Moving a startup abroad is a widely covered (and somewhat over-covered) topic in South Africa. A far less covered topic is startups from first world countries opening up in the South African market. A lot of large companies have a distributor here, but you don’t hear about many first world startups opening up a permanent office in the country. This isn’t a big surprise. With the 41st largest economy in the world, low growth prospects and a high crime rate, there are a multitude of better options for these startups to consider. But there are those who open up here, and I chatted to Eleanor Weaver from Darktrace and Geordie Palmer from What3words (both British startups) to find out why they set up shop in SA, and how the journey has been for them.
Before we get started, what are Darktrace and What3words all about?
Eleanor explains: “Darktrace is a world-leading cyber intelligence company that uses machine learning based AI algorithms to detect and respond to cyber threats on large corporate or government networks. The technology is self-learning, requires no set-up and identifies threats in real time. The technology detects a wide range of threats, including those from insiders.” Last year, Darktrace raised capital at an $850m valuation and can name the likes of KKR, Softbank and Invoke Capital as investors – they’re a powerhouse startup.
What3words has mapped the world’s landmasses into 3×3 squares and named each square with three common words. The result is that anyone can accurately find any location and share it more quickly, easily and with less ambiguity than any other system. This has proven particularly useful for everyone from large logistics companies to individuals around the world. What3words has got a lot of media attention and is being used by companies in over 100 countries – they’re a rapid growth startup.
Darktrace, with their target market being enterprises with large networks to protect, and What3words, being a “B2B2C company” (practically, this means they sell to businesses, whose customers benefit from the technology as well – in effect What3words’s customers are both businesses as well as these businesses customers), are very different companies with differing reasons for entering the South African market.
So why open up in SA?
Both Darktrace and What3words have always had global ambitions. Entry into South Africa made sense for Darktrace after their expansion across Europe and America – more of the traditional ‘gateway to Africa’ type approach for them. Although South Africa has a small economy on a global scale, it is home to many global businesses which are attractive targets to the likes of Darktrace.
What3words on the other hand, saw South Africa as an ideal market to open an office in following success in their first global office, Mongolia. A sophisticated network of logistics companies, a large and growing e-commerce market and an address system that wasn’t ideally suited to the likes of Google Maps, but perfectly suited to What3word’s product made South Africa a great fit for their expansion.
All good and well deciding on South Africa as a target market for your product, but how do you go about actually opening an office out here? Geordie himself had opened the Mongolia office for What3words. He initially spent 6 months there, and successfully got What3words integrated into the national postal service and many of the biggest companies in the market.
Even with that experience in hand, Geordie believes it is naïve to think that you have all the answers when you open a new market, even if you may have done it before. “I would like to say we have a blue print of how exactly to do international expansion, but in truth we are always learning and improving our methods of getting in right – we almost consider each new market opening as its own startup, which helps create the right level of focus. One thing I can say for certain though is that we always look for local partners and try to leverage local skills to up-skill us on the local market. It would be naive to expect to simply walk into a country you have little presence in and sell to the biggest companies in the market off the bat.”
Both Eleanor and Geordie opened up their respective offices with their companies having built a significant international brand. However, in both instances, this counted for very little in the early days of opening up their offices in South Africa.
Eleanor, having been in the South African office for 3 years now and having sold Darktrace to over 20 large South African companies, explains what this journey was like “The large South African corporates have long sales cycles and deeply ingrained technology partners in place. It would be almost impossible to walk into the CIOs office of one these companies without being installed in various South African companies already and expect to make a sale. When I moved out here, I initially met with most of the medium sized companies, went to many conferences and generally focussed on building the Darktrace brand in South Africa. Although we had the benefit of a great reputation around the world as being the leaders in our industry, there was still a huge amount of market education that went on before making the first sale in South Africa. After I had made a few sales and built up the Darktrace brand in the market, I focused on building relationships with the larger technology partners in the country, and they are now an important sales channel for us. We spend a lot of time educating them on our product, so that we can work as a team to close deals with the larger companies that they have old and deeply ingrained relationships with. Importantly though, we never let a partner run a process. You can’t put your reputation and brand entirely in another party’s hands – that would be a dangerous strategy.”
For What3words, they have a more niche target market in the big logistics companies and e-commerce sites using the logistics companies’ services. Once these players are on board in a market, they find that individuals tend to adopt the service for their personal use. “We generally know who our ‘whale client’ is when we enter a market – the whale being the adopter that would assure us traction in the market – and South Africa was no different. Initially, we don’t target the whale directly and focus on building up enough of a client base with the smaller players in the market. Once we have enough traction, we engage with the whale client. This makes a huge difference in making sure the whale pays attention to our offering and has proven a successful strategy in Mongolia and South Africa.
Culture across markets
Startups focus a lot on culture. It informs what they do, why they do it and often influences the quality of work produced and the type of talent they attract as a company. This culture often proves the major competitive advantage against larger companies in the industry. Startup employees generally feel a same deep connection with the company’s brand and really want to work to further their mission, as opposed mainly working for a salary and a bonus which is typical of employees of larger and older corporates.
A big problem for any companies going abroad, is how they keep this culture consistent throughout their offices. An international office that grows with a different culture and way of doing things can be hugely detrimental to a startup. So how did Darktrace and What3words go about keeping the culture consistent when opening up in South Africa? “At Darktrace, all of the sales reps and country managers fly to the UK for their first week to do training and get a good sense of what the company is like from the get go. We also all get flown back to the UK for the sales kick off once a year. After training, and even after each sales kick off, I can really see the effect on the team in terms of how motivated and inspired they are when they get back from head office.” What3words, being a bit smaller than Darktrace, relies heavily on the country manager to create the right culture in the office “although we send the international team back to our head office every now and then, we generally let the country manager get on with it in the region they are running. As such, we have a huge amount of trust in the country manager and think carefully about who this person will be in each new country we target. They are essentially responsible for the brand in their respective office and region.”
How was the hiring process out here?
Your brand may have a great reputation back home, but how do you go about hiring top talent in a new market that doesn’t know your start-up? From both Eleanor and Geordie’s perspective, the most important thing here is not to rush into a hire that you will regret. Both Darktrace and What3words employ the strategy of sending an employee that they trust to setup their international market. In Eleanor’s case, she has stayed and run the South African office, which is an ideal result for a start-up. In Geordie’s case, once he had done the initial setup work, he got in contact with a South African expat in the UK who wanted to move back home. She proved a great fit for running the SA office when he was comfortable that it was on the right track. In general, referrals are the best way of hiring talent as a start-up and the sooner you can get tapped into a network that can provide these referrals the better. Without this, recruiters and LinkedIn are the other obvious alternatives.
Eleanor, now with an office of 5, remembers the early hires in South Africa “we generally went through recruiters to find sales reps. In South Africa, a job in sales isn’t seen as desirable a job as back in the UK for some reason, so I had to position it quite differently to candidates in terms of responsibility and potential earnings to attract quality candidates.”,
No doubt opening an office in a new country is exciting, especially in a country as diverse as South Africa. But this is not all a glamour job, and Eleanor assures us she didn’t spend that first year flying to Cape Town and lying on the beach all day: “I made our first hire after 8 months, so for a long while I was working by myself. In the UK we had an office of 20, so to make the adjustment to working by myself in a city where I didn’t know many people was tough. You have to be extremely motivated by what you are doing and have a strategy in place before you start, otherwise you can lose motivation in an office by yourself. Going back to the UK helped to motivate me, but you are largely on your own. Although the first few months in South Africa were a bit frustrating as I spent a lot of time educating the market before I got proper traction, in the end, it is unbelievably rewarding to look back and see what I personally have accomplished and the team itself has pulled off over the last few years.”