A Better Mousetrap: Analysis of the Startup Genome Project

Apr 12, 2012
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Yesterday we highlighted that the Startup Genome project** recently released some preliminary research ranking Paris #11 on it’s top 25 startup ecosystem list, in front of Berlin and pretty much every other European city with the exception of London and Moscow. This is, of course, welcome news as these types of studies help spread the word amongst the global tech community that the startup ecosystem in France is truly evolving. However, there was also another really interesting part of the study, namely the section that offered some new insights on the top-three most active startup hubs, Silicon Valley, NYC, and London. One of the key insights for me was on the area of “Market Type”. More specifically that:

Silicon Valley entrepreneurs are 13 percent more likely to tackle new markets than London entrepreneurs whereas London entrepreneurs are 21 percent more likely than entrepreneurs in Silicon Valley to tackle existing markets with better products. New York entrepreneurs have the highest proportion of companies trying to resegment existing markets with niche products. They are 30 percent more likely to build something niche than entrepreneurs in London

This immediately set off my ‘clonedar’. It’s really interesting that even in London, which is apparently still considered the startup hub in Europe, there is a reluctance to venture into new markets or unproven niches. Instead, entrepreneurs there prefer to improve upon what already exists. Why is this? Is this really a wide-spread ‘problem’ across Europe? Is there value in this approach?

While I think that Europe does need to create more bold, paradigm-changing products and services, existing ideas can often be improved upon. I think most of us can easily come up with at least one example of an original idea or product that has been vastly improved upon by someone other than its original creator. In addition, although the existence of very similar startups in the same sector is not ideal, the situation can create value. One example of where this can happen is at the scale-up phase of a startup’s development. The burgeoning ‘beauty box’ space is a good timely example of this. As most of you probably know, Birchbox launched in 2010, made a splash, raised a lot of funding, grew pretty quickly, and spawned several copycat versions, particularly in Europe. The obvious question is whether any of these copycats would be in a position to compete with the well-funded, US-based Birchbox. Alone, it’s tough…but, together they have a better shot. In recent months there have been several acquisitions/mergers in this space: for example, GlossyBox (funded by clone-friendly Rocket Internet) purchased Mon Coffret Beauté and Carmine while France-based Joliebox recently purchased Spain-based Glamourum and, UK-based Boudoir Privé. In theory this consolidation, which any strategy 101 professor will tell you is typical in ‘new’ sectors, not only helps these two acquirers scale their businesses more quickly but also may make it trickier for BirchBox as they launch internationally (which given their level of funding, you know is coming). In fact, GlossyBox are now buoyed enough by their growth strategy that they are building on the momentum and launching on BirchBox’s home turf, the US.

I’m not arguing that as a general rule that it’s a good idea to outright copy other businesses. As noted above, quite the contrary. But, I do think it’s worth considering that the existence of a certain level of copycatting is probably quite normal (particularly in ‘new sectors’) and, in some instances, can generate value.

**The Startup Genome Project, is an initiative that looks to help entrepreneurs succeed by providing them data-driven insights on what makes a startup successful or not. In addition, the project also looks to provide information on various “entrepreneurial ecosystem hubs” around the world. In order to continue to evolve, the project needs the input of local start-ups in each ecosystem you can find more info here.