Copycats kill European innovation
“Copycats kill European innovation”: those were the words that Loic Le Meur (@loic) put up in front of an audience of French entrepreneurs who came together at the TechCrunch France Remix event in November 2010 to hear about success stories and for networking with other Internet entrepreneurs. Loic is very well known and respected, so no need to say that when he says something like that you pay attention.
But this did not match my personal experience: when we launched Ciao.com end of 1999 it was a pretty blunt copy the US site epinions.com. We did not feel particularly proud of taking someone else’s idea, but we also had no reason to not do it as we were seeing business opportunities and were convinced that we could become the dominant player in Europe for unbiased consumer reviews. If we wouldn’t do it, somebody else would. So where is the problem?
Then pretty quickly, as we grew and as things evolved (meaning the Internet bubble burst in 2002) we pivoted into different directions product-wise and also business-wise. Epinions.com was acquired by Shopping.com (is was then DealTime back in 2003) and we developed a successful market research business as second leg for Ciao.com. We actually innovated in this business and got copied ourselves heavily by many other players in Europe, Asia and Latin America. So within 3 years we went from being a “copycat” to becoming the “original” for many others.
Then Loic comes 7 years later and claims “copycats kill European innovation”. Why? Through my last startup Hypeed.com I got some insights into the fashion market. Fashion has this particularity that the more successful a fashion item is, the more it gets copied. There is no copyright protection in fashion, there is only trademark protection as Johanna Blakley explains in her very entertaining TED talk and yet fashion is one of the most creative and innovative markets. There are interesting messages for web startups in her talk. Check it out.
Back to Loic,’s speech (to be clear: Loic did a great talk, and this is just one of the slides he used). I don’t think the message can be just simplified so much and put on a slide like this without further differentiation. Can the fact that we don’t have enough global leaders coming from France be tied to this copycat issue? Aren’t American startups also copying from each other? Didn’t Apple copy many ideas from its competitors and even publicly admit it? What about the successes of Berlin-based incubator Rocket Internet who has industrialized the copycat process since 2007 (CityDeal, Zalando, eDarling and many more, like Pinspire that Pinterest clone that just got funded by Russian and Swedish investors)?
Triggered by this, and still wondering why Loic tells French fellows to stop copying, I wanted to drill down on the pros and cons of a copycat strategy and really understand what entrepreneurs think about it, and where VC’s come out.
We did a quick Tweet-poll and I followed-up to speak with five entrepreneurs or VCs with different backgrounds.
Who they are:
“Copying means acceleration” says Guilhem Bertholet who was long in charge of promoting entrepreneurship at HEC, France’s top Business school. Between 2007 and 2011 he helped 85 projects do their first steps through the HEC Incubator. He has just organized the Copycat Startup Accelerator, a 3 week program for HEC students and graduates
“I’d rather succeed with someone else’s good idea, than fail with my own bad one” says Patrice Cassard, well known French entrepreneur who’s first success was La Fraise (exit to Germany’s Spreadshirt in 2006) and who then launched Arichiduchesse.com. Currently he works on Neeed.com, which is said to be a Pinterest copy, but he sais the original idea came from Svpply.com
“I’m launching copycats in Turkey” claims Bora Kizil who now works for Rocket Internet. He was part of Le Camping 2011, the French Accelerator’s first class and has build expertise in speed-launching new companies. He went from 4 months for Zifiz at Le Camping to 3 months for GlossyBox (a Rocket Internet project) to 1.5 months for the current project, an Etsy clone for Turkey.
“Copying is too boring to give a sh*t” shout Mayel de Borniol and Josef Dunne, the co-founders of Babelverse. They climbed to the 3rd place in the startup competition at LeWeb last December. Babelverse , they say, is the first solution that provides real-time interpretation powered by a global community of human interpreters
“If you want to be global, don’t be a copycat, especially if the “original” one already raised funds” is the point of view of Mortaza Karimi who is currently analyst at Partech, one of the biggest Internet startup VCs in France with a strong international investment activity and an office in San Francisco. You can’t discuss this subject in general terms without looking at the business and market, thus he selectively embraces copycats and brings an outside view to it.
I asked the following three questions to all of them:
1. What is your main motivation in creating or supporting copycats?
Guilhem: “First of all acceleration and lean structures. I am running the Accelerator program at HEC’s incubator for the 2nd year. This year we focused on Copycats. I preselected eight US projects and the teams were asked to work on a local adaptation. The mission was not to produce a pure copy, but to twist the project and adapt it to the local market. The original project serves as source of inspiration and also sets the benchmark. The teams were not allowed to produce results that were not matching the quality of the original, at least. The results are stunning and the teams accomplished much more under identical conditions compared to last year where we did not focus on copycats and asked the teams to generate their business idea first.”
Patrice: “My motivation is not to build copycats, but to make great ideas work. I try to leverage those ideas that can come from anywhere combining them to something new. My current project Neeed for instance is not Svpply.com copy. I consider it a lab where we experiment new ways to capture visual content and organize it, inspired by Svpply. Before Neeed becomes a real business we need to add many more features, which might come from other sources of inspiration. LaFraise.com was not a copycat of Threadless.com, the successful T-Shirt company out of Chicago. I only discovered them 6 months after I started LaFraise, but they did some interesting things which I copied.”
Bora: “Sometimes people have great ideas at the same moment around the world. When one executes it very well and begins to be successful, this is inspiring for every entrepreneur. There are also ideas that are born in some countries and bring value to consumers and won’t leave that country unless global entrepreneurs bring it to people around the world. Look at the micro credit business. If no copycats were done we would still have it only in Bangladesh!”
Mayel & Josef: “We don’t really have a beef with people replicating others business ideas. For us that’s not what entrepreneurship is about. Every year, we see a new trend become what everyone talks about, be it blogging, user-generated content, social, mobile apps, cloud, big data, etc. And many pitch decks read like someone took all of the current buzzwords and threw them together, or looked at a proven business model and applied it to a different niche (the Airbnb of cars, the LinkedIn of the art industry, and on and on…)”
It’s all well and good to create products and companies that address today’s market needs, but what about the future? What happened to creating something that takes a great leap, that pushes the human race forward, that actually has a shot at changing the world?”
Mortaza: “At Partech we have a precise strategy concerning copycats: if your business enables you to be an attractive company by “only” being a national or continental leader; then there’s no problem with being a copycat. Zappos was not present in France and so Sarenza or Spartoo were great investment cases. But I wouldn’t back any new guy right now in France (hello Zalando). If your business is not suited to being only a national leader; then copycats can be tricky investment cases: nobody would back a French Tumblr. Now this depends on the market of course: backing the Chinese Facebook has great chances to become a success story. So look at the market you can address and be a leader, look at the in-fine size of the business, and then take a decision.
To conclude on Partech, the investment strategy is balanced between building global leaders (Invensense) and local leaders (Brands4Friends in Germany, Qype in Europe, Vente à la Propriété and Digitick in France, Dailymotion in… well everywhere actually, but behind Youtube). Global players are riskier but with higher potential returns, local leaders (copycats or not) can be great, with mid to upper-range ($50-200M) exits.“
2. Are there any limits in copying other startups?
Guilhem: “You can’t just take an idea and then do exactly the same. The limit is that you have to pick the right approach for your local market. The consumer needs are different and the environment is different. Copying successful startups is really a good strategy to avoid mistakes and going into a wrong direction, but your success comes from the quality of execution. We identify best practices and set these as benchmarks for our projects. Then legally speaking there are limits of course. Copying source code, using client files etc. or phishing people are not the way to go”.
Patrice: “Picking the right idea that you want to copy is the first challenge. If you don’t have a brilliant idea yourself, like me, and you bet on the wrong horse, then you’re not going to succeed. The other limit is that you can’t copy everything because usually you don’t have insights into the companies’ processes, tools and organization. You can only copy what you see, but the secret sauce is hidden from you. This is where your innovation takes place.”
Bora: “You need to be inspired and adapt the idea to the market. It is very important to make the idea grow and evolve based on local differences. “
Mayel & Josef: “As Europeans, the most successful copycats we see are those that are very obviously copying successful US startups. And we can’t blame them, we rather welcome them. Because as users ourselves, we are quite annoyed when great US services take years (if ever) to make the way into our hands here (Netflix, OpenTable, Hulu, Kickstarter, Google Voice…).”
Mortaza: “If you want to change the world (i.e. be a global leader), don’t be a copycat. but if you copy a company, which is still very young (seed), then you might have a chance, depending on your pace, fundraising and execution. Youtube was founded after Dailymotion yet it got bigger, quicker with a huge exit. Why? Silicon Valley effeect. From a French and European perspective; if you want to get global, you should absolutely focus on something new: Soundcloud, Skype, MySQL, Criteo. Copying start-ups should always be oriented towards anything but global leadership. Best copycats in the world are made by the Samwers [Note: Rocket Internet], yet none of them will get global.”
3. What is your response to people who claim that doing copycats is unethical, lacking creativity or even stealing someone else’s work?
Guilhem: “I think this is a false debate. The evolution of technology has made it very affordable for people who are motivated to start their own business. You can rent servers for almost nothing and learn Ruby to get your own service up and running in a few months. If you’re busy trying to protect your idea instead of focusing on execution in your project and adding the right level of creativity where it creates a difference, then you’ll lose. In addition, we should keep in mind that the Internet startup scene is a micro-universe where founders like to see themselves as “superstars”, yet on the outside nobody really cares about this question”
Patrice: “Where does copying start and where does copying end. Everything is a remix. You should watch this video to understand how things are dependent one on the other and how mutation and evolution are connected. In many cases you don’t know who was first and who copied. Everyone is copying from everyone and at the end we see new standards and rules emerge. This is the best newsletter execution; this is the best Facebook integration and so on and so on.
I know that the chances of succeeding with an idea that never anyone had before are infinitesimally small. I don’t take pride in inventions, but I want to succeed with my business”.
Bora: “Come on let’s not exaggerate. Ideas are worth nothing. What counts is execution and only execution. Being inspired by others leads to innovation and development. If this was unethical there would be only one fast food restaurant chain in the world, one sport shoes brand, one low cost airplane line, one search engine… “
Mayel & Josef: “Well, it of course lacks creativity. But as long as a certain (blurry) line is not crossed, what’s the problem? Everybody needs to make a living. We just view those people as commonplace businessmen though, to be compared with someone starting a new chain of coffee shops, not real entrepreneurs, and definitely not innovators. Personally, we just prefer to do (or rather, create) things that we can really be passionate about.”
Mortaza: “Copying Airbnb is not copying Delacroix. As an investor, I don’t care about ideas but execution and I always assume that when someone has an idea, 5 people somewhere else in the world are having the exact same idea at the exact same moment or even before. So I focus on how the entrepreneur is able to build a great business faster and bigger than others. Plus you might copy the business idea but get creative on processes, business model, by-products, marketing, depending on where and to whom you sell your product. Entrepreneurship is not always about changing the world and bringing something new; sometimes it’s just about selling soda, because it can be profitable and exitable. There’s nothing wrong with that, as long as you’re the best at it in your own, smaller playground.”
Conclusion: be smart at copying and don’t get caught
Successful and repeat entrepreneurs have realized that a key ingredient for their business is the inspiration from the outside. This is not denying that there are entrepreneurs whose passion it is to try to come up with a killer idea that nobody has ever had before, but the chances of success for the first mover are very small. Be smart at copying and innovate in assembling and execution, focus on efficiency in an ever-accelerating environment.
Investors on the other hand want to back the global leader, or if the market is big enough then eventually the local or regional leader. Speaking about France as market, it’s very difficult for an Internet pure player to find a product and segment that is attractive to investors, even more if you have to share the pie with someone else. You have to think BIG. Nobody cares where your business idea is coming from, as long as you can outperform the rest of the copycats and me-too’ers, then you’re in business. But remember that being second in class is not an option … for investors.
So Loic, it seams your message was not entirely heard; there are people who want to change the world, and they are even French, but it is a minority compared to the more general consensus that nobody really cares about who’s first with an idea, but rather who’s best in making it work. If you’re after VC money you have to think BIG or try having an impact, if not, you can be a happy and successful entrepreneur and copy and innovate at the same time.