Back in 2007, when Alain and I were building Trigami, we almost made a terrible mistake. Actually we were in the middle of doing it. To give you some background: Trigami was a B2B advertising network, specialized on blogs and social media, heavily relying on B2B sales (phone calls, proposals, meetings). We were young and basically had no clue what we were getting into. Clearly we hadn’t built a viable business yet.
Now, we had the glorious idea to go international. Our business in Switzerland and Germany was still very weak and we were struggling on all fronts. Yet we took on the burden to basically go worldwide. Why not, right? We hired a freelancer and started translating our service not only to English, but also to French. I even went to Paris to meet a guy with the idea to open up a subsidiary in France. Not a terrible idea in itself, but terrible if your French is weak and your core business doesn’t exist yet.
Luckily, the cooperation with the freelancer didn’t work out, and the French subsidiary never materialized. So we ended up where we began: building a business in our core markets Switzerland and Germany. We successfully built a sales team, and the rest is history.
Here is what I learned from this experience:
I agree 100% with Peter Thiel in his excellent book Zero to One: First focus on a very specific segment of the market, and become the #1 there. Once you have successfully conquered this one segment, use the momentum (and hopefully profits) from that to expand into adjacent areas. Rinse and repeat.
This is especially true if you want to build “marketplace” products. Never begin with the whole country or the whole world. Focus on one city or one segment, just as Uber, Groupon and Facebook have. Facebook didn’t start as a “worldwide social network for everything and everybody”. It started as a Harvard college community. Extremely specific. Then expanded to Stanford, Yale and Columbia. Still extremely specific. Everywhere they went, they became #1. If you cannot even become #1 in your first market, then why should it be easier to succeed in multiple markets at once?
Keep in mind, that you are usually dealing with very limited resources. If you call one customer in country A, you at the same time cannot call a customer in country B. If you spend your ad budget on area 1, you cannot at the same time tackle area 2. So you always need to ask yourself: If I *had to* choose between A and B, what would I choose? Then get rid of the other option and focus 100% of your energy on the first choice. If you tried everything and still cannot succeed, pivot and start fresh. Repeat until you succeed or die.
Doing multiple languages at once is a similar pain. I’ve done this mistake with ZenFriend. We started with English and German. The good thing is that I am fluent in both languages, so I could translate everything myself. The bad thing is that this slows down development considerably. Every small change needs to be done in both languages. As well as all App Store descriptions, keywords, screenshots. Again, it’s all fine if your core business is doing well. If you are still looking for product/market fit, it’s clearly a mistake. In the case of ZenFriend, English would have been the best choice. Or German. But not both at the same time.
Same story at Exsila.ch. In 2008 Exsila went to Germany and I thought it was a smart move. Then in 2014, when I became CEO, one of the first things I did was to shut down Germany. The decision was easy: In Switzerland we have more than 150k members, a healthy business and still a lot of room to grow (our potential market is certainly much larger than 150k out of 4.3 million German-speaking Swiss people over 18 years old). Germany was basically dead. So where does it make sense to spend our limited resources? In a healthy market with lots of room to grow, or a dead market where we have to start from scratch?
The second major decision at Exsila was to go back to the roots in 2015, and to focus 100% on our own currency “Exsila points” (we run our own micro-economy and central bank, how cool is that?). In this segment we can be (and are!) the market leader. Yes, a cash-based marketplace can be a bigger business, but unlikely that we become #1 there. So we decided to focus on our strength, increase the good position we are already in, and once we exhaust our local potential, maybe even start expanding again?