Expansion or Exile? The Role of Geopolitics in Start-up Globalisation
If we talk about start-ups, the path to globalisation seems pretty simple: build an innovative product, find the right market, start raising funds, and you’re ready to take on the world. All you need is a great idea, ambition, and grit. However, that is no longer the case in 2025. It’s not because of the ultra-competitive environment, but something far more intricate and volatile: geopolitics. We’re talking about sanctions, tariffs, data protection laws, and even bans; which are more of a problem for early stage start-up founders than they are for tech giants. If not navigated properly, they can lead not just to loss of customers, but entire markets.
The present article sheds light on an important, looming question which every start-up founder should consider:
Will your start-up be able to enter new markets smoothly? Or will you be exiled by geopolitics even before you set foot properly?
How Politics become a Threat to your Product
The by-default course of action for start-ups has been ‘build now, comply later.’ While it is natural to be more focused on product development and funding, it is equally, if not more important to keep in mind regulatory approvals and compliances. This aspect is particularly relevant in today’s volatile political landscape, where law and policy are influencing markets in real time. This brings us to two recent and relevant examples:
1. The United States, earlier this year, introduced measures to tighten export controls on advanced semiconductor chips and technologies targeted at the Chinese market. This is being done with the intention of preventing China from developing advanced AI and military capabilities. These rules and controls encompass the blacklisting of Chinese and Singaporean companies, stringent licensing requirements, and enhanced due diligence requirements. Tech giants like Nvidia have already been impacted by these measures, which will most definitely have dire consequences for small, early-stage start-ups. Ramifications could range anywhere from restrictions on exports to violation of export policies.
2. Similarly, fintech start-ups in Asia are expected to be hit particularly hard by the United States’ sanctions on crypto currencies, which stem from an alleged fraud network linked to North Korea, Russia, and China. This means more work for start-ups, who must be increasingly aware of compliances, and strategise accordingly. One small, seemingly innocent mistake might blow up their chances of success.
In short, politics can destroy your prospects and product even before competitors can think of taking the lead in the market.
Sanctions: The Silent Start–up Killers
In continuation of the last segment, let us now look at sanctions: one word which the world has been hearing all too often ever since the Russo-Ukrainian conflict which started back in 2022. The United States and European Union have both, imposed several sanctions on countries/ organisations like Russia, Cuba, Iran, North Korea, and the Taliban. These numbers have only skyrocketed with the rise in global conflicts since 2022. However, these sanctions are more than just mere numbers. They can suddenly disrupt your entire game plan if you’re providing your products and/ or services to a certain set of customers. Let’s look at an example:
Imagine you are a start-up whose operations are premised on AI, and one of your clients is based in a country which has recently been sanctioned, or even worse, is connected to a sanctioned entity. Regulatory entities may penalise you for association, which can have severe repercussions on your start-ups. While sanctions obviously disrupt supply chains, start-ups have a lot more to lose due to implications like loss of reputation, financial devastation, loss of revenue, increased operational costs, etc.
Simply put, compliance isn’t optional. Due diligence becomes all the more important in this day and age where policy decisions are made purely on impulse, and sanctions can be imposed on anyone at any given point of time.
Tariffs, Bans, and Investor Concerns: The Overlooked Obstacles
Unfortunately, sanctions are far from the only thing start-ups have to worry about. While they may be the norm, tariff wars and technology bans are being used as geopolitical tools in the modern age. Talking about tariffs, which have evidently become the centre of Donald Trump’s second term as president; they can severely impede the growth and operations of start-ups, particularly those dealing in hardware, manufacturing, and construction. Obvious ramifications include increased operational costs, reduced profit margins, uncertain market landscapes, and wavering investor confidence. Tariffs also increase the costs of exports, thereby making it more difficult and less profitable for start-ups to solidify their base in certain international markets.
Apart from the USA-China trade standoff, it also becomes important to give consideration to EU’s new Carbon Border Adjustment Mechanism (CBAM), which aims to impose certain prices on the carbon emissions arising from certain imported goods to ensure better industrial practices and prevent “carbon leakage.” While the practice is good in itself, founders with ventures leaning into these areas should devise robust strategies to mitigate risks and possible liabilities. Moving on, technology bans have also become a phenomenon known all too well. One policy decision can singlehandedly close the doors to entire markets and consumer bases. Take India’s ban of Tiktok, Shein, and several Chinese apps in 2020 due to border tensions. Tiktok continues to remain under scrutiny in the US and EU over cyber security and data concerns. While these bans may be headlines for the general public, they can shake the foundations of start-ups whose products went for a toss not due to technical flaws, but political tensions.
Our readers might be surprised to discover that funding, one of the core aspects determining the success of a start-up, has also become a sensitive issue in light of the geopolitical tensions brewing across the world in recent years. Founders should now also take into consideration investor concerns. Since geopolitical risks are directly linked to supply chains, flow of capital, and market trends, investment decisions too, end up getting impacted. Questions relating to linkages with sanctioned bodies, data storage & processing practices, and supply chains have become common in interviews.
How can Founders Navigate the Maze
Now that we have looked at the possible deterrents, it becomes important to discuss means and measures which may be implemented to navigate them in a way which is compliant, implementable, and effective. As a founder, you can implement the following measures to avoid getting blindsided by geopolitical developments:
– Involve a legal and/ or compliance officer from day 1 to ensure streamlined operations and proper advice. These individuals can guide you while choosing new markets, business partners, and everything in between.
– Stay updated with the laws and compliances of target jurisdictions; and prepare back-up plans and strategies to avoid losing your product and market to sanctions, bans, and tariffs.
– Do not treat compliance as a mere formality which can be taken care of at a later stage. Use it to your advantage and turn it into a competitive edge. This will in turn inspire investor confidence, attract consumers, and help you stand out from the crowd.
Conclusion
With all said and done, it is safe to conclude by saying that geopolitics have become the not so invisible force changing the fundamentals of start-up globalisation. It is no longer feasible to simply rely on innovation and funding. To go global, one must be prepared to work with law, policy, and compliances. While some founders will adapt by devising legally sound strategies, others will ignore the warning signs, rush to scale, and eventually perish.
So, the choice is simple: expand strategically, or get exiled overnight.
– Authored by: Priyamvada Lonial, Advocate, SUO Law Offices
