A Better Mousetrap: Analysis of the Startup Genome Project

European StartUp Scene

Digging into the Startup Genome Project’s recentl publication, Trista Bridges explores the implication behind the statistics, as well as the implications, necessities, advantages and woes of copycatting in Europe.

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.

5 Responses

  1. P. Moehring

    How do you go from “tackling existing markets with better products” to clones? And how are outright clones improvements of existing products?
    Not sure I follow the reasoning from the first paragraph to the rest of the article – would be great to hear a take on how Paris differs or would fall into these categories vs NY, SF, and London. 

    • Liam Boogar

      I think that clones definitely follow into the market of better products for existing markets:
      1. The market exists because the product that was cloned either entered an existing market or created a new one – either way it exists.
      2. The Samwers have made a fortune off of creating products that work well in Germany that have already been proven in other markets.
      I think the argument comes down to whether a clone is an “improvement” on an existing market. I think when we read that, we hear “existing product” – don’t get caught in the difference.
      Germany’s CityDeals was an improvement on the equivalent market that Groupon occupied in America. They saw I worked and the US and made the “same improvement” in Germany.
      As for how Paris does in terms of new markets vs. improving products in existing markets – Paris is young, and tries a lot of things. They also have a bad streak of “Two Weeks Late” syndrome, where they just don’t expand as fast as their American counterpart (Viadeo, Netvibes, DailyMotion) – this is something they are working on, and the most followed startups in Paris (BlaBlaCar, Kwaga, Prixing, Teleports, etc. ) are all doing what France does best – using internally-developed technologies to push the barrier on what we can do.

    • P. Moehring

      Makes sense and I agree in principal in terms of technology adaption, etc. Rocket’s success has lots to do with isolated markets such as France and Germany: Clones are much more successful there because the local customs and language are not easily adopted to by US firms. 
      I was just wondering how that is derived from the first paragraph, and especially the data in the report, but I digress. 

  2. Ana Sanabria

    Very interesting piece of info.  I wonder how Paris compares to Sillicon Valley and New York, but I’m pretty sure it’s similar to London (or “worse”?).  Two things came to mind when I read this post:
     
    1. It’s cultural: There is no doubt that innovation does happen in Europe.  But I believe Europe holds too hard on it history, its past. Europeans, but especially French, are quite reluctant to change in general.  At least, this is what I have observed during the 6 years I have been living here. And that mindset makes it more difficult to innovate or go into new markets.  Compared to Europe, the US is all about “new”.  To most French, the US is a country with “no history”.  This is obviously not true, but what is true is that the US is in constant motion, change is welcomed.   This is what I observed in the 6 years that I lived in North America. And this mindset makes it easier to innovate or go into new markets.
     
    2. It’s economical: I remember an MBA candidate I was once interviewing in Paris who told me he wanted to go to an American business school because he wanted to be an entrepreneur and start a new business in the US. Why not in France? Because in France it’s as if they tried to block you in purpose, he said. They make it so difficult and expensive, he added.  He was talking about legislation, mostly.
     
    Now, copycats: can they add value? At least they add more choice to consumers and more choice is always good.  When they are in direct competition they need to look for differentiation: products are improved, features are added, prices go down… all to the bonheur of consumers!

    • tristabridges

      Not sure if they’ve done the same detailed analysis on Paris yet, but I’m assuming the project is looking to do so (as with other major startup ecosystems).  I know they need the support of the ecosystems to expand the project, so I’m planning on reaching out to them to see how those in the Paris ecosystem can help and will report back on what I learn.
      As for the clones, this goes without saying, but one would be hard pressed to find many entrepreneurs that openly admit their product or service is a clone even if it clearly is one (with the exception of perhaps the Samwers, mentioned by Liam, who are at least a bit more upfront about their approach). Problem is that there’s always been this dilemma of lots of ‘new and improved’ products/services that are neither very new nor significantly improved enough to move beyond being a ‘clone’.  You’re right…differentiation is imperative, but clearly pretty hard to do in practice.

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