When doing business away from home, find a place that feels like home
In the spirit of Global Entrepreneurship Week, I got to thinking about Canadian companies that have started doing business abroad. Australia might not be the first market you would of think of for international expansion of a Canadian company, but it was a perfect fit for MetaFLO Technologies.
MetaFLO has a patented process and technology for helping drillers, miners and waste producers dispose of their liquid waste cost-effectively. Australia is Canada’s 16th largest trading partner and one of Canada’s biggest customers for mining technology and equipment. Canadian companies have invested over $26 billion in Australia, primarily in the resource sector. In that light, the decision process MetaFLO used is an interesting case study for startups considering international expansion.
Part of the process of drilling for the exploration and laying of pipes entails the production of significant amounts of non-toxic liquid waste, which poses a challenge to drillers. The water is too dirty to be reintroduced into the water table, and trucking and storing it at liquid waste transfer stations is very expensive. Using MetaFLO’s equipment and reagent, drillers can now process the waste on site and convert it into a solid that can be disposed of either on site or in a landfill. Since the cost savings are considerable, it’s no wonder the technology is being used all over the world.
Doing business abroad is not for most companies. You should think long and hard about allocating resources to international expansion if those resources could be better be deployed in your home market. If you have a strong foothold in your local market, adequate resources to mount an expansion and foreign customer interest, maybe it’s time to start thinking of doing business abroad.
Here are some questions to ask yourself before you venture forth:
1. Will foreign customers have the same pain points and will our product offer the same value?
Foreign customers might seem different, especially since the things that drive them and their businesses are often unique to their location. For example, digital signage network hardware never took off in China because it was more cost effective to physically update each of the signs than it was to link the signs to a central network. Therefore, companies need to find geographies where the pain points that their product solves are prevalent.
Australia has many physical similarities to Canada:
- The land is vast and thinly populated.
- The earth is rich in natural resources and those resources are spread out over large distances.
- The cost of transportation of water and waste is significant.
- Australian miners and drillers have to drive large distances to dump their waste and get their water.
Conclusion: A solution that could help Australian miners with the problems associated with waste water storage would be an easy sale.
2. What is the reach of my partners?
Entering a new market is never easy, and it’s especially daunting the first time, so it’s important to have help.
- Evaluate where your distribution and channel partners have strong presences that you can leverage.
- Take stock of potential customers and see where their international operations are located.
- Servicing local subsidiaries of foreign customers can be a great toehold position to build from.
In MetaFLO’s case, its distribution partners and suppliers were already doing a lot of business in Australia. Following them gave MetaFLO more opportunities to drive more sales from its relationships and to better service its customers with foreign operations.
3. How favourable is the legal and regulatory landscape?
A similar legal landscape can be as important as a similar geographical landscape.
- Will your contracts be enforceable?
- If something goes wrong, how easy will it be to enforce your rights or litigate?
- Can foreign companies enter into contracts or do they need a local agent?
- What are the tariffs and taxes like?
These are some of the hardest questions to answer. A good place to start is each of the respective countries’ websites and consulates.
MetaFLO benefited from the common heritage that Canada shares with Australia. The countries’ legal systems are closely related and the trade volumes between the countries have resulted in reduced tariffs on imports. Plus, the two currencies are closely tied and do not fluctuate greatly, simplifying payments and cash management.
In conclusion, when looking to expand operations internationally for the first time, make it easy for yourself by choosing a destination that is similar to where you come from. Make sure the foreign customers need what you are selling, and try to find a place where there are people around you who can help you. Finally, make sure you have the necessary freedom to operate, in good times and bad.
To learn more about MetaFLO and their liquid waste solidification technology, please check out the MetaFLO website.
Jared has nearly a decade of experience in the venture capital and technology industries in a multitude of investing, operational and legal roles. During his venture career, he has been actively involved in the promotion and development of early-stage companies. Prior to joining the Investment Accelerator Fund as an investment manager, Jared was in a senior management position with a foreign financial institution. See more…