From left Keane Ritikos (Endeavor Malaysia), Jan Lambrechts (CEO and Founder, CXS International), Hanim Hamzah (Regional Managing Partner, ZICO Law Network) and Goh Chee Hau (Co-Founder and Managing Director of TheLorry)
Southeast Asia and its booming technology startup ecosystem have been touted as the next new frontier for expansion. Nevertheless, despite the recent successes and heightened global recognition, the ecosystem remains a puzzle to many given its diverse cultural, legal and commercial requirements.
We gathered industry experts - Jade Hwang (Partner, ZICO Law Indonesia), Tay Zi Li (Partner, ZICO Law Vietnam) and Archaree Suppakrucha (Partner, ZICO Law Thailand) to give insights on each market. This was followed by a panel discussion between Endeavor Entrepreneurs, Jan Lambrechts (CEO and Founder, CXS International), Goh Chee Hau (Co-Founder and Managing Director of TheLorry), and Hanim Hamzah (Regional Managing Partner, ZICO Law Network).
Do all companies need to be regional?
Expanding your business geographically can add growth to your topline but it also comes with new levels of complexities. If expansion is managed poorly, the move can negatively affect home operations and alienate your core customers. Jan Lambrechts, CEO of CXS International, a learning analytics platform with clients over 34 markets shared a few key questions you would need to ask before considering expansion:
Market size - Is there a demand for the products/services you offer in the targeted country? Where are you expecting tough competition from?
Capabilities/networks –Is the timing right to expand your business? Do you have the right network to support your expansion?
Regulation- Will you be able to abide with the local laws? Do they encourage foreign ownership / expansion into the country?
Financing- Can your company support an expansion financially?
Targets & goals- What are your business projections?
A big criteria for expansion is also whether the business model stands to benefit from network effects – would the incremental growth in suppliers and customers add to the existing network and enhance the overall business offering?
Chee Hau, the co-founder of TheLorry, realised early on that the business needed to be regional. As a lorry-booking platform catering to Malaysian clients, it was imperative that they had enough truckers and fleet owners who could cover adjacent markets (Thailand, Singapore) as their clients required cross-border services.
For CXS, Jan shared that it was crucial that the business served government and education institutions on a national level and corporates at scale. With large sets of data, CXS was then able to churn deeper and more insightful findings on job suitability and staff performance. Multinational corporations are then able to best move employees and create training policies on a regional level. Governments can create policies to cater to the needs of the 21st century. Educators can then train students on the skills needed to thrive for the future of work. This would not have been possible if CXS only had one or two, or even 10 universities.
Even for service-based businesses with strong local ties, ZICO found themselves having to expand regionally out of requests from their clients. Hanim Hamzah, the Regional Managing Partner of ZICO Law network, shared that in 2003, ZICO’s Malaysian clients started buying assets outside of Malaysia, which opened an opportunity for ZICO to expand beyond their home borders. As of today, ZICO has presence in Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.
Corporate structures & legal matters
No matter where you plan to expand your business, there will always be laws and local regulations that you need to abide by. Each company should be very clear on their corporate structure before planning for expansion to avoid any unnecessary cost and time wastage.
For TheLorry, Chee Hau shared that the first 100 days of expansion were spent on creating corporate structures for the new market, either as a subsidiary or a separate local entity with different shareholders. For protectionist markets, it was important for them to find a local business partner or appoint a proxy and create a clear shares surrender agreement.
Restarting up
Running operations in a new market is very much akin to the early startup stages of your company. Companies need to work on building brand awareness from scratch, acquiring the first 100 customers by understanding their needs and gathering feedback from them to work on product and marketing localization.
For ZICO, expansion to new, unfamiliar markets meant that they needed to revise service fees, build up local talent who had the right networks, expertise and cultural know-how and leverage technology platforms to manage workflow and effectively tap on more experienced lawyers at their home base.
This was further complicated as client relationships for service-based businesses were not scalable – it was hard to scale trust and legacy knowledge. ZICO solved this by training junior partners to place importance on helping clients problem-solve on challenges beyond legal matters. It was important for top lawyers to also hone their leadership skills, business acumen and marketing capabilities in order for them to have a holistic picture of their client’s business and priorities. Today, ZICO prioritises secondments to expose lawyers to other markets as a form of retention and regularly practices rotations to ensure client relationships are not pegged to one single individual.
Alignment & Leadership
As teams become more remote and as they scale in numbers, it is difficult to keep track of performance and get everyone aligned to the company’s vision and goals.
Firstly, founders need to first define the company’s core values, goals and objectives. This needs to be communicated clearly at the start of the year and on a regular basis. Chee Hau from TheLorry shared that they have a monthly townhall with each office on a monthly basis to keep track of performance and to ensure that teams are able to voice their concerns or questions. Core values need to be practiced from the very top, and needs to be repeated (almost ad nauseum) so that each person embodies those values.
Founders also need to be consistent in leadership and learn to delegate tasks. Often with new markets, companies have local country managers. Founders need to create clear reporting structures, escalation procedures and utilize dashboards to make communication clear and performance tracking transparent.
Founders need to be able to trust their teams to work and balance macro vs micro-management to get the most out of their teams.
As mentioned above, in a new market, you are in startup mode again – companies need to be lean and hire for purpose. At the same time, companies can benefit from shared resources – for example, some marketing work can be done on a regional level to ensure consistent delivery of certain key messages.
Expanding your business is a big step that could potentially have repercussions you may not have envisioned. Having the necessary planning, capital and resources in place is key to help guide your business in the right direction for market expansion.
The content of the article is summarised from the ScaleUp Scoop event in collaboration with ZICO. Endeavor helps entrepreneurs connect with mentors from the global network who are able to give critical input as they work to scale their businesses regionally and globally. This is one of the many pillars of support that Endeavor provides - Access to Markets. Interested in becoming an Endeavor Entrepreneur? Apply now on our website!