The Global Garage Operation

Arie Brish

Edits for 2011

• Add 1-2 slides about advertisement, PR, journalism

• Social networking

• Cut down to 20-25 slides

• First steps overseas: Commute, part-time rep,….

• Globalization and eng/science/medical work

AGENDA

• Why go global?• History• Why global small business?• Case study: Tehuti• Global Challenges• Additional challenges for a global small business

Why Global?• Increase market potential

• Competitive strategy

• Leverage off-shore manufacturing know how

• Tap into foreign technology experts

• Access to resources

• Arbitrage opportunities

• Access to work force

• Global Customers

History

Europe’s Expansion to America

• 1003: First known European settlement by Leif Ericson.

• 1485: Portuguese king declined Columbus’ initiative.• 1486-1491: Columbus campaign with Spanish monarch.• 1492: First expedition. 3 ships. Returned with “samples”.• 1493: Second expedition. 17 ships.• 1493: Columbus granted governor of the new territories• 1500: Columbus stripped of governorship.• 1510: First permanent settlement.

The Birth Place of Silicon Valley

1939 :Bill Hewlett and Dave Packard officially founded HP. First location a 12X18 ft garage at 369 Addison Ave, Palo Alto, CAInitial funding $538 in cash

Revenue at the end of 1939: $5369 .

The Birth Place of Silicon Valley

2005 :369 Addison Ave became an official state landmark.

1959 :HP Going Global

Marketing organization in Geneva Switzerland

Manufacturing facility in Boeblingen Germany

The trigger: European Common Market

Sales: $48M Employees: 2,378

Made In JapanAkio Morita and Sony

Although our company was still small … it was a consensus … that a JapaneseCompany must export goods in order to survive.

In 1958, only 1% of Japanese homes had a TV, only 5% had a washing machine... ,

Our first transistor radio of 1955 was small and practical…. We were very proud of it.

I saw the United States as a natural market; business was booming, employmentWas high, …. , and international travel was becoming easier.

Small Business Examples

Technology Start Up

• Global customers

• Leverage off-shore manufacturing know how

• Tap into foreign technology experts

• Foreign employees

Freescale’s 1’st 3G chip was designed by a global team in all these locations

ChicagoPhoenix Austin Ft Lauderdale

Toulouse

Tel Aviv

Bangalore

Sidney

Geneva

Communication• Report on global events to local media.

• Report home events to foreign media.

• Different countries/cultures often require different communication strategy.

• Different countries have different channels and processes to approach media and get coverage.

• Different cultures respond to ads differently.

Local Doctor Clinic

• Many foreign nationals patients

• Medical Tourism

• Foreign drug suppliers

• Outsource diagnostic tasks to off shore clinics

• Learn from off shore drug trials

• Foreign medical equipment suppliers

• Off shore insurance processing services

Small Farmer in West Texas• Foreign farm equipment

• Energy cost depends on global events

• Oil revenue depends on global events

• Many wind energy companies are foreign based

• Global commodities markets

• Learn from like farmers in other countries

• Global events opportunities

A Global Startup in the 21’s Century

2003 Investors: 1 U.S., 1 Italian, 2 Israeli Total 3 employees, all in Israel

A U.S. phone number that rang in Israel

2005 10 employees in Israel (50% Russian) 3 employees in the U.S. (33% Indians)

2 employees in Taiwan

Customers Deployment by Geography

CISCODELLF5FOUNDRYFORCE10HPIBMINTELLAWRENCESUNNextIO

FUJITSU-SIEMENSNOKIA

FUJITSUNEC

SILICOMVOLTAIRE

ABITACCTONADVANTECHACERALPHA NETWORKSAOPENARIMAASUSDLINKGIGABYTEIWILL LANTECHMITACPORTWELLQUANTATATUNGTYANUSI

Tehuti’s Global Network

Silicon Valley Chicago Raleigh Austin Houston

Paris

Tel Aviv

BangaloreTaipei

GenevaMilan

OsloAmsterdam

Global Challenges

Global Challenges• Cultural differences• Distance• Time zones• Language barriers• Different financial systems• Exchange rate risks• Operational infrastructure• Different labor environment• Different legal systems• Government regulations

A common way for a large corporation to deal with all of the above challenges is to open a local operation/office with local professional staff

Additional Challenges to Small Businesses

• Cash flow-A multi $K international trip could be a significant expense for a small business

• Critical massA small business can not afford to hire people in each country it operates in

• BandwidthA small business owner does not have the time to deal with all the international issues by him/herself.

Globalization Becomes Affordable

1980-1982 2004-2008U.S. Liason of an Israeli

Subsidiery CEO of a Global Startup

Cost of International Phone Call $7/min $0.03/min

Free if using VOIPCost of one hour International Phone Call $420 $1.80

Sending an immediate mail

Go through a centralized mail service. Expensive. Requires

management approval. Free email

Video Conference Call DID NOT EXIST Practically Free

overseas flight $2,000 $2,000

Practical Tips

How to Overcome Distance & Time Zone IssuesHow to “localize” Yourself in Each Region

• Visit the other region frequently (At least once/quarter)

• Participate in local networking groups and local events

• Network heavily in all regions

• Invest in local PRs

• Acquire a local phone number that will ring you anywhere in the world

• Keep a local office

• Respond to overseas messages promptly (within few business hours)

• Be virtually accessible during both time zones

• Respond to emails in weird hours

• Hire a local answering service

a Day in the ofc for a U.S. Based CEO of a Global Start Up( and Have a Life)

04000500060007000800090010001100NOON130014001500160017001800190020002100

Israel & Europe

U.S. East Coast

Personal time

All U.S. Regions

Personal time

U.S West Coast

Personal time

Asia

Alternative:

Eur days: Start early - finish early

Asian Days: Start late - finish late

How to Overcome Major Customers Resistance

Major customers are often hesitant to integrate a product coming from a start-up, let alone a foreign start up

• Customer does not want to depend its product on an un-proven technology.Answers: 1. Offer it first as an add-on option. 2. Apply it first to a lower priority product.

• Customer is afraid that the start-up will go under and leave them stuck with no supply.Answers: 1. Escrow the design with a reliable third party (IP lawyer) 2. Contract a second source for critical components.

3. Inventory.

• Major customers often insist to have local technical supportAnswers: 1. Initially have one of your technical experts commute to customer’s location. 2. Very quickly train a local technical support. 3. Translate documentation to customer’s language. 4. Have a home based engineer on call during most of biz hrs abroad

• Customer plain refuse to deal with a foreign start-up.Answers: 1. Sign up a home customer first that will serve as a value added channel 2. Hire a reputable 3’rd party generic manufacturer that will offer your product

3. Partner with customer’s subsidiary in your country first.

Manufacturing and Logistics

• Prototypes are better off to be manufactured close to R&D.• Prefer use of short turn around manufacturing technologies for

quick fixes of design errors.• Limit the quantity produced in early batches.• Contingency plans for surprise upsides:

- Build some back up inventory of long lead components.- Build a backup batch half way.

• Perform due diligence before signing up a foreign production site.• Visit the manufacturing supplier in person before signing a

contract.• Do not pay the whole amount in advance.• Visit off shore production site frequently.• Have an off shore production agent for day to day supervision. • Consult with an off-shore attorney or respected business person.

How to Start a Sales Channel

The Problem: Tier1 Channels are reluctant to serve start ups. Even if they do, they are often too expensive.

• “Compromise” on tier2 channel partners.• Value Added Channel partners.• Hire a local senior advisor.• Offer stock options.• Offer launch milestone bonuses on top of sales commission.• Offer higher commission in early years.• Offer a “tail” commission formula in case of disengagement

Considerations in Setting Up Headquarters

• Target markets.

• Government incentive programs.

• Investors geographical preference.

• Tax considerations

• Workforce skill sets.

Strategic Steps for Start-Up Globalization

• Acquire an investor from your strategic target region.

• Hire a strong part time senior executive to serve as the local senior face.

• Hire a global advisory board with senior people from your major strategic regions.

• Incorporate in the major countries you plan to operate in.

• Issue patents in all your regions.

Questions?

Thank You