We don’t know what we don’t know
I like to explain this point with the phrase ‘we don’t know what we don’t know.’ It’s an obvious statement, but unfortunately, we see many companies failing to consider this in their internationalization process. A great example is the case of a Brazilian company called Wi-Fire, which helps restaurants, bars, and shops gather more data and improve customer relationships through hotspots. The company expanded to several Latin American markets and saw a great opportunity in Panama City when the Coronavirus pandemic hit: the city had no services like Ifood or Uber Eats. Since Wi-Fire already had an excellent relationship with local restaurants, they decided to create their own delivery system in Panama.
After running the new solution for a while, the entrepreneur noticed something odd—only orders from the city center were coming in, with none from more residential neighborhoods. After talking to a few people, the company discovered that areas outside Panama City’s center don’t use traditional addresses. That’s right—you don’t say you live at 13 Citizenship Street; instead, you say you live next to Mr. Joe’s bakery, in the purple house on the corner. Since the system required users to input a ‘standard’ (Brazilian-style) address to process orders, people couldn’t complete their orders.
Now, let me ask you—when would you think to research if the capital of one of the Americas’ largest logistics hubs uses an address system to facilitate movement? I’d bet 99% of readers would answer ‘never,’ precisely because we don’t know what we don’t know. As a result, we never imagine this could be an issue.
This way, our own limited view of the world makes secondary research insufficient in most cases. To avoid this problem, it is crucial for entrepreneurs to deepen their knowledge with people who already understand their target market and can share essential insights to avoid errors like this and accelerate the entry process. I guarantee that a good 30-minute conversation with someone familiar with your sector in that country, like a potential customer or a specialist in your field, will provide you with much more valuable data than a month of secondary research.
The importance of building a local network to acquire this knowledge has already been discussed in the book in various ways—especially when we talk about business missions and the relevance of the innovation ecosystem to the internationalization process. In this chapter, we introduce an even more comprehensive solution for startups seeking international markets—the soft-landing.
Soft-landing
A soft-landing program is similar to an international mission, where a group of entrepreneurs visits foreign markets to get to know the country and explore business opportunities. However, these initiatives are group-focused, meaning individual issues of each company aren’t addressed.
A soft-landing program, on the other hand, offers personalized services for startups, providing access to local market experts who can share more specific information about your potential operations in that country. This information might include bureaucratic considerations, insights on local competition, market trends, potential customers, taxes, and even access to external funding.
The primary goal of this individualized set of actions is to accelerate your validation process and entry into your target market, as well as to facilitate access to relevant information for decision-making and connections with key players in that country. Thus, the soft-landing program is aimed at companies that already have a defined target market and now need more concrete information to finalize their market entry decision, understand the best market access strategy, and gain initial connections to establish their first local steps.
These programs are organized by institutions related to innovative entrepreneurship, such as technology parks, innovation hubs, government organizations, and even accelerators. Each organization creates its own soft-landing model, which can range from digital meetings to a requirement for a few months of in-country residence.
In this chapter, we’ll explore how to find soft-landing programs, the application process, and best practices for both getting accepted and maximizing your results during participation.
How to Approach This Stage
First of all, entrepreneurs must understand that internationalization programs are a support system for their process, not solutions that will solve all their problems without any effort. With that in mind, this chapter will not only provide guidance on how to find an interesting program but also outline what prerequisites you need to maximize the support you receive.
What to Do Before Applying for the Program
Soft-landing is a personalized program that demands much more time and commitment from your team than, for example, a business mission. Therefore, this program won’t help you find the most attractive market for your company—it comes a step later. The soft-landing will help you validate whether that market actually offers the potential you expect, as well as provide the necessary information and connections to localize your product, add value in the local context, and operationalize your business.
Thus, it is important that you already have a basic understanding of the target market and hypotheses that need to be validated before applying for a soft-landing program. This basic knowledge should be based on the most important information for your company, such as market size, competitive landscape, potential customers, and the level of innovation in your segment.
Once you understand that a particular country seems to be the most interesting for your business, it’s important to list some hypotheses that need validation to actually enter that market. This is usually the first practical focus of the program. These points are highly individualized based on each company’s profile, but some common examples include:
- Validating whether the customer’s pain in that country is the same as in Brazil and whether the negative impacts of the problem are similar.
- Understanding if the pain is recognized the same way as in Brazil.
- Checking if there are laws or market factors that might prevent your solution from being implemented.
- Validating if your pricing is suitable for that country’s reality and if it’s necessary to adjust your pricing model.
- Exploring local marketing and distribution channels to determine if you can replicate the same efforts used in Brazil or need new strategies.
- Getting to know the key players in your segment and evaluating potential synergies.
- Validating your value proposition and communication strategy.
- And more.
Arriving with a list of hypotheses will help mentors and advisors connect you with the right people and speed up your validation process since you won’t waste time on basic market aspects that could have been resolved with basic research or advisory. Furthermore, showing that you already have an initial understanding of the market proves your seriousness about entering that country, which puts you ahead of many other companies seeking this kind of support.
Finding the Right Program for Your Business
Once you’ve done your initial homework, it’s time to understand which programs are available in your target market and which can offer the support you need. Generally, soft-landing programs can be divided into two main categories depending on the type of institution offering the support: public and private programs. Although the basic idea of the program is the same, each type of institution will be able to support you in a distinct way, with different counterparts required depending on their offering.
Programs offered by government institutions tend to be the most financially accessible. Support from these organizations is typically provided by investment attraction agencies, such as INVEST SP in São Paulo, for example. These institutions are a government arm responsible for attracting foreign companies to the regions they represent—both regionally, as in the previous example, and nationally, as is the case with ICEX in Spain.
Because they are funded by the government, these agencies can offer various services for free, from sharing local market studies to connecting you with service providers who can help you incorporate a company in the region. While extremely useful and accessible, these organizations cannot provide any commercial assistance, such as connecting with potential customers or intermediating negotiations.
Private institutions (technology parks, accelerators, innovation hubs, etc.), on the other hand, can offer the same services as government organizations in a more in-depth and customized way, according to your company’s reality, and often also assist with the first commercial steps in your target market. However, there is a financial counterpart linked to each service provided. While the most common form is payment in cash, there is also the possibility of equity-based negotiations if your company is still in the early stages, making the program resemble an acceleration initiative.
Some countries have very aggressive programs for attracting foreign startups, such as Poland with the Poland Prize. The local government has formed several public-private partnerships and finances local accelerators to provide soft-landing services for free to those who want to take their business to Poland. Additionally, companies selected to participate in these programs receive over €60,000 to start their local operations—equity-free. Although these programs are rarer and usually available in ‘less attractive’ markets overall, they are perfect options that combine the best benefits of both categories.
Thus, our suggestion is to contact public institutions first. You can narrow down your list of hypotheses with this free assistance and, if necessary, turn to private partners to achieve what couldn’t initially be accomplished.
Another important point to mention is that the term ‘Soft-landing’ is not used by all institutions, even though the support provided is exactly the same. Therefore, we recommend that in addition to searching for existing programs, you also make a list of the key ecosystem players and reach out to inquire about the types of support they offer to foreign companies to get a complete view of your options before making your decision.
Applying for a Soft-landing Program
Programs offered by investment attraction agencies and private players usually do not have a selection process—they are available to anyone interested in that market and willing to pay for the services (in the case of private options).
However, some options, like the Poland Prize in Poland, have a selection process to evaluate which companies are best suited to receive this type of support.