International Bootstrapping in The Software Industry
International Bootstrapping is the activities which leads you to the first 3-5 reference customers in a new geography.
This post suggests how to orchestra international bootstrapping in a more predictable and controllable way.
Why do we write a blog post about international bootstrapping?
Because it is a nightmare for most software companies. The nightmare is associated with the uncertainty and unpredictability of the effort. If you do bootstrapping the traditional way, you will normally not be able to predict if it will take 12 or 60 months? This post provides a few simple recommendations, which can shorten the bootstrapping period considerably.
This post is focusing on international bootstrapping for long value chain software solutions (see end of post for definition).At TBK Consult we distinguish between 3 phases in internationalization:
- Market bootstrapping
- Growing to the bridgehead
- Scaling for market dominance
Your ultimate ambition must be market dominance. If this is not the case, then you’re in for a tough ride. The rule of thump in the software industry is that “the winner takes it all”. See Definitions at the end of the post for an explanation.
Scaling for market dominance requires a bridgehead (see the end of this post for at definition of the bridgehead). The bridgehead is your local representation. We assume you do not want to set up your own representation until you have a secured revenue stream from some 10-15 solid references. To get from nothing to the first 3-5 references is what we call bootstrapping. This is where everyone must start.
The traditional approach and why it doesn’t work
Traditionally you will look for partners who can do the bootstrapping for you.
Although the theory justifies this approach – practical experience shows the opposite.
The theory says:
- The partner has established customer relationships. He will sell your solution taking advantage of these relationships
- The partner will get a commission. The commission will motivate him to invest in the learning curve and to sell your solution to his clients
Practical experience shows:
- The partner is reluctant to promote you solution to his existing customers. He doesn’t know you well enough and is afraid that a failed project will jeopardize his existing customer relationships
- The Partner may have customer relationships, but they are not with the people or at the level required for selling your solution
- Resellers do not employ super sales people. He can’t afford them (he believes). It is not so prestigious to work in the reseller eco-system, so super sales people do not respond to the job advertisements.
- Without super sales people the reseller cannot sell a new solution to a new customer.
- The partner is truly opportunistic. If the effort doesn’t show tangible results very fast he will reallocate the resources back to his current business.
- Your solution it too cheap. The margin on the first sale will not provide RoI on his investment in the learning curve.
- Your solution is too expensive. Although the margin on the first sale will be considerable, the partner is not positioned to sell high-priced solutions.
- The partner expects you to provide the leads, to build the brand, the awareness etc. Then he will fill the demand. He may not say so, but this is how he thinks.
We are not saying that you can’t find partners who are different, but our experience shows that most resellers fit’s the profile above.
Can you piggyback into a new geography with some of your current customers? If yes, do so! It is the shortest route to reference customers. Unfortunately, this is not always possible and even when it is, it may not be sufficient. The local office of your customer may not be qualified to serve as a reference and very often they are not quite as excited as the headquarter who made the decision to acquire your software. But again, if you can piggyback; do it!
The local Sherpa approach and why it works
International Bootstrapping is no magic. It is actually fairly straightforward. It requires a professional approach supporting the complex sales process and a local “Sherpa” who guides you to your potential clients, supports the sales process and help you close the deals.
Here is what it requires from you:
- Your solution has a high price tag (because it provides high value)
- You have a compelling customer Value Proposition, which is not available from local suppliers in the local market
- You can prove RoI or IRR from your current customers
- You have a clear Ideal Customer Profile and have a series of case stories from your domestic market supporting your Customer Value claims
- You have broken down you sales tools supporting the sales process in the 4 phases:
- A professional and easy to understand Synopsis/Sales Presentation with excellent references
- A proof of value component working on customer data which requires no or very little effort and investment on the customers behalf
- A pilot, which provides further proof of value , with limited investment on the customers behalf
- A fully supported implementation process and an SLA
- You know exactly how to satisfy the needs of each buying influence in the purchase process and you have the sales tools available to do so.
What is a local Sherpa?
A local Sherpa has no less than 15 years of sales experience in your area and an established network with personal relationships to the CXO’s who make the final purchase decision for your type of solution.
Why is a local Sherpa so important?
Because he/she provides exactly what you don’t have. The local Sherpa has access to the key decision makers. They can get “the magic hour” it takes to bring your Customer Value Proposition to potential clients at the C-level. They can achieve executive endorsement for a “test case” and make sure the customer is allocating the resources it takes to justify if your solution is worthwhile pursuing.
How do you find a local Sherpa?
You can search on Xing, Linkedin and ask management consulting companies like TBK Consult. You can also find a local Sherpa through executive recruitment agencies in the geography you are to penetrate.
How do you motivate a local Sherpa?
You simply pay them for their services with a combination of a retainer and an attractive commission of the deals he/she makes
Is the Channel obsolete?
The channel (System Integrators, Value Added Resellers etc.) can be an excellent way to provide the capacity required to gain market coverage in phase 2 and 3 (the way to the bridgehead and scaling for market dominance). But the channel is not good for bootstrapping.
If your go-to-market strategy requires a channel for bootstrapping, we will recommend you to reconsider you strategy. The probability that you will fail is simply too high.
You must take direct charge of the bootstrapping phase.
You can involve the SI/VARs in the sales process. This way they will walk the learning curve with you without distorting the customer feedback. Unfiltered customer feedback is critical when bootstrapping.
Long value chains
Software with long value chains has 4 main characteristics:
- Some sort of implementation, customization, integration or other activity demanding customer involvement in making the software work is required
- The solution must be brought to the potential clients through a sales person
- It is always a complex sales situation and
- it requires some sort of value justification for the customer to make a purchase decision
The winner takes it all
Because of the idiosyncrasies associated with selecting and implementing software customers, potential employees, resellers, system integrators, market analysts, the press, consultants etc. favors the market leader. If you are not a rising star with the ambitions and the potential of challenging the market leader or being the first mover in a new category chances are that you will be ignored.
A bridgehead is your first local representation. It may be a subsidiary, a joint venture, a franchise, an exclusive distributor or some other constellation. The bridgehead is 100% focused on your business. It is combining the local market insight with competencies in your area of business, and it is working its’ way to market dominance.
Other sources on bootstrapping
Other sources on this subjects are available here: