The importance of building bridges to new e-commerce markets
Building bridges has always been a challenge of engineering and finance. Linking two bodies of land over a sea requires exceptional mastery of design and access to appropriate resources. Likewise, bridging a business to an oversea jurisdiction requires careful legal, fiscal and commercial considerations.
In the last two decades multinationals have expanded their geographical coverage, and are now present in most developing countries. For these complex organization, opening a new subsidiary can be expensive, easily costing more than $50,000 per country in legal and advisory fees. Such budgets are nowhere near the financial capacity of developing countries entrepreneurs.
Yet, incorporating a company in the US or the UK can be particularly empowering for entrepreneurs.
How can it be financially possible, let alone commercially viable?
The short answer is that thanks to technology and the evolution in corporate law, SMEs can now become “Micro Multinationals”, a term used back in 2015 in an eBay publication.
Unlike an established company, a developing country SME can adopt “ready-made” incorporation templates that simplify company formation. This approach has been successfully demonstrated by sub $1,000 international company setup programs like those offered by Stripe Atlas for the US, or the E-residency program in the EU by the Estonian authorities.
Moreover, jurisdictions such as the US, the UK and Estonia allow full foreign ownership of locally registered companies. A Gambian entrepreneur can therefore form and operate his or her own company in those countries, without the need to have a locally resident partner or director, nor hire local employees and is not even obliged to maintain a physical office.
As of 2020 a great number of service providers such as Payoneer for e-payments, or Mercury bank for banking, are accepting US companies fully owned by foreign nationals. There is a whole momentum. Y Combinator online startup school has accommodated over 100,000 entrepreneurs in their program in the last 3 years. The success of the Startup model and its openness to developing countries entrepreneurs has lead Y Combinator to launch several events in Nigeria and onboard a growing number of African founders.
One commonly advised structure in the US Startup ecosystem, no matter the origin of the founders, currently is a Delaware C-corporation. Having such type of company allows a developing country founder to access not only the US market, but potentially the whole world market as they can now accept international payments and satisfy most of the trust and compliance requirements.
Used in combination with e-commerce know-how and tools, having an international structure unlocks the potential for international expansion.
Learning from the experience of others
Samia Ben Abdallah, Founder of AwA in Tunisia, highlights the obstacles that e-commerce entrepreneurs face when selling abroad: “Tunisia is in the same time zone and only 1h30 far away from Europe – a natural market for entrepreneurs to start their exports. So it’s a great irony that in this digital era there are still so many barriers to selling goods online from Tunisia. Those of us used to working through traditional channels to sell our products in Europe struggle to be accepted in online platforms and payment solutions. It doesn’t stop us from exploring the many mechanisms to do so: using our creativity, business and social connections. But best practice would be to work through transparent and fully compliant business structures: we just need a simple and cost effective way to do this”.
To discuss this important topic and find out how innovative business structures and payment solutions can help SMEs, like Samia’s, sell online, ITC ecomConnect is organizing a webinar on October 20 from 2-3:15 PM (CET). To join, you will need to register here!