Startup Copycats: You’re Doing it Wrong.

Editor’s note: This is a guest post by Stefano Bernardi. Stefano recently left his job in Venture Capital in Europe and moved to San Francisco joining the founding team of Betable, where he works on the platform product. He is a part-time hacker, angel investor and product advisor, and was selected from more than 300 people to “shadow” Dave McClure at 500 Startups. You can read more about him, his posts and his tweets.

Yesterday I was having brunch with another Italian entrepreneur in San Francisco. He said he was thinking about going back to Italy to create startup copycats, that spurred an interesting conversation and I wanted to share my thoughts on it.

I’m not going to debate on the morality of it, I’ll just assume that someone has decided to clone an American startup in a foreign market and I’ll try to give some advice regarding what type of projects to choose.

Don’t clone consumer Internet startups.

Consumer Internet is a single winner market, where only one gorilla company emerges. There is no second place.

Please do not clone Pinterest. Do not clone Instagram. It will not work. Not matter what Pinspire and co. want you to believe. Cloning social startups is extremely hard as you face the same growth problems of the American startup, in a market with fewer early adopters and many more monetization challenges.

Let’s assume that you have assets or tools you can leverage to create massive user adoption in a very short period of time in a few hard-to-enter markets and decided to clone Twitter in Germany when it was clear that it was going to become huge. You would have failed miserably for very simple reasons:

  • Social software is becoming inherently international. German users on Twitter want to interact with Americans, Chinese and aliens, and won’t be able to do it on your platform.
  • You will have built zero barriers to entry, and Twitter has the resources to acquire the customers you spent a ton of money on, which are now educated about the product and can definitely sustain a product switch.

This is the reason why Facebook, Twitter, Foursquare etc. are not acquiring competitors and are acquiring different kinds of startups instead. They are the best at what they do and are confident they can gain 100% of the user market. You should not gamble against them at their own game. You may counter that Tuenti, Bebo, Studyvz, Xing etc. made it big. My opinion is that the Internet has changed quite a bit in the recent years and gaining traction is now a matter of months. None of those companies would have been able to achieve the traction they did if they were started today. Also, the “exitability” of this type of companies is incredibly low and we will not see another $800m Bebo anytime soon.

If you still really want to create a copycat…

Which startups should you clone instead?

Clone Stripe in your country right now. Stripe is going to be huge, and they have requests to expand to other countries coming in every second. If you can solve the regulatory problems for them, they will acquire you very gladly. If they don’t, I will. Keep in mind that Stripe is an extremely hard company to create here in the States, which has happened only because of two small geniuses, and might be even harder to do abroad without their skills and resources.

Square is also a great startup to be cloning, as iZettle figured out very smartly (they unfortunately weren’t as smart with their name tho). Others include Uber and Twilio.

In general, any startup that is affected by regulation is a very clonable target, as solving those problems in every country of the world is extremely hard and they’d love to have someone do it for them.

Startups that require deep integration with the local consumer and business community are easily clonable. GrouponOpentableTaskRabbit. Keep in mind that Foursquare doesn’t fall in this category, as it doesn’t require such a deep integration with local businesses (users create places).

E-commerce is intrinsically local. You need to source products, handle logistics and shipping, customer support, etc. and all these activities are local. There was space to create Amazon.com in every country before they expanded, and there are countries where it has been done (Russia).

  • Business to Business Startups

Any B2B startup is clonable. Companies around the world usually have the same type of problems. If an American startup can figure out a huge problem, and solve it elegantly, you can probably sell a similar solution to companies in your country. Plus, B2B is not a single winner market, and there is always space for someone else.
Want some ideas? Cloning YammerBox or Huddle a few years ago would have been a very smart idea. It’s up to you to figure out the next ones.

Starting a company is hard stuff. I can see how wanting to hedge risk by leveraging an already proven idea can make sense for some type of teams and investors, but if you really want to do it please keep in mind these guidelines and please, please, please, don’t pitch me about your next Pinterest clone.