Face Tattoos and Pajama Checks: What No One Tells You About Growing an International Business
(Presented at TechTO, October 28, 2016, Toronto, Canada)
In 2009, starting here in Toronto with 20 people, we picked a fight with the largest ecommerce company in the world, the most successful hardware company ever, the most profitable search and advertising company in human history and the world’s largest book retail chain. Seven years later, with 30 million users, millions of devices sold, a $315M exit and hundreds of millions of revenue a year later, there are a ton of stories that I could tell — but today I’ll take five or seven minutes to talk about how we became a company that operates in 20 countries with a third of our staff and more than half of our revenue outside North America. Along the way, we’ll talk about weddings in Vegas, pyjamas as an HR metric, and vacations in barcelona, but all of it is really about being international when you’re just down the street in Liberty Village.
We went international because we had to. It would have been so much easier to just focus on a couple of markets, but even when we were writing the first business plans in 2009, we could tell that ebooks were a business where most countries weren’t big enough to fight this on their own. There wouldn’t be a Canadian ebook company, a French ebook company, a Dutch ebook company. We figured there would be maybe 3-5 companies that would dominate ebooks worldwide and we wanted to be one of them.
That’s pretty aggressive for 20 people in unhygienic office space on Peter Street. But we made maybe three good decisions right at the beginning that helped make it all happen.
First, we didn't do the obvious Canadian thing of saying, “Okay, Canada’s not big enough. I guess it’s all about the US.” We could already see that the US, the richest market for ebooks in the world, was about to become a battleground. It was the home turf of Amazon, Apple, Google, and Barnes & Noble, and everyone wants to win at home. It was going to be ugly and expensive. So our list of countries had to be longer than Canada + One. (That freaks out VCs by the way. A long list of country expansions looks expensive, but that led to our second good thing we did:
We made expanding into new countries as light-weight as possible. We were initially incubated by Indigo here in Canada, who was trying to answer the question — what do we do if our print customers decide to start reading digitally, because if we don’t do something, Amazon’s going to take them all away from us. It turns out, that’s the same challenge that every other book retailer in the world was struggling with. So we took that model on the road and now have retail partnerships in most of the countries that we are in. We give them an ebook experience and devices that competes toe-to-toe with Amazon and Apple. They introduce us to all of their customers who might be interested in reading digitally, sell devices through their stores, include us in their marketing.
So we hire only a small number of staff where local knowledge is absolutely essential. For us, that’s one or two people to coordinate sales and marketing with retailers, and a couple of people on the book side of things — people who understand how to talk about books in that market, have relationships with publishers, build out our catalog, and can make a store that looks familiar to a Dutch customer or Australian reader. That’s it. We don’t build out offices, we keep the footprint as small as we can. Everything else is run here from Toronto.
Third - We built everything -- infrastructure, apps, payment processing, e-commerce stack -- assuming that we would be operating in multiple countries, in multiple currencies, in multiple languages. From almost the very beginning. For any of you that are gutting it out in the first few revisions of your product, you know that’s hard. When you’re trying to keep things lean and agile, when you’re following an MVP philosophy — those decisions feel incredibly expensive. You are having to make enterprise-grade code investments when you only have a few thousand customers. Your competitors are coming out with cool new features, you’re making language-table support. It sucks.
But these first three decisions were incredibly important. While our competitors were all tied up in a very expensive fight for control of the US market, we quickly and quietly expanded early into every other single country where we could get in. And when our competitors finally figured out what we were up to, we gained months, sometimes years of breathing room as some of them struggled to internationalize systems that had been built to serve the US market alone. By then, we had partners, built share, had brand recognition, and we weren’t going anywhere. And because our investment in each country was small, a new market could take a few years to grow without getting smothered by its own expenses.
Now, of the 370 people at Kobo, just under 100 of them are outside of Toronto, and those people are a huge part of the reason why we are doing well today. It hasn’t been easy. But we have learned some things along the way.
PR and Marketing ends up being different for each country. Messages resonate differently. Your Canadian or US PR firm will usually flame out when you go overseas. We had a very well-respected Canadian ad shop put together a campaign for our Italian market. We showed it to our Italian partners and they were like, dude, why do you have Vespas everywhere? Happens all the time. Even the big international firms are pretty hit and miss — good in some countries, completely missing the boat in others. Over time we have cultivated a string of small, boutique shops in key markets — all managed by a small team here in Toronto.
Your CFO either has to come in with some international experience already, or learn fast and have some great advisors. Not all Canadian banks are great with international trading. Tax and currency get important fast. We now have enough revenue and expenses in USD, Euros, Yen that exchange rates really matter. We had to build out hedging programs that saved us when oil prices tanked the Canadian dollar and Brexit shot up USD.
Most importantly, having a large number of people working remote in other countries will throw a spotlight on every weakness you have in HR, in hiring, in performance management, and really in your core culture.
Because we only have a few people in each country, those first hires are incredibly important. They are the ones who will be building our first relationships, talking with media, helping to hire our next people. And because of the way labour law works throughout most of the EU, if a hire doesn’t work out, it’s tough. Hiring in North America, for better and worse, is like getting married in Vegas — could be for a good time, could be for a long time, but if it isn’t right, you can part ways. Hiring in Europe is like getting a tattoo on your face — you had better be committed, because it defines you and it’s pretty much forever. So we have to hire with that in mind — on top of the hard skills that they need to do their job, we are looking for passion, English and local language communication skills, a certain independence of spirit. And we have to make a call on whether they are still going to have that passion three, five, ten years from now.
These are people who could be operating remotely on their own or with a few other people, for years. We need people to feel like they are a part of a team, part of both the every-day challenges and successes across the company. Communications becomes incredibly important. We use a ton of video. One big department with a lot of remote employees who work from home in cities around the world has for years run a daily global video check-in. It used to be called the pyjama check — is everyone out of their bathrobe and in real clothes? But really it is about personal connection for people who are spending the day working on their own. We run a globally broadcast video town hall every week, whether we have big news or not, to make sure that everybody knows what’s going on, what’s going well, and to get a quick hit of the culture of the company, to help people feel the scale of what we’re doing.
There is a ton of little stuff to get right. Most of it we got wrong at the beginning and our people were patient enough to hang in while we figured it out. Being aware of timezones for meetings. Onboarding remote employees well. Performance management that is incredibly clear so nothing gets lost in translation. Video and conference call systems that don’t suck.
Little things can trip you up. Like a lot of tech companies, we are completely infested with Slack, which is great for the project level chatter that gets things done. But it gets tough when you have two separate channels for monitoring the free food in the Toronto office and the one person in Berlin says what about me? Or holiday parties. Or on the flip side when a person with three weeks of vacation here in Toronto finds out that the new person they just hired in Barcelona gets six weeks paid vacation by law. But as each one comes up we figure it out.
Going international was absolutely right for us - wouldn’t have survived without it. Each new market is a little bit easier. Some that we started four years ago are now seriously adding to the bottom line. And as some countries slow down, others are accelerating. And it’s pretty great to be one of the few companies in the tech space anywhere in Canada that is running a truly international play where every decision we make, every great thing we do, makes it better for all of our users all over the world.