Reckless Cloners or Innovation Adopters?

By Andrej Rusakov

The criticism of technology start-up “cloners”, who take innovative but proven business ideas from the U.S. and copy them in Europe, Latin America, and China is raging. Silicon Valley entrepreneurs claim that “me too” companies discourage innovation as they limit initial innovator’s upside and thus prevent true entrepreneurs from launching new ventures. Venture Capitalists, however, do not seem to mind, and continue to pour increasingly large funds into copy-cats (e.g. Samwer brothers recently raising $700 million), viewing them as lower risk compared to “new-idea” start-ups as the product/market fit has already been validated in “me too” companies. Who is right here? Do “me too” businesses add value to the society? Can their founders be called entrepreneurs or are they simply executors?

Innovation Adopters?

From a societal point of view, copy-cats do add value. They foster competition and bring innovative products to new markets fast. Why should a billion people in India wait years for paypal.com to eventually enter the market if they can get the same service from someone else today? Moreover, many (but not all) “me too” companies improve the original business concept and adopt it to the localities of the market – something many incumbents lack the abilities, knowledge or resources to do.

Some choose to clone products and concepts in their entireties, however, and not bother with any localization or concept improvement. Such companies may hardly be called innovation adopters. However, they do promote competition. Examples are ample:


Pinterest.com (original) Pinspire.com (copy)


Fab.com (original) Bamarang.co.uk (copy)



Entrepreneurs or Executors?

Because copy-cats often do not need to spend much time or money discovering the product/market fit, and the go-to-market approach is already tested by the incumbent, “me too” businesses tend to be “start-ups on steroids” growing fast and offering very lucrative risk adjusted returns to their founders. Indeed, the rumor has it that 90% of the Samwer brothers cloning machine’s start-ups become profitable after 1 year from launch!

But can we call these guys entrepreneurs? Is an MBA launching a “me too” venture anything more than an executor of somebody else’s ideas? I would argue that despite him using other people’s idea, he is still building something from scratch, and thus he is an entrepreneur. Getting the right people together, incentivizing them, securing funding, adopting the product to the local market – what is it if not entrepreneurship? We still call a restaurant owner in London who “borrowed” an interesting concept from New York an entrepreneur. Why tech industry should be any different? Ideas are worth a nickel a bucket; execution is what makes all the difference. In this sense, even Samwer brothers are entrepreneurs – many of the companies they have replicated are more successful than the original once.

Conclusion.

It is a very personal choice between taking on more risk, but having a moral satisfaction of having invented something entirely new, and taking a potentially less risky path of replicating an existing business in a new geography. If you lean towards “true innovation”, strong network effects and high barriers to entry may deter bold replicators to copy your “brain child”. However, there is no guaranty – facebook has been successfully copied in (and adopted to) local markets such as Russia, where it is still having hard time fighting with copy-cats. Something worth keeping in mind when choosing a business to start.

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