October is international trade month for the Michigan Economic Development Corporation (MEDC), so we wanted to speak with a Michigan startup making inroads in a foreign market. This week we had a conversation with Geoff Horst, CEO of Northville-based Algal Scientific and James Zhang, a board member and partner at Algal who leads Chinese operations for the venture fund Formation8.
Q: Geoff, could you begin by giving us a little background on Algal?
GH: Absolutely. Algal was founded in 2009 to commercialize a technology that treats wastewater with algae. About three years ago, however, we discovered that the algae we were producing was perhaps more valuable than the wastewater technology we were selling, so we pivoted. We now focus on using the algae to make beta gulcan, a compound that can act as a vitamin, for example, in an animal’s diet to strengthen its immune system and help fight off infections naturally without antibiotics.
GH: Our client base is actually quite varied for us being a small company in Michigan. A lot of our partners are actually located outside the U.S. We have partners in Europe, South America and Asia, including a large partner in China. We’re literally shipping all over the world.
Q: And have you used state resources to help Algal export to those markets?
GH: We were going to export to these markets anyway because of the demand, but MEDC’s International Trade Office helped pave the way and has been hugely important to us – even now. The office helped cover the cost of exploratory visits we made to China to meet with potential partners and gauge the market interest.
Q: What happened once you made the decision to enter the Chinese market?
Through the Michigan China Center, MEDC connected us to experts in China who know the market, who could attend meetings with us and act as translators. Having that extra support from the state not only made our meetings more productive, but it also demonstrated legitimacy to our potential partners, and showed that we have enough support locally and from our home region.
Q: Have you learned any lessons that you’d like to share with other small businesses in Michigan thinking of exporting internationally?
GH: Find a partner through either the state or through private investments who can offer more years of experience to help you navigate new markets – whether by helping with regulatory issues or even just setting up operations to sell your products more effectively. I would not recommend trying to export internationally for the first time on your own.
Q: James, do you have anything to add?
JZ: In the U.S. we’re accustomed to rapidly developing business relationships, but in a country like China, relationships are built on years and even decades of interactions. Especially when entering a new market, it’s essential to leverage long-lasting relationships where possible.
Q: From a Chinese perspective, what’s attractive about doing business with a Michigan company?
JZ: As a smaller market than California, let’s say, you have access to greater assistance from the state government. In California, for example, the state government can’t be bothered with every startup in Silicon Valley. In Michigan, however, the government pays attention to ensure startups have the proper resources at their disposal. I remember when former Gov. Granholm paid a lot attention to the company during one of our first investments in Michigan. This would be impossible in California – you can’t get Arnold Schwarzenegger to pay attention to a startup.
Paula Sorrell is the vice president of entrepreneurship, innovation, & venture capital at the MEDC.
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