit from being associated with the larger Okta brand, and Okta will likewise now have credibility in the deals that involve a heavy developer focused buyer,” Kelly told me.

Okta co-founder and CEO Todd McKinnon said he was enthusiastic about the deal precisely because of the complementary nature of the two companies’ approaches to identity. “How a developer interacts with the service, and the flexibility they need is different from how the CIO wants to work with [identity]. So by giving customers this choice and support, it’s really compelling,” McKinnon explained.

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