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How To Take On The Samwers!

There is a way for online businesses to expand internationally without spending top dollar on a clone that got there first. It’s a challenge MBAs are perfect for!


Wed Jul 18 2012

Contributor Christian Boas continues his series about opportunities for tech entrepreneurs in Europe! You can read the first part here. Christian, 29, is an associate partner at VC firm Quorumm, which invests in early stage digital marketing agencies. He has been involved in both for-profit and non-profit start-ups, and in raising finance for infrastructure projects in Eastern Europe. Raised between Germany and the UK, Christian studied Philosophy and Political Economy at the University of Exeter and is based in Berlin.

Many hot US internet brands struggle in international markets against tech firms that specialise in quickly copying their successful business models, but there’s an alternative route to market that’s also a great opportunity for MBAs.

The most famous names in internet cloning are the Samwer brothers, who run Berlin-based Rocket Internet. Their European clones of e-commerce sites eBay and Groupon were so successful that the US firms eventually bought the Rocket Internet copycats, respectively Alando and CityDeal, rather than expand abroad independently.

Rocket Internet has been criticised for being unoriginal and forcing original, innovative companies to buy a clone of their “baby” at high prices. Nevertheless, building e-commerce businesses, even copycat ones, takes drive, professionalism and a talent for execution.

I want to focus on the example of US site, which I believe has acted to prevent being copied, with the help of a local European business partner.

AirBnB is an online service that matches people seeking vacation rentals and other short-term accommodations with those with rooms to rent, generally in private houses and apartments.

Launched in October 2007, it monetized a service that was not easily to make money from before - spare rooms in private homes - something the Samwer brothers find very appealing.

Take one of their successful exits, when they sold discount coupon site CityDeal to Groupon.An ideal cloning opportunity for Rocket Internet is when there is a fast-growing player who is focusing primarily on the American market, but will expand abroad in the foreseeable future. Ideally this market will have several competing players in the US that can be played against one another to push up the price of a European clone.

In Groupon’s case, the firm could not afford to let its US competitor LivingSocial get to Europe first, and paid a high price to avoid this. Groupon bought CityDeal, which had only been going for six months, for an estimated $100 million.

So, how has AirBnB managed to avoid the same fate? It already had a Rocket Internet-run clone, Wimdu, but has managed to build its business internationally without having to buy it off the Samwers.

Airbnb and Wimdu received rounds of finance at roughly the same time. The difference was that Wimdu received a large round for internationalisation, whereas the round for Airbnb was for the US. Soon after that, Airbnb announced an even larger internationalisation round of finance.

What this meant for the Samwer’s Wimdu was that they had been officially told that the founding company in the US would not buy their copycat. In fact Wimdu would have to take on Airbnb with less money and little US market share, and try to roll-out internationally at the same time. The odds were suddenly against them.

The next step was for Airbnb to team up with a Berlin-based incubator with several international offices called Springstar. The reported deal was that the growth in value of AirBnB subsequent to the deal with Springstar would be shared between them.

Springstar was tasked with adapting the sites, launching them internationally and managing the companies in their local markets.

MBA grads, with their analytical and execution skills and global market knowledge – often 80 to 90 per cent of MBAs at business schools in Europe are international – are perfectly positioned to set up their own incubators.

Instead of going to work in a cloning firm, offer your services as a partner to the firm that developed the successful product and business model in the first place.

It isn’t just US web businesses that are cloned in Europe. The most famous British site to be copied in Germany that I recall was Glasses Direct, which in Germany is known as Mr Spex.

I also want to add a plug for basing your incubator in low-cost Berlin. Rents and staff here are much cheaper than, for example, in London. A Berlin-based incubator run by MBAs with the knowledge and contacts to grow businesses internationally would be an unbeatable combination!

So if there’s a web business in the US that you love, don’t copy it. Try to win them as a partner!