Globalization is not a new trend. It has become increasingly pervasive every decade. But early stage startups have historically been very local. Local teams and local investors.
There are still investors who will only invest within a 1 mile radius of where they live and only when the entire team is based locally. This is not an accident. Early stage startups are hard, and being physically close allows teams to iterate quickly and build a strong shared culture. But there are also several ways in which having a global perspective can benefit startups.
Competition for customers is global and, once an idea takes off, there are now countless competitors willing and able to clone or localize business models. Being the first to prove a business model is not enough, you need to be the first to scale a business model.
The fight for talent is similarly global. Instead of being forced to compete in a local market, which is typically a startup hub, it is a competitive advantage if your company can source and manage a global talent pool. Anti-immigration policies are a real issue and, beyond regulations, many people simply do not want to move. Of course managing distributed talent is hard and not everyone can do it successfully, but enough companies have done it to conclude that this is a repeatable process rather than pure luck.
Suppliers and service providers
For software, this is obvious and has already happened. For hardware, large companies figured this out a long time ago but the global hardware supply chain is just starting to adapt to working with startups. For other services, like legal and financial, the change is less obvious but it is starting. Part of this trend is the productization of services which have previously been manual. Part of this trend is the best service providers becoming more global, increasing competition in previously local oligopoly markets.
Information and transparency
One of the biggest challenges historically has simply been a lack of information about other markets. Local players captured significant value simply by controlling access to information. This will not change overnight but the trend is clearly towards more information being available so that startups can make more informed decisions about both strategy and tactics.
Capital across public markets and late stage private markets has been global for a long time. This process is finally starting to change in early stage private markets. Does that replace the need for local investors? No. It is always helpful to have a local investor who is physically close, but global investors are a fantastic complement.
Beyond sum of parts
Importantly, thinking global across one area can have positive impact across other areas. Global investors can add value across talent, markets and information. Global talent can lead to global customers. Larger market opportunities result in higher valuations from future investors.
The inflection point has arrived for startups to think global from the early days. Companies that understand this shift have the opportunity to create significantly more value than in the past and startups investors with a cross-border perspective have a particularly important role in adding value during this process.