“On the internet, there are Einsteins and there are Bob the Builders. I’m Bob the Builder.” — Oliver Samwer
Founded in 2012 and having raised more than USD-$230mm, Linio became one of the most important marketplaces in the Latin American region having proven to have a successful and scalable business model. A few weeks ago, Clip became the new Mexican unicorn by raising USD-$250mm in a round led by Softbank. This was due to the company’s business model and the high demand in the Mexican market for this type of solutions.
Linio and Clip are clear examples of companies that have shown that you don’t need to invent the black thread to make a venture successful. It’s not difficult to visualize the similiter between the Linio business model and that of Amazon, or the similiter between Clip’s model and technology and that of Square in the United States.
The existence of “Copycats” is based on the premise that in entrepreneurship it’s more important to know how to execute the business than the business idea per se. In essence, there are highly scalable business models that don’t need patents and are relatively easy to replicate. This puts the success of the business on the entrepreneur’s management, execution, and the speed with which they scale in their market.
The greatest exponent of this type of startups is undoubtedly Rocket Internet. It was founded in Germany in 2007 by the Samwer brothers. The model of Rocket Internet is based on replicating business ideas of successful companies in an accelerated way in emerging markets and then selling these companies to their counterparts when they seek global expansion. One of its early successes was the German company Alando, which had a business model and architecture very similar to Ebay. After founding and operating the company for almost 100 days, the Samwer brothers sold Alando to Ebay for USD-$43mm. Linio and Lamudi, companies that belonged to the origin of Rocket Internet. Today, the list of Rocket related companies exceeds 70.
Not all business models are easily replicable, so not all successful companies represent an opportunity to create a copycat in a different geography. The main characteristics of a good copycat are.
- Successful business model: The company to be replicated must have a business model that has been extensively tested, scalable and capable of generating profits. It’s important to mention that a successful model in one geography may not be successful in another, so a comparison should be made between markets to validate the success of the copycat.
- Easy to replicate: A large part of the success of copycats lies in the ease and speed with which the company expands and grows in the new market. A business model that requires heavy investment in technology or has patented resources will make it difficult for the copycat to set up and operate.
- Scalability: Regardless of whether it’s a copycat or not, having a large market with a scalable business model is necessary to build a successful venture. Sometimes there are companies whose scalability is linked to the market the copycat will be targeting and understand its relationship to the possible scale of the business model.
- Adaptability: In many cases, making a perfect copycat is not enough to ensure the success of the venture. It’s necessary to understand the dynamics of the new market and adjust to increase the effectiveness of copycat. A rigid business idea with no room for change or adaptation can present a challenge when replicating it in another geography or market.
Companies like Rocket Internet and entrepreneurs like Samwer brothers have been criticized by the ecosystem for attempting to undermine innovation and exploit market inefficiencies. However, creating a copycat is no easy task as the success of the venture depends heavily on the team’s execution and the arduous task of successfully adapting the business model to the new market.
Note: please refer to the original publication at EL CEO: Los copycats como fuente de generación de startups exitosas en VC (elceo.com)
Hector Shibata. Director of Investments & Portfolio at ACV a global Corporate Venture Capital (CVC) fund and Adjunct Professor for Entrepreneurial Finance.
Ricardo Latournerie. VC Investor at ACV.
ACV is an international Corporate Venture Capital (CVC) fund investing globally in Startups & VC funds.
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