Working and Thriving Overseas
- January 04 2015
This is the second in a two-part special commentary by Andrew Henderson, founder of Nomad Capitalist, where we examine the changing landscape of global business and how our perception in the West of overseas opportunity is often far removed from the reality on the ground. Be sure to check out part one: “How to Find Success in a Changing World.”
Dateline: Kuala Lumpur, Malaysia
One of the biggest fears in the process of moving or starting a business overseas is “how would I get started?” My answer is typically something along the lines of “you get on a plane.”
It may sound trite, but the reality is the world isn’t as different as you’ve been taught to believe. People everywhere have many of the same needs and wants as anywhere else; only the business strategy in selling them what they need is different.
My honest piece of advice to anyone looking to get started is to identify a region of interest to you and just go. Do a little market research as well as a personal inventory of which countries are most appealing and then go there to get a closer look.
I and many of my friends can personally testify to the fact that you will literally be blown away by the opportunities you see almost immediately in many of these places. I remember walking around Phnom Penh, Cambodia my first day there in a search for aspirin and thinking that the local pharmacies wasted a lot of real estate that could be repurposed in a better way.
It turns out I was on to something; a week later, I met a venture capitalist who had just invested into a regional start-up that was opening smaller footprint drug stores in Cambodia based on that same idea.
The takeaway is that no matter how unsophisticated your business experience may be, you should be able to easily spot opportunities simply by hitting the ground in three or four countries in your desired region.
Which countries are worth checking out?
They say that if you want to be successful, you have to do what unsuccessful people won’t. Most westerners love the creature comforts of home and would never move to Africa no matter how many millions they could potentially make. In general, the more frontier a market, the greater the risk and the greater the reward.
However, I believe if you identify an opportunity of general interest in a frontier market, your chances of success are much better than in the West where competition is fierce. Consider these regions as among your best options:
Southeast Asia. It’s not just for backpackers; Southeast Asia is an up-and-coming region with a rapidly growing middle class. Cambodia is among my favorites for open markets and wide open opportunity. Laos is good but it is even more of a frontier market and less open to foreigners. More developed countries like Thailand come with too many regulations and a lot more competition.
The Middle East. Believe it or not, I’m a huge fan of doing business in the Middle East. Much as I love Chinese culture, Mainland Chinese tend to believe that western businesses are overpriced and seek out local alternatives. Those in the Middle East are more open to doing business globally, and there is a tremendous amount of wealth there for those who want to build a business catering to the high end.
Latin America. You have to be more careful in this area, but there are still some real gems. While I like the idea of investing in real estate in Nicaragua’s beach towns, I saw a lot of empty shops in the capital city. Look further south to more developed Panama or the highly underrated Colombia. If you can stand lots of red tape, Brazil has some potential if you know what you’re doing.
Africa. For the true adventurer, Africa holds a lot of opportunity. The entire continent is in a transition period now. I particularly like Botswana and western African countries like Nigeria and Ghana.
There are all sorts of technical trends that validate the need to internationalize. These include the average age in a given area; the average African is 18, while the average European is in his or her mid-30s.
That will mean a lot in coming years.
Meanwhile, there are also fundamental indicators. A quick glance at history reminds us that no empire lasted forever, and those that put all their eggs in one basket were often wiped out. While such a thing is unlikely to occur overnight, I believe it is best to be ahead of the curve and get in on the ground floor (or at least a low floor) in the “next big thing.”
Not only will your business have a greater probability of success, but you’ll have a better chance to exit your business. One venture capitalist I know makes investments in frontier market companies trading at book value because the demand for investment just isn’t there yet.
In one case, he bought an Asian brewery at book value just months after a huge global corporation purchased a brewery in a more developed Asian country for 12X book value.
This investor’s plan is to “front run” companies that want to acquire quality assets to add to their brand portfolio. He is taking a “sit and wait” approach, just waiting for those companies to deem a country like Laos or Ukraine or Morocco important enough to invest in.
I can’t tell you exactly how your overseas business will play out. What I can tell you is that the future in the world’s emerging markets is bright no matter what any of the talking heads in the financial media have to say.