7 Key Challenges Expats Face in Launching Startups



When I moved to London, I thought it would be a unique opportunity to start a retail business tied to a category I was passionate about, and so are the Brits (gardening). I’d worked in the shopper marketing and insights space for 10 years at big consumer products companies such as P&G and L’Oreal and was an avid gardener, I saw an opportunity to create a business to help consumers “bring the garden in” as home décor is a highly fragmented market in the U.K. I saw a unique niche to “set up shop” in the country that Napoleon once dismissed as a “nation of shopkeepers.” Honing the business plan was key. But equally important was identifying and understanding potential barriers I faced as an expat, and developing mitigation plans.

Over time, I identified 7 key challenges that I would highlight to any expat looking to set up a business. I believe these issues are universal, but they will vary in terms of how much they matter based on the individual expat’s background and the specific market (s)he is operating in.

  1. Setting up the business structure. In my experience in the U.K., setting up the business was relatively straightforward. At different junctures, though, I just needed to allow additional time for government or bank approvals, as I needed to supply additional documentation or detail. This can obviously vary considerably from one market to another, so it’s important to stay ahead of the paperwork. One frustration, though, was a regulation that since I rented my home in London, I needed to secure a separate office address, this translated into an overhead cost of roughly £5,000 per annum that could have been put to better use investing in the business. For a startup, every dollar/pound/euro counts. Takeaway: Outline what paperwork needs to be filed with the various organization to set up your business and ensure that you have the supporting documentation (and backup documentation) on hand, and allow for delays.
  2. Accessing funding and financial instruments. Since I wasn’t a “native,” I didn’t have much access to VC or incubator funding or support in the U.K. Additionally, given my lack of credit history in the U.K. prevented access to loans (and even credit cards) and opening up a critical merchant account to process payments required applying to multiple banks. As a result, I “bootstrapped” the company with my own cash and savings. A key positive from this is that it drove focus. I had the luxury of self-funding, but also knew that when the business didn’t shape out the way I’d forecast, it was the right decision to pull the plug. Takeaway: Quickly identify what your funding needs are, what sources are available and which tools you should utilize to support your business.
  3. Navigating “the trade”/setting up relationships with suppliers. I had anticipated a significant barrier in becoming a “stockist” due to my: a) lack of design background, b) expat status, c) start up status and some latent resistance to the Internet channel (as I was starting a standalone website). To mitigate these barriers, I sought out an informal mentor to help me understand and navigate the trade. In addition, I met with as many prospective partners 1:1 to share the plans for my company and understand how we could help them in their merchandising goals. Takeaway: Understand which suppliers are critical to your business from a tactical perspective (i.e., which are the ones you “need” to work with for credibility with the end consumer) and a strategic perspective (i.e., which are the ones that can potentially help you shape and grow your business).
  4. Understanding the local market. From past work, I understood how to develop a market understanding quickly and leveraged limited network in London to start. Additionally, I leveraged data from House & Gardento understand the consumer market (building off of relationships I had with a sister Conde Nast publication, VOGUE,from my days at L’Oréal). I researched the consumer’s buying process to identify unmet needs in the market and trends/themes to exploit and I then interviewed consumers to shape the concept. Takeaway: assess what you do (and do not) understand about the market and look for ways to quickly and inexpensively fill in the gaps.
  5. Gaining consumer receptivity.Even though I’d worked across different markets in my prior jobs, it was imperative to step out of the shoes of the U.S. consumer (my de factor baseline) and understand what made the U.K. consumer tick. How did she learn about items and trends and how did she research her decisions? What did she shop for when she shopped the category? Where did she shop and what did she like/dislike about the process? What nuances shaped her purchase decision? And, importantly, how can you overcome her purchase barriers and close the sale with her… today? Ultimately, how could my proposition address gaps in the market and fulfill unmet needs? Takeaway: Here it is important to stay close to the consumer in order to counter any biases you may bring to the market as well as to keep an ongoing pulse on how consumers react to your business.
  6. Navigating cultural issues. It’s important to call out separately “cultural” issues you may run into in setting up a business abroad. The differences between the U.S. and the U.K. are often more subtle than, say, the U.S. and France, or any given emerging market, for example. But navigating those simple subtleties still matter. In my case, I needed to navigate occasional “language barriers”: the nuances between “American English” (AmE), “British English” (BrE) and “business English” (BE). In addition, I would occasionally encounter differences in the work ethic and approaches I was used to – it was hard to tell when this was an American vs. a British issue, or my experience in working in bigger institutions vs. with smaller agencies and freelancers, or perhaps opportunistic vendors taking advantage of (expat) entrepreneurs, which I am sure happens everywhere. Takeaway: Connect with a mentor or peers in the market (thank you Jonathan Dodd!) to help you understand the nuances of how business is conducted in the market you are working in.
  7. Managing exchange rate risk. This was an issue I didn’t think of in advance (I’m not sure how many entrepreneurs do) but well worth highlighting in hindsight. I financed my business from savings (held in US dollars) with all of the expenses incurred in the U.K. (in GBP). I periodically transferred money from the US bank account to the U.K. account (as for the first few months I was still awaiting approvals on a U.K. account). Over the course of the year, the pound steadily appreciated by 15%, effectively reducing my investment pool as I had set my budget in dollars. Realistically, given that I couldn’t qualify for a bank loan or a credit card in the U.K., “currency hedging” wasn’t on my list, but in hindsight I could have taken simpler steps to manage cash flows between the two accounts. Takeaway: As you are assessing your funding needs and financial instruments, consider how or whether you should manage potential exchange rate risks.




Reprinted by permission.

Image credit: CC by Milos Milosevic

About the author: James Black

James Black is a marketing and insights consultant and freelancer based in New York.  He has 10+ years in marketing and sales experience across P&G, McKinsey and L’Oreal.  Most recently, he founded and led a retail start-up, Black & Puryear Ltd., in the U.K., where he served as Director and Chief Curator.  At L’Oreal, James was head of shopper insights, where he identified and shaped shopper insights to drive greater connection between consumers and L’Oreal’s portfolio of beauty brands across channels.  At McKinsey, he worked in the firm’s Marketing & Sales practices, advising clients on marketing topics across B2B, packaged good and retail clients.  At P&G, he working in both traditional brand management roles as well as in the company’s marketing centre of excellence, studying best practices.  He has an AB from Harvard in Government and an MBA from the Darden School of Business (University of Virginia).

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