Going international too early
With venture funding more plentiful, we now see more of a challenge with companies trying to go international too early.
Often this is a company that is still refining its value proposition but has had some strong early growth in its home market. It decides to expand rapid internationally but then realizes there are issues in the core product. These are much harder to fix when the company is already spread across multiple countries.
One high profile example here is bike-sharing company Ofo, which expanded rapidly from China but more recently contracted international operations after facing strong competition and huge cash flow pressure at home. What really matters to Ofo and its competitors is being a winner in China, and this is far from done, requiring significant further investment — particularly with the rapid rise in escooters and ebikes. In this context, investing further in European growth does not make sense.
Apr 10, 2018: Broken sharing bike crowded on the street in Guangzhou, China.
A homegrown example would be Housetrip, the vacation rental marketplace out of Europe. It grew very fast early on, backed by more than $50 million from Balderton, Index, and Accel. It is in a fairly international market of travellers and so grew rapidly across Europe and with US travellers. However, what really counted in the end was brand loyalty (repeats and word of mouth) in specific countries. When competition from Airbnb, Booking, and others pushed up the cost of performance marketing, Housetrip was left with the difficult choice of shrinking or growing uneconomically. A refocus just on the French and UK markets and a push to profitability led to an exit to Tripadvisor.
Rocket Internet has also had its share of challenges in copying US models that appeared to be working well, rolling out rapidly across countries, then realizing the proposition or economics have flaws. Its vacation rental play Wimdu shut down last year after a reported $90 million of funding.
Carpsring, a copy of Beepi, also shut down (although burnt far less money than Beepi did on its collapse).