Global Natives
How online businesses are leading a new waveof globalization despite growing challenges tointernational trade
JANUARY 2019For most of the past century, globalization has been driven by largebusinesses. The very term multinational conjures the image of a giant
corporation whose far flung units touch every corner of the world.
The internet has turned that image on its head. Borderless andunparalleled in scale, the internet connects an estimated 3.2 billion users,
or more than half of the world’s population. As such, it allows virtually
any business, no matter how small, to reach customers anywhere.
This study, based on an extensive survey of founders and senior executives of online
businesses1 across 15 global markets, examines how a new generation of entrepreneurs
has embraced the singular capabilities of this networked world to benefit from cross-border
expansion. As they broaden their audience and reach by expanding internationally, these
new businesses are driving a new wave of globalization that is poised to boost global GDP.
But the study also shows how government policies in the form of tariffs, taxes, andregulations can sometimes be a challenge to the very promise of global trade, especially forsmall businesses. Even as the internet and a new crop of digital tools are removing hurdles
to international expansion, protectionist regulations and trade tariffs are introducing newones. As a result, an alarming 42% of online businesses say that running an international
business is increasingly getting harder, not easier.
Embracing the internet to sell internationally is a clear path to new customers, and forsmaller companies in particular, it can help fulfill what the US Commerce Department callsa “vast untapped export potential” on its Commercial Service website.2 But that potential—
and its promise to boost global GDP—may never be fully realized without supportive
policies and regulations.

Global Natives

1Online businesses being defined here as companies that accept online payments, and with online commerce as theirprimary source of revenue.

2

International Trade Administration, U.S. Commercial Service: https://www.trade.gov/cs/factsheet.asp

2

Online businesses are global natives
For today’s online businesses, expanding internationally has become a top priority—one
that often takes precedence over other vital business functions such as sales, marketing,engineering, and HR. Indeed, 70% of online businesses sell outside of their home markets
today. The figure is even higher among those with more than 50 employees: 90% are selling
across borders today.
This dwarfs the rates of cross-border trade for companies overall. In most countries, thepercentage of companies with foreign customers is in the single digits. In the United States,
less than one percent of the 30 million companies export, the Commerce Department goeson to say. Much like millennials grow up taking the internet for granted, online businesses
are expanding to new markets faster and more effortlessly than their predecessors. They areglobal natives.
The appetite for expanding internationally varies significantly by geography. Online businesses
based in countries with large domestic markets tend to be laggards with regards to foreign
expansion. In fact, among those surveyed, online businesses in the United States are theleast international of all. Conversely online businesses in Singapore and Hong Kong havethe most international focus. And even though the EU’s Digital Single Market is intended tofacilitate cross-border trade among member countries,3 European online businesses are not asinternationally-focused as their Asian counterparts.
TABLE
SHARE OF ONLINE
BUSINESSES SELLING TO
MORE THAN JUST THEIRHOME MARKET

Singapore

88%

Germany

71%

Hong Kong

88%

Australia

66%

Japan

86%

India

63%

France

84%

UK

60%

Italy

78%

Mexico

59%

Spain

77%

South Africa

56%

Netherlands

76%

USA

45%

China

74%

Selling globally early goes hand in hand with faster growth
The Coca-Cola Company is among the most recognizable multinationals on the planet, but it
wasn’t always so. Founded in 1886, Coca-Cola didn’t begin selling outside of the United States
until 34 years later.4 It’s a story that stands in stark contrast with that of today’s prototypicalonline business: six in ten online companies with international sales entered new markets in thefirst year of their existence.

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3

https://ec.europa.eu/digital-single-market/

4

Coca-Cola set up a Foreign Sales Department in 1926, 34 years after the start of The Coca-Cola Company.

3

There’s a logic behind the urge to expanding internationally quickly: it correlates with longterm economic success and productivity. Over the last five years, firms that expanded
internationally during their first year grew 141 percentage points faster in revenue and15 percentage points more quickly in headcount than the ones that were slower to reachinternational markets. While this correlation does not automatically imply causation, evidence
suggests that speed of internationalization leads to faster growth.5

TABLE
REVENUE AND
HEADCOUNT GROWTHOVER L AST 5 YEARSTime to enter international markets,< 1 year after incorporation

Time to enter international markets,> 1 year after incorporation

Revenue Growth+887%Revenue Growth+746%

Headcount Growth+196%

Headcount Growth+181%

Of course, the rate of growth of online businesses differs by vertical. SaaS and gaming
businesses saw the fastest international growth, whereas hospitality and digital content
companies grew the slowest. It’s clearly easier to grow and scale pure software businesses thancompanies that touch physical infrastructure or require manual content creation. However,across nearly all verticals, the companies that were faster to enter international markets grew
more quickly than other companies in the same category.

New online tools power global natives
International expansion has been a feature of online businesses since the beginning of theweb era. But the availability of a new set of tools and services in recent years has greatly
accelerated the trend, making it easier for startups to conduct cross-border trade.
The tools range from services for payments and business formation to online advertisingtechnologies, localization and translation services, and cloud computing infrastructure. Morethan two-thirds of those surveyed cite these tools as the primary enabler of international
expansion, well above funding (37%), physical infrastructure (36%), or government support(35%). Many have set up shop on marketplaces like Shopify and Amazon, which vastly simplify
the process of establishing businesses with global reach.
Social media has played an important role too. Half of online businesses say social media istheir No. 1 international marketing channel, ahead of traditional advertising (43%) and website
localization (40%).

5

Global Natives

It is also possible that things work in reverse, and faster-growing companies reach international markets more quickly.
Other company characteristics such as product quality or management sophistication might play a role as well. Also,these growth rates focus solely on companies that have remained in operation for at least five years; growth rates for
all companies including those that fail within five years would necessarily be lower.

4TABLEHOW DO YOU
MARKET YOUR GOODSINTERNATIONALLY?

Social MediaInternational advertising
Localization/translation of
website/content

50%

Physical storefront in theinternational market(s)33%Other marketing

19%

43%

40%

As these tools become more entrenched and more capable, it’s reasonable to assume thatinternational sales will grow. Already four in five online businesses say they plan to further
increase their international operations in the coming years, and nearly one in two say theincrease will be significant. As a result, global natives are not only more international than otherkinds of companies today, but they also plan to extend their global footprints more aggressively
tomorrow. In that respect, they are a driving force of the next wave of globalization.

A new type of company: the single-person multinational
Technological advances have certainly propelled the global natives into new markets faster.
They’ve also given rise to a new but rapidly growing crop of multinational companies, the singleperson multinational. With no employees, these companies embody a new category of business:the single-person multinational.
Nearly nine in 10 of respondents with no employees say new digital tools have made it easierto sell internationally. For many of them, marketplaces like Amazon or Shopify have been asignificant driver of internationalization, as these platforms help to erase barriers that would
have previously been insurmountable. They are international simply because they can be—because their product appeals to a global audience and, thanks to the power of marketplaces,
nothing stands in their way. Half of them have even been international from Day 1. In this sense,
platforms and marketplaces are multipliers for entrepreneurship across the world, and the true
infrastructure that greases the wheels of international commerce.

Open, not closed: tariffs, regulation, and immigration restrictions
emerge as challenges to global growth
But even as entrepreneurs rush to reap the benefits of going global in growing numbers, theyare running into increasingly strong headwinds. A startling 42% of those surveyed say it isharder to do business internationally today than it was five years ago. Only 36% say expanding
internationally is becoming easier.
The obstacles typically stem from government policies. More than a third of companies saytaxes, regulatory barriers, and tariffs have all made global expansion more difficult.
The growing challenges of operating internationally are underscored by the on-the-groundexperiences of entrepreneurs. While doing business in foreign countries remains a net positive,
it doesn’t always come cheap. Inconsistent regulation and compliance rules across the world
have become a major driver of operating costs. Online businesses say they spend between
5.9% and 37.8% of their net profit on regulation and compliance every year—and 54% saythis amount has been increasing recently. What’s more, 38% of founders and executives saythey’ve spent weeks or even months of their time in the past year dealing with regulation andcompliance.
Global Natives

5TABLE
WHICH FACTORSHAVE MADE
INTERNATIONALIZATIONEASIER/HARDER?

Factors that have made globalexpansion harder
Taxes6

Factors that have made global
expansion easier
38%

More availability of internet-based
technology and tools

68%

Regulatory barriers (too much
regulation, too complex, etc.)

36%

More skilled talent

39%

Government tariffs

34%

More availability of funding/capital37%

Too expensive

34%

Increasing protectionism

29%

More government support(incentives, etc.)

35%

Lack of funding/capital

27%

Better physical infrastructure

35%

Lack of skilled talent

26%

Fewer regulatory hurdles

30%

Lack of infrastructure (technical,physical, etc.)

25%

More local mentors/advisors

28%

Cultural/linguistic issues

23%

Lack of local mentors/advisors

22%

Lack of education and training

22%

More than half of online businesses (54%) spend more than $50,000 annually on these issues.
Given that there are millions of online businesses in the world, it becomes clear that billions ofdollars are spent globally on regulation and compliance every year.
Not surprisingly, immigration policy remains a perennial source of worry for global
entrepreneurs who often need to rely on foreign workers to understand how to do business invarious geographies. Nearly three quarters of those entrepreneurs oppose new immigration
restrictions. While half of them say the support from their own government for hiring
foreign talent is good or excellent, the assessments vary widely by region. Those in Asia andEurope tend to be much happier than those in the U.S., where only 37% are satisfied with thegovernment’s support for immigration.
Finally, no single policy issue unites global natives more than tariffs: 70% are against raisingthem. Interestingly, the opposition to higher tariffs is notably strong in China (92%) and theUnited States (84%), two countries embroiled in an escalating trade war, and the United
Kingdom (89%), which recently voted to leave the European Union.

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Global Natives

Literally, “too many taxes.” This includes both tax complexity and tax levels.

6TABLESHARE OF ONLINE
BUSINESSES OPPOSEDTO MORE TARIFFS ON
INTERNATIONAL TRADE

China

92%

Netherlands

75%

UK

89%

Spain

74%

USA

84%

Mexico73%

Germany

83%

France68%

South Africa

81%

India

65%

Hong Kong

80%

Japan

65%

Italy

80%

Singapore48%

Australia

75%

Of course, entrepreneurs are not typically cowed by obstacles. Success often demands thatthey tackle challenges head-on, and that’s just what they appear to be doing when it comes tointernational trade. Despite growing costs of and barriers, the vast majority of entrepreneurs
are forging ahead. Only 3.6% say they plan to downsize their international operations. Of
those, nearly half say they are pulling back primarily because of changes in customer demand,but taxes, regulations and the general challenges of operating globally are contributing factors
for many.

Conclusion
A new generation of online businesses is quickly redefining what it means to be a globalcompany. Its members tend to expand internationally in far larger numbers than theirpredecessors, sometimes pushing cross-border sales from Day 1. Thanks to a new set of online
tools that simplify the process, these global natives are able to tap international markets
regardless of company size. They tend to grow faster than their peers, boosting economic
activity and prosperity.
But where the internet is lowering barriers to trade, government policies are lifting themback up. While many regulations and taxes serve socially important purposes, they canalso place limits on the extent to which the internet can accelerate commerce across theglobe. Their impact falls disproportionately on small businesses, who lack the sophisticatedlegal departments and other resources of their larger counterparts. Regulation should offer
businesses a clear framework for innovation. It should encourage and foster new ideas andbusiness models, but it should never be so cumbersome as to stop them from emerging in thefirst place.

METHODOLOGY

Stripe partnered with VIGA research to survey founders and executives of online companies
about their organizations’ approach to international expansion.
More than 9,000 founders and executives of online businesses in 15 international markets and across more than 10 industries participated in the study. Online businesses weredefined as companies that accept online payments, and with online commerce as theirprimary source of revenue.

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APPENDIX 1

The globalization tango
When it comes to where online businesses choose to go outside of their domestic market, noclear patterns emerge and no single destination rules all others. Many companies naturally
look to their own region first. For example, the British may have voted for Brexit, but 60% of
the country’s online businesses choose to export first to the EU—a far greater rate than in any
other European country. On the other hand, in Asia, diversification is the name of the game andcompanies don’t show a clear preference for any region. Whether it is because of its growing
affluence or lack of competition from locally-grown companies, South America ranks high on
the list of destinations for businesses all over the world.

MAP
PREFERRED REGIONSFOR INTERNATIONALEXPANSION

American and European online businesses
Showing weighted arrows from businesses’ home countries to their first area of expansion

EUROPE
United Kingdom
FranceGermany
Netherlands
China
Spain

NORTH AMERICA

Italy

USAMexico

SOUTH AMERICA

Asian, Australian, and African online businesses
Showing weighted arrows from businesses’ home countries to their first area of expansion

EUROPE
EAST ASIA

UK

China
Hong Kong

MIDDLE EASTJapanNORTH AMERICA

India

SOUTHEAST ASIA
SOUTH AMERICA

Singapore

South Africa

Global Natives

Australia

8

APPENDIX 2

Time and effort required to start a business
While governments all over the world say enabling new business formation is a key priority,fewer than half (44%) of respondents say it is easy to set up a business in their home country.
The variations by country are stark. While 77% of Japanese entrepreneurs find it easy to start abusiness at home, just 19% of those in Italy do.
Interestingly, online businesses in Japan, the U.S., and Germany tend to be more optimistic
about conditions for company formation in their own countries than World Bank statistics
would suggest,7 whereas those in Italy, France, and Singapore are, in general, more pessimistic.8TABLE
EASE OF STARTING A
BUSINESS

Global Natives“It’s easy to start a business in mycountry” (Stripe research)

Time required to start a business(World Bank)

Japan

77%

Hong Kong

1.5 DAYS

Hong Kong

57%

Australia

2.5 DAYS

Australia

54%

Singapore

2.5 DAYS

USA

53%

France3.5 DAYS

Germany

51%

Netherlands

3.5 DAYS

Netherlands

48%

UK

4.5 DAYS

India

47%

USA

5.6 DAYS

UK

47%

Italy

6.5 DAYS

France43%

Mexico

8.4 DAYS

China

40%

Germany

10.5 DAYS

Singapore

40%

Japan

12.2 DAYS

Mexico32%

Spain

13 DAYSSouth Africa

30%

China

22.9 DAYS

Spain

29%

India

29.8 DAYS

Italy

19%

South Africa45 DAYS

7

https://data.worldbank.org/indicator/IC.REG.DURS

8This discrepancy has been described by other researchers before: https://www.aeaweb.org/articles?id=10.1257/
jep.29.3.1219