The startup playbook for expanding internationally — Advice from Faire CEO Max Rhodes

 Well, thanks so much for joining us Max I'm super fired up for this conversation.

 Um, so maybe a place to start would be to talk a little bit about, um, Fair's journey thus far, and talk about the fork in the road when you decided you were gonna, um, uh, develop an international strategy and maybe talk a little bit about the chess game that's happened thus far. And we'll use that as a little bit of an explainer, and then, uh, we'll dive deeper on a bunch of the tactics.

 Yeah. we started with a pretty narrow focus at fair, which I think is always a good idea.

I think it's easy to go too broad in the early days and spread yourself too thin when resources are incredibly limited. And I think one of the things I always tell my PMs and then other founders is start as small as you can and grow from there. Like really nail one core segment perfectly. And so we started with literally the retailer list that I had from my days running this, uh, umbrella business.

So quick background, the way we ended up starting fare, which is a wholesale marketplace, was it was out of an experience that I had where I was a PM at square. And I was running this small business on the side where I was selling these umbrellas from New Zealand to retailers and consumers, uh, in the United States.

So it was basically like the distributor for this umbrella company. I was doing it with a couple of friends, kind of, for fun. And so we were going to trade shows and that was how, you know, we, we realized there's a big gap in this market. And so we started literally with just 150 retailers that bought blunt umbrellas.

And that was our, that was our initial lead list. And most of our early customers were just blunt customers that I, I emailed and really used as, our test bed to prove things out. And what that meant was our, our initial customers were gift stores in the United States.

And some other, you know, clothing stores occasionally would slip in there. But for the most part, it was, it was high-end gift stores in the United States. 

as things started to really take off over the course of the next, you know, year is we started to find product market fit. We knew that that was a pretty small market that it's bigger than most people realize, but there. Aren't that many high end brick and mortar single location gift stores out there.

We knew that we needed to find ways to, to expand the market. Fortunately, our primary growth strategy, we sort of stumbled upon, it was this viral loop that we built, where retailers referred brands to us and said, I want to carry this brand on fair that they'd previously had a relationship with.

And brands would refer retailers to us and say, you know, I want to move our relationship on to fair. And we had incentives and, you know, ways to accelerate that we built a bunch of tools around it, but the vast majority of our growth on both the retailer and the brand side has been and continues to be that viral loop.

And what that has done is it's naturally led us into new categories and geographies, and it's, it's kind of guided us to our next stops along the marketplace expansion journey. I think every, every marketplace. unless you are born into like a magic market, the way that maybe Uber, um, was you're going to have to find ways to expand your marketplace and meet the needs of new customers.

Um, and that's, that's the way you grow. Like if you're going to start really small, you gotta be good at the strategy of figuring out where to go next. And for us, it, it turned out to be pretty easy because this viral loop just naturally led us in the directions that were the most adjacent.

So one really good example of that is, you know, by, by focusing on gift stores, we naturally ended up. carrying a bunch of beauty supplies because gift stores sell beauty supplies. We ended up carrying a bunch of candles, uh, jewelry, uh, stationary.

And one of the largest categories for us now is apparel because those jewelry brands and candle brands that we carried, it turns out a lot of, uh, boutique apparel stores have what they refer to a sideline merchandise, where they have like little gift sections. People come in, they're buying clothes. And then, you know, they, they see some jewelry or they want to accessorize the, they want to buy a gift for a friend.

Um, and that naturally led us to a place where 30% of our retailers were apparel stores. We had a very small amount of share of wallet, but we were being carried by, you know, a ton of these apparel stores. And so we said, we looked at that and said, oh shoot, we, we need to be carrying more apparel. And we had a bunch of these apparel stores that were starting to refer apparel to us, but, uh, didn't really think of us as a place to shop apparel.

And so we made a really concentrated effort at, you know, messaging, building the product to better support apparel. And now apparel is like 25, 30% of our volume. The same thing happened internationally, we quickly realized that a lot of our north American brands had relationships with European retailers and a lot of our north American retailers carried international brands.

And so we were seeing in our referral loops these invitations for UK based retailers, UK. Brands, we weren't set up to be able to support them yet. And so we knew that there was this, this cross border network effect that we had the potential to take advantage of. it was always a question for us, if not when, and one of the hardest things I think, especially in the early days is the sequencing of your expansion opportunities.

And it's something I've always really struggled with. I'm like a very curious person. I get bored easily and I always want to do more, more, more, more, more like there's a running joke that I just, just found out about it, uh, at our company. Um, that the saying is why not both, which apparently I, I say that a lot.

I didn't even realize that. I say that a lot. It's like a running joke, particularly among the product team that, you know, when somebody is saying, should we do this or that? My answer is why not both. There's a very good reason why not both. Um, and I understand it intellectually, even if emotionally, I, I struggle with it.

And so it was difficult to say, you know, things are going really well in the gift market. We're still growing really quickly there. And we'd moved from high-end gift into more mass market gift. And so that, that proved to be a much larger market than we realized. And there was so much opportunity there to build foundational, um, product and to keep growing Apparel was a huge opportunity.

We knew that, and we really struggled with when to go international. Um, because we'd heard horror stories from other companies that try to go international too early. It's really hard to go international. Even if you have a good cross border network effect, it is, uh, a huge resource, um, drain and a distraction.

And no matter how similar you think it's going to be, it's going to end up being really, really different. Um, and it will end up splitting your organization and create a ton of complexity. And we we'd heard this over and over again from other founders that had tried it. And, you know, we'd heard the Airbnb story of, you know, they basically had to make it their top priority for two years to, to end up winning despite the strength of their cross-border network effect.

And so we were, we were always struggling with just the, the when question, um, and. Alfred Lin one of the partners from Sequoia who was an early investor, had a really good analogy that really stuck with me, um, which is don't expand until you feel like you're pedaling at half speed until you feel like you, as the CEO are comfortable with all the progress that is being made in your core market.

If you feel like you're still in the mode where you're just like desperately trying to make things work. And the whole company is kind of being pushed forward through the sheer force of your effort, whether that's because there's so many problems To solve competition is really fierce. You haven't got the right leadership in place, whatever the reason is, um, don't overextend yourself until you feel really at peace with the, the position that you're in your core market. And we made a pretty explicit choice, um, to wait to go international, um, and to really focus on nailing things in our core market. And It was in late 2019. So three years in that we decided we were ready to, to go international.

Uh, and we were ready to go to go after apparel. So we made the decision to do both simultaneously.

 To that point. It is that mental model that Alfred gave you, is that when you decided it was worth making the bet that you felt like you had the core, uh, humming team was in place, but it was just more of a judgment call. There. Wasn't a certain, there wasn't sort of anything else other than it feels like we have the core under control and we need to make it this big bet.

 Yeah, it was a, it was a judgment call. there were a few boxes that I felt like we'd checked. One. We had the growth model figured out and I felt comfortable that growth was predictable and that we were just going to keep growing in the U.S. And that we built a big enough lead on domestic competition that we didn't need to figure out new things to accelerate our growth.

That the things that we had figured out we're more in optimization mode than, you know, really needing deep innovation. We had a leadership team in place for all the key functions. That felt stable. And I no longer felt like I was having to put out fires all day every day because this person was going to quit.

This problem popped up that we didn't know the answer to like my involvement in the day-to-day operations of all the functions no longer felt necessary. It felt like things were mostly working. And then the third thing is we had our unit economics figured out where I was no longer worried that we would run out of money if we kept growing, we had good payback periods. We had solid contribution margin and we were a very low margin business. We were negative contribution margin for the first two and a half years. And we'd finally cracked the code on getting to positive contribution. And so it, it felt like the systemic risks to the business, whether it was competition, um, you know, hurting our growth, whether it was capital risk, us running out of money.

 or if it was from, you know, people execution issues where the organization was just going to fall apart. All of those things felt like they were in a, a solid place.

 And therefore it, that analogy of like pedaling, I think is a really good one. Like when you're going up a hill on a bike, you're peddling as hard as you can. You're looking for that feeling where actually Now, I'm on, maybe I'm not going downhill, but I'm on, a flat road and there isn't as much resistance and I can peddle a bit and then I can kind of let my momentum carry me forward.

Um, that was sort of the, the emotional feeling that I think we had in that moment.

 Now, before we talk a little bit about, once you decided to start to develop an international strategy, what did you actually do? I'm curious, was there anything else in the canvasing of other CEOs that you learned in terms of do's or don'ts or things that maybe wouldn't have been intuitively obvious to you, um, that you learned in some of those conversations you had in the early days?

 Yeah, the number one thing that I heard from a few different CEOs, but the one that I remember most is Tony from DoorDash. He said, go international. You're going to regret it if you don't, because you're going to see somebody copying your idea and having all this success, and it's going to drive you nuts, but make it a top level company focus.

Don't do it just like dipping a toe in, go all the way. And that really resonated with me. And I didn't know, at the time how right he was about that. I now have come to fully appreciate it. But that, that was one piece of advice that really stood out.

 And is that because this is a classic case of something that intellectually seems somewhat simple, but when you peel back the onion, it's, it's sort of mind bendingly complicated. And so it needs to be resourced as such or some.

 Yes, that's exactly right. it's both the complexity that is impossible to comprehend. We have a pretty simple business like to, to expand internationally. We were able to launch in the UK, like two months after starting to work on it. We don't have a lot of the regulatory complexity, the logistics, complexity, you know, we don't have to have a warehouse with.

Our business is a lot simpler. We don't have to like build a local presence in the same way that, you know, a door dash or an Uber. Um, we don't have to worry about the regulatory complexity with payments that like square did. We have a pretty straight forward, um, international expansion playbook, and even so the number of nuanced differences of the way VAT works and the payments that retailers want to use.

And even the, the translation process is, is mind. Bendingly complicated. Like you can't just go get somebody to translate your website. You need somebody who actually understands the meaning of the words and the way you want to position yourself. even in the simplest case possible, there's still a ton of complexity to work through there.

And then on top of that, you've got local competition. And maybe you're lucky enough that you're able to expand internationally quickly enough that, that you don't have to worry about that. But there's a real trade off there where I think it's really, really unusual that that you're able to, because it goes against that, wait until you're peddling at half speed.

And so by the time you actually get to a place where you can organizationally handle all the complexity of expanding internationally, there's a really good chance that somebody else has figured out how successful you are, especially now, like maybe 10 years ago, this wasn't the case, but there's a lot of European venture capital.

There's good technology companies being built there. Somebody is going to take your idea and copy it and, and, and build a headstart. And So more likely than not, by the time you're expanding. You're probably playing from behind against at least a couple of local players. And that also means, You can't afford to make a small bet, like I'm a big believer in, um, threshold effects where You need to make a certain size of an investment from a focus perspective, from a capital perspective, um, from a, general resources perspective, you need to generally an investment needs to hit a certain size threshold in order to work.

Um, and I think the combination of the complexity of European expansion or international expansion along with the competitive dynamic that is likely going to be in place means that that threshold is going to be really high because it's going to be too small and you're not going to be able to get through the complexity.

It's not really going to work, or even if, even if you make a big enough bet to cut through that complexity, if you don't make a big enough. To beat the local competitors. You're probably going to lose because those local competitors, all day, every day, they're thinking about nothing else than beating you on their home turf.

And you're simultaneously trying to run your core market. And so if your, if your attention is divided and you don't make a big enough investment, you're probably gonna end up losing. And I think that that's happened multiple times.

I think it happened to Uber and China. I think it it probably happened to door dash in Europe and that's how they ended up making an acquisition there. Um, you know, I think there's a lot of examples of local companies winning. And I think if you look at the examples where an international company came and won, which is probably the more common, uh, Thing.

Like, I think that happens more often than not, but when that happens, I think either the cross-border network effects are so strong, like a Facebook where it, it just doesn't matter. Or they made a really, really big bet, like what Airbnb did. And I think Uber also, and I haven't studied it deeply, but I think Uber bet really hard on the international expansion, really early on, um, they were incredibly aggressive and I think that that has a lot to do with why, their international business is so big, both on the ride side and on, the Eats side.

 let's go back to the moment where you kind of looked down and you're like, okay, we're peddling at 50%. I feel like we can make this a top three company objective. I'm super interested to explore like then what happens next then? And I guess it's kind of, two-fold one is kind of team construct.

So do you take existing members and say work on this project? Do you go hire a new team and how that sort of fits together with figuring out where you're going to go in order of operations, in terms of specific markets next?

 So we decided you'll understand the joke about why not both. Um, we decided to do apparel and international simultaneously. I think if, if we had chosen to just do international, maybe we would have done it a little bit differently, but the way that we approached it, um, was I focused on apparel and I hired a woman, Andre, Washington, um, who, you know, I've known for a really long time and is extremely talented leader and general manager. I actually had her report directly to me, um, which was advice that I'd gotten from, um, Jason Kylar, who led the, the video expansion at Amazon and then subsequently, you know, led their entire marketplace business and, and then founded Hulu.

And now is the CEO of time Warner cable. His advice was like, you have to, if you want to get this right, you have to pull it directly to you and you have to make it a top focus and we full stacked it. And so Andre was leading Both go to market and product and reporting directly to me. And then my COO and co-founder Jeff who is extremely talented and, um, really versatile.

Uh, he made international his top focus and we kind of just carved it up and my background's product, but I'm going to own go to market and, um, and product for apparel. And we kind of had the sense that apparel was a little bit more of a product problem than international, which was more just like an ops problem of like, let's just get this off the ground.

And then Jeff led international. We started with a really small team, it was a product team that was just we, we called it our launch team. That basically was just doing all the things that needed to be done to launch. And then we had my chief of staff at the time focus on all the operational stuff.

Again, mostly working through Jeff. Um, I was spending a little bit of time on the product stuff, just, correcting a few things here or there in, in our approach and making sure that we were getting to value as quickly as possible. But, um, Jeff and then the small product team. And then my, my chief of staff figured out what are all the things that we need to get launched?

They built a Gantt chart that kind of worked backwards. We identified the long poles, uh, you know, made sure we had a really complete understanding of all the things that we needed to do from a regulatory perspective, from a product perspective, um, we started onboarding brands, so we started to build out a sales team, uh, and.

I think the way that we approached that was we just actually did it from the U S like, we just started having our US-based team. And I mean, it was crazy what, what they did. They, they were waking up at like 4:00 AM, 5:00 AM. Um, we had one woman who had, who had led some international efforts at Uber who was in charge of like building and leading that team.

And we started building up the base of brands that wanted access to the U S market. We started building towards that and the, the whole idea was like, just get live as quickly as possible. Like just as fast as we possibly can. Let's just get this thing out. Let's not worry about a big launch moment. Let's not worry about it being perfect.

Let's just get speed to market. Was the number one thing that we were, we were worried about because we, we knew that we needed to start building liquidity. Um, we needed to start getting retailers and brands on, on both sides. We started in the UK. Uh, because that was the easiest market to get live. And that was our foothold.

Um, and we actually ended up beating our biggest European competitor to market in the UK, which despite them having, over a year head start on us in terms of when they actually started working, um, we beat them to market in the UK and that that's ended up being a huge advantage for us is incredibly important.

 then we immediately, once we saw the success in the UK, we immediately moved on to, okay, now how do we localize? How do we get all these, these countries launched? Um, but again, it was really a, team of people that we already had at the company.

 Um, and it was a strong team. We, we, we try to make sure that we had some of our, our, our best people on it. Um, with the laser focus of Jeff driving things forward. Our CFO, Lauren, um, was also really involved, and the two of them kind of quarterbacked it. 

 And, and in that case for Jeff, was it his 100% focus for a long period of time? Or how was his time divided? If it wasn't that.

 So he was still leading all the go-to-market efforts, um, in north America. I he's got a massive amount of scope. Um, but I'd have to ask him, but my guess is he was probably spending 50% of his time on it, but it was like a hundred percent of his problem solving kind of mental capacity.

 And you started to talk a little bit about this, but how did you figure out the second and third and fourth markets, um, and beyond, did you have sort of a scorecard or a methodology or you looked where there was already the cross border market pull? How did y'all think about that?

we did build a scorecard or head of strategy. Um, Dan Hockenmaier created a scorecard that we used to assess. I think the key inputs were number of retailers that we already had on our waiting list. Number of brands that we had received, you know, retailer demand for through our referral engine and that made the UK really obvious.

 And then it was just GDP was the, the other, um, factor. when we've looked at other continents expanding to like Japan or Korea, um, or Latin America, you know, we've also looked at the regulatory complexity, the cultural complexity, and made it, uh, you know, prioritization of those markets based on things that are slightly more complex.

But Europe was just so obviously the next market for us to go after both because of the local competitive dynamics and because of the overlap between north America and Europe from a, a retailer and brand relationship perspective. Um, and because of the size,

And then within Europe, um, it was. The size and then the amount of cross border demand, but size was a pretty good proxy. Honestly, it was like the UK was first cause it's, it's really big and there's so much overlap with the U S and was so easy to get launched because of the, the language. And then, you know, it's the usual suspects, it's France, Germany, um, Italy, Spain, uh, and then we, we thought about the countries alongside those.

So France, Belgium, Switzerland, Germany, Netherlands, Austria, um, you know, there's, there's tighter relationships between those countries. And so those became, you know, natural ad-ons. and then we thought about the Nordics, uh, as you know, more difficult because currencies different, um, languages, more different, but, they're big enough and wealthy enough that it made sense to do those next.

And so I think that's like roughly the order that we went and we're about to launch Portugal. Um, we're looking at a few other countries considering, you know, Eastern Europe as well, but we're, we're mostly live in, you know, the Western European countries. 

But there was a little bit of just like, we put our heads down and just did it as fast as we freaking could across the board. I mean, we launched the UK, I think in February. And then we had France and Germany live in April or may, and then we had the rest of those countries live in. June or July. So it was just like, we, we got things launched really, really quickly. 

And there was another thing that I think we did was just really try to create a sense of urgency among the team, like a real execution orientation, and finding mechanisms for doing that, celebrating them at, at all hands like creating a weekly, uh, slack update, um, joining their, their stand-ups and, you know, really trying to inject a sense of enthusiasm, making it clear that like, this is the most important thing for the company like you are are the tip of the spear. and really, really helping them understand that speed is, is so important. And. the speed at which we were operating in north America, um, at that point was not appropriate for the speed that we needed to be operating at in, in Europe.

 Why did you decide that it was so important to quickly expand country by country versus, you know, launching in a country waiting six months, figuring out the kinks and then kind of slowly moving into other countries. why was speed so important in the equation?

 a couple of reasons. One is just marketplace network effects, um, the nature of our business growth compounds. And if you fall too far behind, it can become really difficult to catch. And knowing that there were local competitors popping up all over the place. we have like eight copycats in Europe, um, and there there's more launching, you know, feels like every month.

Uh, so we, we knew it was really important to, to make sure that we didn't fall too far behind any local players. And then the other reason is because there's a cross-border network effect between the us and Europe. There's an even stronger cross-border network effect between European countries, especially within the EU.

And so the product actually gets better in France if you've launched in Germany and therefore it not only made sense from the perspective of. Germany is a big opportunity. Therefore we need to go after it, but Germany makes the French experience better and vice versa. even if you were just thinking about what's the next best thing for France, um, launching Germany would probably be pretty near the top of the list. 

 Did you find interesting, uh, peculiarities on either side of the marketplace in terms of the way in which, um, let's say a gift store operates or a wholesale partner operates relative to the way that they behave, the things they care about in the U S 

 Tons like a staggering number. Um, and we keep identifying more and more things, uh, today. so I've spent some time over there and the first time that I went over there was like last summer. And I spent a bunch of time talking to customers as I was over there to try to like figure that out.

Um, in like to what degree are we going to need to really change the way that we build our product? And there were two things that struck me. One is just how many nuances. The payment types that retailers want to use, the words that they use, even in, even in the UK, the words that they use to describe things like can lead to, us at, at best appearing foreign and at worst, like things not even making any sense.

Um, the regulatory complexity with that with, the complexity of shipping, especially with Brexit, um, everything is just more complex everything is just harder and more complicated, which is an advantage for us as a really product driven organization.

Like I think one of our core strengths as an organization is building product that simplifies stop that's complex. I think that's one of the reasons why we were successful in wholesale in the first place. Like wholesale is a lot more complicated than consumer in the US. And I think we built a consumer grade experience for wholesale that never existed before and wholesale in Europe is even more complex than wholesale in the United States.

And so I think there's real opportunity for us to, to build that consumer grade simplicity in, in the experience is something we hear a lot from our, our brands and retailers is like a major differentiator, the usability of the experience. 

The second thing that struck me, which is a bit paradoxical is just how similar things are at a fundamental level. Like, I, I always say that the things that retailers and brands both want at the end of the day is they want to grow their businesses. They want to save money and they want to save time 

If you really boil it down, everything that we do should be trying to help our retailers and brands on one of those fundamental dimensions like net 60 payment terms, the reason why it matters to give net 60 payment terms, it allows retailers to buy more products because they don't tie up their working capital, um, in inventory, which then allows them to have more selection, which then allows them to sell more.

The reason why it matters that, you know, we offer free shipping and free duties on international products is, you know, it saves, it saves margin. It helps our retailers improve their margin. The reason why we want to simplify things down and make things really easy. And, you know, offer Shopify integrations it's time.

Like you're, you're, you're at the end of the day, you're saving retailers and brands time, and it's time spent doing horrible things that they don't like doing complex cognitive load things. And so, uh, it became very clear through those conversations that those same basic needs were there. 

And therefore our product worked, even though it wasn't localized very well, even though we rushed it out and there were all these problems, the basic product worked and, we grew incredibly fast. it took us in Europe six months to reach the same level of, of marketplace volume that it took two years to reach in, in the U S and that was, you know, even, even accounting for the fact that we were only live in, you know, half the countries for half that time, um, the rate of growth in Europe has just been spectacular and it's because the basic product, you know, it works, there's a ton of issues.

They need to be fixed and we're working really hard on fixing them. Um, like there's a lot of paper cuts in the experience, but the basic product worked and therefore, you know, we were able to just explode out of the gates. Um, and that was really exciting. 

 You mentioned this a little while ago, but can you talk a bit more about the rituals or operating cadence in those first three, six months that you set up any little things that you did, whether it be the way that you handled the internal comms or growing that team or prioritizing or, or anything come to mind in terms of the way that you operated in those first few months, that might be useful to share.

 There's a few key components of our company operating system that we were careful to ensure supported a major focus on Europe and apparel

 one is our bi-weekly meeting, which we call tempo. Um, it's, it's like a weekly business review where we look at the highlights, the low lights, and then the, the key performance indicators for the most important areas of the business. And the tempo is structured around our company strategy, which in turn determines our company org structure.

And we have anywhere from three to five strategic pillars at any given time. So, you know, last year it was core brand core retailer, apparel, and international. And we organize the company around those core strategic pillars. And so we have a product lead, a design lead, an eng lead for brand retailer international, and apparel

we have a go to market lead for each of those things. And then, you know, in the, in the case of apparel and international, we also have an executive leader who is really leaning in and, and driving that forward. We design all of our, OKRs, around those strategic pillars. We write strategy documents for those strategic pillars.

We build our operating model for the business around those strategic pillars. And then we run tempo, uh, around those strategic pillars. And so we're looking at performance versus goal. getting updates on things that we're learning that are changing our strategy and we're really highlighting and surfacing issues, making sure that we're unblocking the, the work that's happening across those strategic pillars.

 The second key component of our operating rhythm is our all hands and our all hands is weekly. We use that as a way to really remind people what are the most important things at the company from a strategic perspective. And then what are the most important things to the company from a values perspective as well.

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Max Rhodes, co-founder & CEO of Faire, shares tactical advice for expanding internationally, from getting the timing right and facing down competition, to hiring the team, tweaking the operational cadence, and crafting the strategy to pull it off.

The startup playbook for expanding internationally

Faire's Max Rhodes shares tactical advice for expanding internationally, from timing and competition, to hiring, operations and strategy.