Crossing the pond to expand your business: how to internationalise your startup

The entrepreneurial gene brings with it an international vocation. In the process of growing a startup into a scaleup or the coveted unicorn status (startups that reach a funding of 1 billion or more before going public), there comes a point when looking abroad becomes almost essential. Particularly in countries with smaller local markets, such as Uruguay or Chile, startups are created with their focus already set abroad.

Latin American entrepreneurship is being boosted by the traction of the main regional hubs and the strong injection of liquidity (startups in the region attracted a record investment of 19,500 million dollars in 2021) is a lever for cross-border expansion. With the exception of Brazilians, given their larger market, most Latin American companies turn to internationalisation to scale up: 51% have regional or global strategies, according to a report by the International Development Bank.

In 2021, Latin American foreign direct investment (the aggregate of equity investment by individual investors, public institutions, and private companies) totalled 57,403 million dollars, with Spain positioned as the world’s second largest recipient of this, with 1,444 million. In turn, Spanish companies have invested 148,816 million euros in Latin America, the second most important international destination for the Spanish economy, accounting for 31% of investments.

Unicorns and scaleups crossing the ocean

Several startups from both coasts have made successful leaps across the Atlantic. Mexico is the most attractive destination in Latin America for internationalisation, according to a recent study by Endeavor Mexico. It was the first destination to which Spanish unicorn Domestika (edtech focused on creative professionals) expanded, and where it currently has its largest community, with one million users.

On the other side of the ocean, Spain is the main European destination for Latin American startups. The ‘insurtech‘ unicorn Betterfly (the most recent of the current two in the country) arrived here in 2022, whose expansion strategy to Spain was based on the acquisition of the Alicante-based ‘fintech’ Flexoh, focused on flexible remuneration. “We work through agreements with insurers and exclusive partnerships in each market, ” explains João Figueira, Betterfly’s Vice President of Strategy and Business Development. The first social unicorn of Latin America has relied on other strategic alliances to internationalise its business, such as the Brazilian startup Xerpay. Figueira states: “It’s important to get a partner that is relevant and a good fit with our value proposition and vision.”

To expand to Spain, the Colombian edtech startup Platzi, with a catalogue of more than 1,000 online courses in Spanish, has become an official sponsor of the first division football club Granada F.C. “We were looking to generate brand awareness. We chose football because it is part of the Hispanic culture, and it allowed us to reach a wider audience,” says Juliane Butty, Platzi’s Director of Startups. They were also committed to recruiting local talent and forming alliances with experts who would serve as ambassadors for the company and its community: “We expanded our team of teachers in Spain [more than 50], thanks, among other things, to recognised and well-connected professionals,” explains Butty.

Scaling from border to border

For a Latin American startup, expanding its business outside of its home country is almost a necessity, says Vincent Speranza, general manager of Endeavor Mexico. “In Latin America, only Brazil and Mexico have produced unicorns without the need for expansion, because the Brazilian and Mexican markets are big enough.”

As a destination country in this internationalisation process, João Figueira of Betterfly believes Spain has a double advantage: “It’s a market with a lot of value in itself, but also a base for us to expand to the rest of Europe.” Juliane Butty of Platzi agrees on the importance of Spain as a bridge and target market: “It has the fourth largest population out of all the Spanish-speaking countries, in addition to being the country with the most Latin Americans in Europe,” she recalls.

But successful expansion requires good planning: “The first thing is to be well informed, to structure ourselves legally, to identify where our natural interlocutors are and to establish a network of contacts,” says Alberto Sanz, Invest in Spain‘s Director of Financing and Investor Relations. “We have different instruments: the Rising Up in Spain programme, which we have been developing for several years, allows foreign startups that want to establish themselves in Spain to speed up the installation”, he explains. This initiative facilitates the arrival process of foreign companies through networking opportunities, visa counselling or legal consultancy, particularly important after the drafting of Spain’s Startup Law, recently approved in Congress. Recently, ICEX has also launched the Spain-Latam Scale-up programme with the help of BID Lab and the Endeavor network to foster the installation of Latin American startups in Spain, which saw BBVA Spark participate in the first edition.

The key to internationalisation in Spain

Global DNA, good planning and localisation of solutions are some of the strategies that cannot be missing on the roadmap to expand a startup, according to experts:

• Build your startup in an international way. “When you set out with the global market in mind, you prepare the structure for international growth,” explains Vincent Speranza of Endeavor Mexico. “When you do it later, the transition from local to global is costly.” “Setting out with the mindset of internationalising and being a global company helped us a lot in building the product and the cultural diversity of the team,” says João Figueira of Betterfly.
• Choose the right moment. “Expansion has to be motivated by a market issue, following a strategic roadmap for growth, not just access to funds,” warns Vincent Speranza. “And by the time you do that, the local operation should be robust.”
• Learn the national idiosyncrasies. All experts agree: despite the similarities, we must not forget that there are wide linguistic and cultural differences between Spain and Latin America, as well as within the region. “Also in Europe, even though we are an integrated market, culturally and in the way we do business we are very different,” says Alberto Sanz of Invest in Spain. One country’s recipe may not work in another, agrees Vincent Speranza: “The entrepreneur, in their chronic optimism, sometimes fails to see some complexities that are real and inherent to the continent.”

• Better in the field. When expanding into a new market, “you should have the founders or very senior professionals in the country, at least for the first few months,” says João Figueira of Betterfly. This applies even for a company that prioritises remote work, such as Platzi: “You have to send one or two people who know the business model very well to help recruit the local team, understand the culture of the country and represent the internal culture of the company,” notes Juliane Butty.
• Surround yourself with strategic partners. “Big corporate players like BBVA that are integrated in Latin America have a presence in Spain and can help you grow there,” Butty says. Acquiring or partnering up with local startups is not only a way of paving the way for expansion, but also allows companies to look at the “lessons learned that they can take from one market to another,” adds João Figueira.

The international vocation of Latin American startups, whether out of necessity or for the motivation to climb to the top, is a strong driver for entrepreneurship in the region. As a destination country for this goal, Spain offers numerous advantages that will be of mutual benefit across the Atlantic, if we make the most of them.