Why Moving Your Startup Offshore Can Quadruple the Length of Your 'Runway'
While startup costs are cheaper than ever before, most people still have to pay bills and work full-time to make a salary. Even young entrepreneurs with the luxury of starting out at home or in a low-cost environment eventually need to raise money or start generating revenue to pay the growing costs that come with scaling the idea. And many times there's an early failure -- think Youtube, Instagram, Twitter, PayPal and Shopify – which may be followed by success. When Harvard Business School Professor Clayton Christensen analyzed startups over the last 100 years, he concluded that, “Successful startups are the ones who have enough money left over to try their second idea.”
What all that means for early-stage startups is that they need money to buy time, a concept I'll call their "runway." And one idea I'll put forward for lengthening that runway is to move your business offshore, because it will save you money, big-time. For example, say your monthly outgoings are $5,000. While you're living in the United States, $20,000 will thus give you four months' time. But the same sum will give you 12 to 18 months' worth of time if you move to a cheaper country such as Chile or Vietnam.
This may sound a bit bold, but moving offshore is exactly what many startups today are doing simply out of necessity. Indeed, small companies are being built and run by remote teams utilizing combinations of cloud-based tools and free services like Skype.
Many co-founding teams already have packed their bags and moved to places like Southeast Asia, Eastern Europe or South America to try out their ideas, with minimal risks. There are whole communities of nomad entrepreneurs in those locales camped out in co-working spaces with fast internet connections. And other nations are interested: Programs like Startup Chile offer equity free accelerators for early-stage startups, just to attract innovation.
So, if you’re adventurous, and heading offshore sounds like something you can see yourself doing, before you make the move, there are many things to consider. Cost of living and safety are the basics; however, internet connection speed, the local tech community -- if any -- and availability of talent are other factors that should play a major role. Some websites will help by offering comparisons -- one of them being nomadlist.com.
As to costs, accommodating your team in a local co-working space can cost you as little as $150, in some places. And, provided you utilize many of the low-cost services like Skype, Google Docs, AWS; and hardware like $200 Chromebooks, that $20,000 will suddenly stretch much further.
You may have to sacrifice comfort.
Creativity alone, combined with a willingness to give up some of your creature comforts, can push your startup forward, from 0 to 1 product/market fit, regardless of your lack of money and resources.
My co-founder and I, for instance, started our mobile app service company four years ago in Melbourne, Australia, one year later building a delivery center in Gurgaon, India (a leading tech hub in Southeast Asia). Today, our business has 200 employees and counting, with offices in San Francisco and Melbourne, Australia.
In terms of costs, we started Appster with less than $3,000. But fast-forward four years, and revenue is now at over $1 million a month. In fact, we are working on some of the most innovative startups in the world and still haven’t taken a cent of outside funding. Now, that's lengthening our runway!
And while the process isn’t as easy or glamorous as it sounds, the moral of this story is that becoming an entrepreneur today is more do-able than ever, provided you’re willing to do whatever it takes to overcome the obstacles standing in your way. After all, that’s the true definition of entrepreneurship, isn't it?