Strategising for cross-border B2B

Summary

International markets, particularly the US, present an opportunity for B2B startups to expand their own business as well as boost India’s capacity for exports. The large US mid market segment especially has growing needs, as they launch new products and are willing to try new suppliers. CEO Amrit Acharya provides insights from Zetwerk’s experience of going cross-border.

There are compelling reasons why more B2B founders need to seriously consider foraying into international markets. As a growing number of overseas customers start looking for new and improved supply chains, doing business with them can potentially stoke profitability for Indian startups.

Recent shifts in global macroeconomic conditions are proving favourable for cross-border expansion. The fact that more US manufacturers were looking for an alternative to buying from China brought them to Zetwerk’s door during the pandemic. The company has discovered a thriving base of customers in the US mid-market since then.  

As long as a company has the right offering and credible proof points, the gains from selling to US customers can be greater, observes Amrit Acharya, CEO of Zetwerk. “If the core value propositions are pretty good, US customers are willing to pay a premium for it.”

The demand for Indian materials exists, what has held back trade so far is logistics. So the benefits of making for the world are clear: Solving access to supply for foreign customers can exponentially increase India’s capacity for exports. 

“If the core value propositions are pretty good, US customers are willing to pay a premium for it.” - Amrit

To throw more light on the gaps and opportunities, as well as on how to strategise for B2B international shores, we spoke with Amrit who took his company to the US in 2020. 

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The mid-market opportunity 

When customers from the US first came calling, Amrit and team were tempted to ignore it. But the calls did not stop, so Zetwerk performed a few audits, and found that US customers wanted to move away from China and towards other suppliers. The US makes up 20% of the company’s revenue now. The lesson for founders here is: pay attention to shifting market dynamics. 

Not only is the US market big, but players in it are willing to try new things, and are relatively very pro-software. “India is a $3 trillion economy, the US is a $20 trillion economy. When we visit, it becomes obvious how large the US market really is.” 

While B2B founders can pursue small businesses or large Fortune 500 companies, Amrit observes each of these categories come with their own unique opportunities and challenges. Interestingly, there is a third category called mid market, with companies making an impressive $500 million to $5 billion but still agile enough that you can talk to the CEO directly. In terms of scale, you can compare this market to the enterprise segment of India. 

For example, Zetwerk discovered US customers making a single product in very niche areas — such as fire safety boxes for buildings — with hundreds of millions in revenue.

Testing in the US

For any company that has product-market fit, there will be a section of the market which shows pull. Work with them and eventually figure out your ideal customer. Before Zetwerk discovered its sweet spot in the mid-market, it tested demand with smaller companies that had shown interest first. To build a feedback loop that will help you grow, the first step is to figure out what your sales cycle is. Go through many motions of trying to sell, see what works, and eventually find a pattern.

With supply chains for an existing product, there may be hesitation to change but companies are willing to try something new and tolerate the changes that come with that while making new products. So when an international customer is launching a new product or actively seeking a change in suppliers, it is the ideal time to do business with them. 

As you search for your ICP, Amrit finds it useful to ask the following questions about the customer: 

1. Are they looking for a change in the supply chain?
2. Is their decision-making process fast? 
3. Have they had challenges with their existing supply chain? 
4. Are they looking to launch a product? 
5. Who is the person championing you on the customer side — are they senior enough to make decisions?

The prospects are best when most of these boxes are checked.

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Solving for cost, quality, time

Both in India and the US, Zetwerk has taken the platform route rather than being a marketplace. With a marketplace, the risk is that if the quality and timelines for supplies or payments are not met, the accountability for any failure would fall on the startup that is linking buyers and sellers. Making introductions is only one part of the process, there are many other parts of the manufacturing supply chain that are broken.

“If the problem is x in a domestic context, it becomes 100x in an export context.” Amrit explains that language is often an issue. Moreover, most Indian suppliers who want to ship to the US have no easy way to find customers. Their product spends 2-3 months on the ship. B2B commerce companies can solve these inefficiencies in the system, helping customers and suppliers focus on their core business.

B2B founders should make sure there are enough suppliers to fulfil orders, and that these suppliers will choose to work on this specific opportunity amid everything else that they are doing.

“If the problem is x in a domestic context, it becomes 100x in an export context.” - Amrit

In Zetwerk’s case, as it crossed the border into the US, the company narrowed down its core offerings to address three main problems — discovery, pricing, and fulfilment. It helps customers get their products made with the best possible supplier, it helps with pricing the item since many are made-to-order, and finally, it helps fulfil and successfully close the order.

If you can solve for cost in India, you can solve for cost in any part of the world, Amrit believes. “Because India is just a very cost-sensitive market.” The US should feel like a logical extension for B2B startups because in India, while customers expect quality products and timely fulfilment, there is no premium attached to it. But in the US, customers do award a premium to the fastest supplier or a high quality supplier. 

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Building a local approach 

At first, Zetwerk was able to do the complete process — prospecting the customers, sending out email campaigns, getting them to try them — from India. Companies such as Freshworks have proved this can be done, and this tends to be good for your cost structure. 

However, once you hit a scale with order sizes in millions of dollars, founders will be better off having local people who could solve for the last last mile of negotiations and close the deal. You need to create a US subsidiary from which the invoicing happens, so that the customer feels that they're dealing with somebody in the US. 

While staying on top of things in each geography, it is important to decouple the two geographies as you evolve. “You need to really look at that market as a different market altogether, with its own set of nuances and challenges.” 

Among those challenges is hiring. “Hiring in the US is very different from hiring in India and we really struggled with (that). Most salespeople were very wary about joining an unknown Indian company.” As this was happening during the pandemic, Amrit couldn’t travel but some of Zetwerk’s investors in the US met and convinced candidates themselves. 

Around this time, Zetwerk acquired a local company in the US. In addition to finding great business synergies in the market, it also found a people advantage.  While this option is not for all startups, those with a suitable cap table could consider acquiring a local firm to cut short timelines and get managerial bandwidth in the US. 

“Hiring in the US is very different from hiring in India and we really struggled with (that).” - Amrit

In the early part of their journey, startups may find it difficult to have a long sales cycle. But they can optimise for a shorter sales cycle, which could be through pull or through the nature of the customer, and work their way towards the ICP. That is Amrit’s strong suggestion, and he adds it is worth persisting since very few B2B markets can boast the kind of depth the US provides.

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