Send In The Clones: Startup Raises $90 Million To Copy Other Startup

from the interesting-strategies dept

For all the talk of companies "copying" each other, it's always interesting to see how things work in practice. Last year, we wrote about the excellent book Copycats, which discusses both successes and failures in companies that simply try to copy others. In general, what it finds is that merely copying someone else isn't enough to be successful. You have to innovate, and do something better to be a success. But, one of the "easy" targets, if you want to just copy and still find a market, is to copy in a different territory. For example, it's well known that for every successful US internet startup, a near direct clone pops up in China pretty quickly. The same thing happens in Europe at times as well. But sometimes things get odd.

There's been a ton of buzz lately around the startup Airbnb, which a lot of investors apparently weren't impressed with early on, but which has been able to build up pretty massive adoption pretty quickly, leading to stories of it apparently being about to raise $100 million on a staggering $1 billion valuation. That seems a bit rich, but in the world of Winner Take All economics, you can see how it could make sense for some early investors.

What seems like a bit more of a head-scratcher is when a brand new clone in the space then raises $90 million just a few months after launching... and hires 400 people. This company, Wimdu, seems to be focusing on Europe. If it can pull that off, that's something, but this sets off basic alarm bells. It sounds like a company and investors just throwing money after a problem, rather than actually innovating. Historically, just throwing money after a market tends not to work nearly as well as people expect. Airbnb is apparently worried about this particular clone, but I think it may be overreacting. Money isn't everything, and a company that focuses on providing a better overall experience, rather than worrying about clones, seems like it'll be better positioned to succeed long term.


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  1.  
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    Anonymous Coward, Jun 15th, 2011 @ 2:32am

    Love the US -centric view

    "it's well known that for every successful US internet startup, a near direct clone pops up in China pretty quickly. The same thing happens in Europe at times as well. "

    Of course it doesn't always work that way around- US companies somtimes copy European or far eastern ideas - but they rarely acknowledge the fact.

    That world wide web thing? Who invented it ? Where was he working?

     

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  2.  
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    Richard (profile), Jun 15th, 2011 @ 2:44am

    Re: Love the US -centric view

    Btw the above comment is mine - and in case you want another example of the US copying a European idea try ZOPA.

    From their "how it works" page

    "Zopa was the world's first lending and borrowing marketplace. By demonstrating that Peer-to-peer lending works on a large scale, Zopa has changed the financial sector for good.

    In Zopa's wake, copycats - such as Prosper in the US, Smava in Germany and Communitae in Spain - have sprung up across the world.

    Peer-to-peer lending is a financial category of genuine and increasing importance. "

     

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  3.  
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    Christopher Gizzi (profile), Jun 15th, 2011 @ 6:04am

    Dangerous

    I find this very dangerous. Take Groupon, for example. Critics are coming out everywhere to say their business isn't sustainable. It's ponzi scheme, they claim.

    Not having looked into their finaincials myself, I'm led to believe there could be some questions around their business model. But it's funny (and dangerous) that Groupon has spawned so many competitors. And they've each raised a sizable amount of money.

    I feel investors are more scared of missing out on an opportunity than understanding the fundamentals. The key that I've always had in my personal life is if I don't understand how they make their money... don't risk yours (mine... whatever).

    People then talk of bubbles... the social discount bubble will burst or the social apartment lending will burst (especaillly when cities like NYC make it illegal to sublet like that). But I see it as the free market doing this thing. But the free market isn't always smart and I see this as another risky bet.

     

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  4.  
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    Richard (profile), Jun 15th, 2011 @ 7:00am

    Re: Dangerous

    The strange thing about these startups is that they see the need to raise such large sums upfront. Most of the really successful internet startups have been able to grow organically from relatively little capital upfront. (Do you remember Google, Facebook or Twitter raising large amounts of startup capital early on?)

    Truth is that these people go to investors because they aren't confident of their ability to generate any revenue in the short term (or maybe even at all!)

     

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  5.  
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    airbnb customer, Jun 15th, 2011 @ 7:22am

    many clones=later roll up oppty?

    Homeaway had many clones and it likely was a clone itself. In any event they are the winner for now in a similar, more formalized rental space. They had a crappy web service and still have a crappy web service but they went on a buying spree and now are rewarding their investors handsomely. I've used homeway several times and use airbnb as property owner and renter. Different modes of operation but as those with disposable cash buy up distressed property in the US and become landlords this sort of thing might actually work. No idea about other markets.

     

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  6.  
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    senshikaze (profile), Jun 15th, 2011 @ 7:30am

    Almost completely unrelated:
    That book, Winner Take All, is $0.05(+$3.99 S&H) on Amazon.
    http://www.amazon.com/Winner-Take-All-Society-Robert-H-Frank/dp/0028740343/ref=sr_1_1?s=boo ks&ie=UTF8&qid=1308147844&sr=1-1

    Hell, I may get it at that price. ;)

     

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  7.  
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    Raul Peters, Jun 15th, 2011 @ 8:10am

    CrApple

    The problem is that everyone sees the ultimate copycat, Apple, and thinks they can create the same. The difference is that these others following Apple's lead don't have the decades of marketing that Apple has used to get hipsters on-board.

    So no, it doesn't require innovation to be successful because Apple hasn't "innovated" since the Newton and that's debatable.

     

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  8.  
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    Andrew D. Todd, Jun 15th, 2011 @ 11:14am

    A Reflection on Social Apartment Lending.

    The apartment sublet market does not really mean people inviting strangers into their homes. Instead, it looks something like the following: you had to rent an apartment by the year, and you had to put down enough advance money to insure that you couldn't profit by breaking the agreement; and according to your convenience, you physically left a few months early, taking with you those of your belongings which you did not propose to abandon, and you don't ever propose to be back. This leaves you with a kind of "businessman's interest" in the apartment. Limits were traditionally set by the fact that people could not always find a sublet tenant. If you were a student, most of your friends were also students, and just as you were leaving in June, to take up a job, and were stuck with a lease running until September, they were in the same position. Social Apartment Lending tends to become a vehicle by which these undervalued "businessman's interests" can be monetized. This tends to create a problem for the neighbors, because there are unknown strangers sharing their space, and in a big city, that is threatening. Inevitably Social Apartment Lending is going to be legislated out of business.

    If you want to visit a giant city like New York or London with modest means, thing to do is to remember the rule, "when in Rome, do as the Romans do." That means that New York and London have very good trains. People who aren't rich, and don't want to live in a slum either, use the trains to commute from some place they can afford. So, insofar as possible, if you want to visit a city like that, you should do the same thing. Find a reasonably priced motel somewhere on the outskirts of New York, convenient to a train station, and take the train in.

    In 1972, when I was fourteen years old, my family visited England and spent a month there. As it happened, we had friends at the University of Sussex, who had come over to the University of Cincinnati as exchange faculty a couple of years earlier. They lived in Lewes, the old, sedate county town of East Sussex, rather than in Brighton, and, by way of repaying old favors, they arranged to rent a trailer in a local holiday trailer camp (*), the kind of place where the lower-middle-class Englishman went to visit the sea. This camp was more or less across the road from a BritRail station, in the country at a place called Bishopstone, but with two small towns, Newhaven and Seaford, within walking distance. We did things like walking along a public footpath across a cow pasture to one of the towns to visit an Indian restaurant, and taking the train home again. We took the train to visit our friends in Lewes every so often, and every so often, we took the train up to London, about an hour's ride, and visited the various museums, and saw the sights. This, of course, was the kind of thing an ordinary American tourist could not have done-- one needed a friend on the ground, who knew the territory, and could make arrangements for one. I doubt the campground landlord would have had any idea of how to take a reservation from America, but our friend could physically drive over to take care of the matter.

    (*) I think this was before the Butlin's company "McDonald-ized" that kind of thing.

    The advantage was a higher level of experience than one could get, staying in a hotel in London. This was during the time when the Vietnam War was winding down, just as the war is Iraq and Afghanistan is winding down now, and of course, in England, it was hard to judge the state of affairs. English people saw television clips of American politicians demanding that the war be expanded, that the United States Army should invade China and dictate peace terms in Beijing, and that, to this end, say, five million men should be sent to Vietnam, to fight to the last man. Englishmen did not have the local background to know that this particular American politician was a famous windbag, not to be taken seriously. At the age of fourteen, I was about six feet tall, and looked a couple of years older than my age, especially to someone not accustomed to "reading" the fine details of American teenagers. I looked more or less conscription-age, in other words. What I remember is the rough sympathy of middle-aged, working-class Englishmen. These men, who might well have gone ashore on Normandy Beach in June 1944, looked at me, and saw, in effect, the Somme, circa 1916, the death of a generation, so to speak. Of a typical group of ten young men in 1914 (say, a school class, or a sports team), nine were dead by 1918. I didn't understand this at the time, of course, but it meant that years later, when I was studying history, I had a certain personal experience to compare the books against. I could emotionally understand that the scars of the Somme were so deep that they were still raw in the 1970's. It also meant that in 2004, at the beginning of the Middle East war, I understood the limits of European commitment in ways that George W. Bush did not understand, and could never understand. People like that travel a lot, but they always stay at the best hotels, and consequently, they never meet the working-class, and never understand the root of a country.

    Now of course, there are computer applications you can do, to assist a tourist in "doing as the Romans do." For example, you can create an Iphone app which tells you how to get from one place to another on the New York Subway, one of the most complicated in the world. The system can likewise incorporate data on buses, and on New York's three different commuter rail systems. I believe people have done this, but there is no real money in it.

     

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  9.  
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    David Liu (profile), Jun 15th, 2011 @ 11:57am

    Re: CrApple

    I would say though, that Apple does things well. There's a difference between a cheap clone, and a good quality, better-implemented, clone.

     

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  10.  
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    David Liu (profile), Jun 15th, 2011 @ 12:01pm

    Re: Re: CrApple

    In fact, innovation isn't the key to being successful at all. Mike doesn't even suggest that. Reread what he said:

    "Money isn't everything, and a company that focuses on providing a better overall experience, rather than worrying about clones, seems like it'll be better positioned to succeed long term."

    This is pretty much the case with Blizzard and Valve, the two most successful game companies. They don't do anything amazingly innovative, but the games they put out are of very high quality and experience.

     

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  11.  
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    ltlw0lf (profile), Jun 15th, 2011 @ 4:56pm

    Re: Love the US -centric view

    That world wide web thing? Who invented it ? Where was he working?

    He? If I recall correctly, it was developed by five gents at the University of Minnesota: Mark McCahill, Farhad Anklesaria, Paul Lindner, Daniel Torrey, and Bob Alberti. The world wide web existed long before it got its famous name.

    That is, if you accept the fact that http replaced gopher (though it is debatable as to which was superior.) If, however, you conveniently forget that part of history, then it would be Tim Berners-Lee, an independent contractor at CERN who "invented" the world wide web.

     

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  12.  
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    Richard (profile), Jun 16th, 2011 @ 4:55am

    Re: Re: Love the US -centric view

    He? If I recall correctly, it was developed by five gents at the University of Minnesota: Mark McCahill, Farhad Anklesaria, Paul Lindner, Daniel Torrey, and Bob Alberti. The world wide web existed long before it got its famous name.

    Dates?

    My info show these gents as coming after TBL sorry...

     

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  13.  
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    Richard (profile), Jun 16th, 2011 @ 4:58am

    Re: Re: Re: Love the US -centric view

    Wikipedia entries

    "The original Gopher system was released in late spring of 1991 by Mark McCahill, Farhad Anklesaria, Paul Lindner, Daniel Torrey, and Bob Alberti of the University of Minnesota"

    "On 25 December 1990, with the help of Robert Cailliau and a young student at CERN, he (Tim BL) implemented the first successful communication between a Hypertext Transfer Protocol (HTTP) client and server via the Internet."

     

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