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Business Management

Clone Wars: Innovation Killer Or Startup & Consumer Saviour?

In the late nineties, three German brothers; Mac, Oliver, and Alexander Samwer went to Silicon Valley to see what all the fuss was about. They saw eBay and thought that would work great in Germany. The eCommerce site ignored the brothers’ idea, and so they took it upon themselves to create their own version. Less than a year later they sold Alando for $50 million.

It’s a story that’s been told many times, as has the rest of the story; the brothers founded Rocket Internet, the startup incubator that many call a “Clone Factory”; taking a startup’s idea, and replicating it in markets around the world. The list of sites copied includes Amazon, Airbnb, eHarmony, Pinterest and Groupon, just to name a few. And the hand of the Samwers is everywhere.

From Nigeria, Russia, and Australia to Latin America and Asia, there’s few places where Rocket haven’t entered the fray.  They’ve raised and made hundreds of millions from their ventures, both from selling the businesses they create (often back to the original creators of the idea) and from the profits of the businesses themselves. They have a high success rate, and further expansion and a possible IPO are on the cards.  The brothers’ clone tactics have earned them both plaudits and critics, but you can’t fault their success. So is this production line of startup clones a good thing for business?

The Scourge Of Innovation…

Not wanting to get into attacks on the brothers themselves, there are still many things not to like about their methods. The term innovation killer is thrown around a lot when talking about the company. Cloning kills off any chance of the originators expanding, it’s lazy entrepreneurship, and not very sporting. Even members of Rocket’s own team have left due to the lack of innovation at the company. And the ‘build it, sell it’ model irks some for not being the right way to do business.

Away from the personal beliefs over copycats, there’s always the worry that their success will only encourage other clones, which is ok in small numbers. But if the entrepreneurial landscape in any particular region is still very young and developing, it can be a problem.  Startups still need innovators to lead the way.

There’s also questionable practices; some of Rocket’s businesses have been actively stealing the opposition’s customers, while in Nigeria one site was found to have taken the clone idea too far, and actually stealing code from another site.

Or The Model Entrepreneurs?

There are, however, two sides to every coin. And while many might feel unsure around the ethics of cloning, many find the results admirable.  

Startups should be flattered that people see enough value in their idea to roll it out to the word. And while flattery might not be good for a company’s bottom line, competition brings out the best in business, forcing them to be better. No one likes a monopoly do they?

It creates more entrepreneurs. Rocket offer equity in any company they start, but offers a low-risk for wannabe CEOs. And with so many businesses opening in all corners of the world, offers jobs to tech workers who may otherwise struggle to find a job. Plus if there’s little competition, for example, around eCommerce in Africa, it might spur locals to start their own.  

It’s also good for the consumers. Whether it’s bringing services to Europe, or emerging markets, if there’s a gap in the market, it’s only logical to fill it. While often the smaller startups haven’t got the resources to go global, what excuse have companies such as eBay and Amazon got for not bothering? Giving the masses services they want is only a good thing. And if there’s a proven market, there’s nothing to say you can arrive second and do things better – especially if Rocket have come in and solved any supply/logistics/infrastructure issues.

But possibly the best part about the way the Samwers work is the speed of their execution. An executive in the company told Forbes the company can launch a site in just 25 days. “If we identify [an opportunity], we do it immediately,” said Rocket’s MD, Alexander Kudlich. “We would never say ‘in Q4 we will do this.’ If we see something we do it now. We would start coding the same afternoon.” While you could argue much of the hard work has been done by the originator, you have to admire the speed, decisiveness and organization of their work. 

There’s plenty of ammo for both sides of the argument, and in the end it comes down to your own sense of ethics and business ruthlessness. One thing is for sure, the Samwers are unlikely to change any of their habits in the near future.  And for me? The worst thing about those three Germans is that they were behind the Crazy Frog.

What do you think? Are startup clones a good thing? Comment below.

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Dan Swinhoe

Dan is a journalist at CSO Online. Previously he was Senior Staff Writer at IDG Connect.

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