Cloning Successful Startups

Jeff Leventhal, the CEO of our portfolio company WorkMarket, emailed me yesterday. He said:

i would love to see an avc post about copycats like samwer bros. what do u think of this form of entrepreneurs, etc?

I looked back over my archives and I guess I've never addressed this topic here at AVC. So here goes.

It's a free market out there. People can do what they want. That's even more true globally. If you are successful, you will be cloned. That's life. In fact, it's a sign that you've made it when clones of your website, mobile app, and business start cropping up.

That said, I am not a fan of this behavior and approach to making money. It is devoid of any creativity. It doesn't inspire me. And we avoid doing it and investing in those who do it. As Jeff said to me in an email reply, "the problem is that people make money doing it……..these people should just internally understand that they are not entrepreneurs and not creating true value." I agree with Jeff on that.

Some will say "but you are an investor in Zynga and they copy others' games." I accept that critique but we committed to invest in Zynga when it was just poker on Facebook and that was an entirely new idea. They grown by adapting other games to their social model for sure. That's the history of the games business by the way. Even so, I'm not attracted to or inspired by this approach to making money.

Our approach at USV is to invest in the category creator, the innovator, the market leader. That's what attracts us to startups. And when the category creator executes well, we have found that it can win the market by a long shot and produce fantastic returns.

There are a few examples of USV portfolio companies that were not the category creator. Lending Club is a good example of that. We invested in Lending Club because they innovated around the peer to peer consumer lending model and came up with the winning approach and they are now the clear market leader. That was a late stage investment made out of the Opportunity Fund. I suspect that we will do that kind of thing more frequently in our Opportunity Fund investments.

But in the early stage sector, we are drawn to entrepreneurs who have new ideas, novel approaches, and big visions with long roadmaps. We are not drawn to those who seek to knock off another company and execute it better or in a different geographic market. If that is what you are doing, I am certain you can find investors and I am not looking down on your approach. But we are not the best investor for you and your project.

#VC & Technology

Comments (Archived):

  1. maxniederhofer

    Thanks, Fred.It feels very hard to operate with this approach in Europe, but I’m doing my best. ūüôā

    1. fredwilson

      it is not just europe. it happens in the US and also in latin america and asia

      1. Adam B.

        Especially in Latin America. I see clones in Argentina and Brazil pop up frequently. BsAs had 11 groupon clones within 2 months of the launch. Same with food delivery in BsAs.

        1. Martin Wawrusch

          The Samwer brothers are doing this globally. One has to respect them for their execution skills.

          1. JamesHRH

            Leeches have awesome execution skills too.

          2. Stuart Campbell

            Agreed. Whether you like them or not they can certainly execute, and quickly!

          3. Jeffrey Leventhal

            They are amazing cloners with a bit of extortion tied in to the exit process, but they are not entrepreneurs in the true sense of the word.  Entrepreneurs create value, cloners steal it.

          4. Emily Merkle

            value is won or lost – it is not stolen.

  2. William Mougayar

    Exactly. Goes back to Paul Graham’s conclusion that doing a startup is not like erecting a building, ie by following blueprints & plans.¬†If you are following plans, you’re not doing a startup. You are either copying one or you have a Services business.¬†I will say it again: Columbus didn’t search “America” on Google. ¬†He just knew he had to head westward to find something new. Every new startup has a general direction they stick to. The rest is fuzzy & made-up along the way. ¬†http://paulgraham.com/ambit…

    1. awaldstein

      Kind of early to disagree with such a close friend, but…Not generally true. Although sometimes.If you wanted to build a software wallet to let all consumers transact with one click to a multiplicity of online POS systems, is this a general direction or a specific goal with unchartered details?My sense is that most startups are out to solve a problem and evolve from there.I think this is true even around discovering and platforming social behaviors.You can’t focus on general discovery. You can focus and iterate if you are after a goal.

      1. William Mougayar

        I think we agree. Solving that problem is the True North, but getting there is the fuzzy part.Yes, go solve that software wallet issue if you see it as missing & needed.

        1. awaldstein

          To be clear re: software wallet…I don’t want to solve that problem. Example only but if anyone has solved this, I need it!

          1. Emily Merkle

            up and to the right 

      2. Emily Merkle

        Well put. And in the 12 years I have spent with startups the goal has invariably been “do <something> BETTER”. The game-changing innovations are not stumbled upon or tripped over in a vacuum. They are born in part of a combo of right people / right place / right time – incidentally the same words we have always used to pitch the model of PPC. I can understand Fred’s & USV’s feelings on the topic; I do not see any sense in quibbling over who is or is not a “true” entrepreneur. Proof is in the pudding.

    2. sigmaalgebra

      > to find something new … The rest is fuzzy & made-up along the way.¬†The SR-71 was “something new”.¬† It was carefully designed for its purpose — fly at Mach 3+, at 80,000+ feet, for 2000+ miles without refueling to take pictures across the USSR. That design, on paper, was funded, and the plane flew as designed.Why can’t a startup follow this pattern — pick an important problem, design a valuable, new solution for it, and execute the design? Where is the advantage in “The rest is fuzzy & made-up along the way.”?

      1. JamesHRH

        One of the few things Paul Graham has said that I disagree with. It is just not universally true.Apple is the opposite of ‘fuzzy & made up along the way’.

      2. Emily Merkle

        Even in executing a biz model not original, markets change. Original problems that a company wanted to solve morph. New ones arise. First to market is not always best forever. Keeps everyone sharp. Good for consumer, venture capitalists, etc. everyone if all operate with intellect and integrity all here have.

        1. sigmaalgebra

          What you are saying is fine.¬† What I’m trying to say is different.

          1. Emily Merkle

            Willing to listen; I have lots to learn and am willing ūüėČ

          2. sigmaalgebra

            In information technology and Web 2.0 startups, there are some obstacles that are slowing progress and leading to, e.g., the disaster of “The rest is fuzzy & made-up along the way.”.So, I’m saying that this “fuzzy and made-up” stuff and the Steve Blank stuff about looking for product/market fit and the expected high frequency of pivots do not have to hold and that for some projects there can be a better way.For a better way, I suggest some steps (1) pick a problem where a good solution will quite clearly be valuable, (2) for a good solution do some research and find some powerful secret sauce, and then (3) execute to deliver the solution to the problem.A good problem would be to solve the energy problem via perpetual motion; alas, we have some rock solid physics saying that, while a solution would be very valuable, it is also impossible forever.Another good problem would be a one pill cure for any cancer. Here we definitely need some research for, in effect, some secret sauce, but some decades of work back at least to the Watson and Crick work on DNA and some billions of dollars from the US NSF and NIH have shown that the secret sauce is so far too difficult to stir up.Still, given a one pill cure for cancer, we would likely not face fuzzy and made-up, search for product/market fit, or pivots.So, can we get some examples of (1) problem, (2) secret sauce, and (3) delivering the solution?Sure: A good example is the SR-71 I mentioned. Again, the problem was how, after the Gary Powers U-2 downing, the US could get surveillance of the Soviet Union. The proposed solution was to build the SR-71 with its special capabilities in speed, altitude, and range. Much of the secret sauce was the special engines that were turbojet engines at low speed but converted to ram jet engines near Mach 3 (that is, three times the speed of sound, about 2000 MPH).Moreover, this solution had another nice property: The project was proposed and evaluated essentially just on paper, and with that evaluation passed the success was achieved. Further it turns out that from other projects so proposed and evaluated, the success had high probability.Other such projects included, of course, radar, sonar, the proximity fuse, the A-bomb, the H-bomb, the B-52, the Polaris missile launching submarine, adaptive beam forming passive sonar, the sea floor passive sonar Sosus, photo reconnaissance satellites, GPS, stealth, etc. So, each of these was a case of an important problem, research for powerful secret sauce for a solution, a proposal just on paper, and the solution as proposed implemented with high probability. No fuzzy, made-up stuff. No high project failure rates. Problem solved important enough that a good solution was very valuable without concerns about product/market fit.I am claiming that parts of information technology startups, including some software based startups, including some Web 2.0 startups, can and should do much the same.One key to such success will be good problem selection. So, we want to pick a problem where a good solution will clearly be quite valuable with little chance of having to worry about product/market fit or pivoting. We want the problem difficult enough to solve that some secret sauce from some research will be needed but not so difficult that the secret sauce is too difficult or impossible. We want the problem to remain important, and a good solution for it valuable, long enough to build a valuable business. And in the context of this blog, we want the startup to be in information technology and Web 2.0 and to deliver the solution via the Internet exploiting Moore’s law, software, etc.In some important respects, what I am saying here is radical for current practice in information technology and Web 2.0 startups. In particular, such startups have essentially no role for some secret sauce based on research; indeed, that there could be some research that could be sufficient, powerful, valuable, or even very relevant is not accepted. Although it was essentially just US national security that built Silicon Valley, that the examples of national security projects I listed could provide a pattern for current information technology or Web 2.0 startups is not accepted.Much of the reason for lack of acceptance of a central, powerful role for research is that the relevant academic field for the research is not recognized.In one step more detail, there are some assumptions now solidly accepted in the relevant parts of business: The first assumption is that the key academic foundation for applications of computing and software is the academic field of computer science. The second assumption is that the key technology of an information technology startup is such software.For what I am proposing, both of these assumptions are badly wrong. In a sense, I would agree with those parts of business: Doing research starting with computer science is not promising for constructing the desired secret sauce.So, instead of computer science, I would start with mathematics. This suggestion will fall almost entirely on deaf ears: (1) People who understand the math are rare. (2) While we are awash in good examples of such math for US national security problems, we are short on examples for Web 2.0.Why not computer science and why mathematics would require more explanation, but this post is already too long.

          3. Emily Merkle

            ¬†may I connect with you to continue a [email protected] com

  3. Modernist

    Speaking of IP, do you have a comment on Altucher’s Vringo trade?Speaking of DST, do you like Naspers shares at these levels?

    1. fredwilson

      i don’t know what you are talking about on either pointcan you send me links?

  4. LIAD

    1. Success is 1% inspiration. 99% perspiration. The money flow to the clones in terms of revenue and buyouts are a clear indicator they are creating value.2. Cloners are real entrepreneurs. Just not overly creative ones. They are exploiting opportunity to the same extent those they’re copying are.Having said that, for most the entrepreneurs on this site, I doubt amassing dollar bills is their primary motivating factor. What gets me juiced is being innovative and creative. Trying to solve problems and create real value. I find overt clones distasteful. Not in terms of ethics but in terms of wasting your own potential.Paraphrasing Seth Godin – if we just wanted to earn money we would sell crack to teenagers outside the school gates.¬†The further we move away from that side of the money-making spectrum, the higher our moral and creative sensibilities are.The abject cloners just have lower thresholds than the rest of us.

    1. William Mougayar

      Cloners are entrepreneurs? Cloners are Cloners- that’s their guiding post.

      1. LIAD

        Building a successful business, whether you had the initial idea yourself or stole it from your neighbour still requires massive amounts of work and skill.We can call them distasteful but I think they still deserve to be called entrepreneurs.

        1. ShanaC

          I’m with you – if you think about it, that’s what most businesses are. Its hard to innovate on say, a coffee shop….that doesn’t mean the person who owns your favorite coffee shop isn’t innovative

          1. JamesHRH

            it means they are not very innovative, otherwise their coffee shop would be Starbucks.

          2. ShanaC

            Says who – I would say starbucks is not very innovative compared to my favorite coffee shop in NY. I’ll get starbucks, but I tend to look for something else in my coffee when I want to sit there and enjoy coffee

          3. LE

            That’s the problem with this whole concept of copying as not being entrepreneurship. When does the idea become totally original (Starbucks) vs. someone trying to improve on Starbucks.¬†Is there a committee (or ad hoc crowd) that meets and decides when an idea is original enough to warrant not being a clone?¬†Of course not.

          4. FAKE GRIMLOCK

            IF IMPROVE, THEN NOT COPY.FRED COMPLAIN ABOUT COPY WITH ZERO IMPROVEMENT.

          5. ShanaC

            if I think about it too much, some of my favorite coffee shops could be starbucks with different coloring. I think we’re getting nit picky

          6. Ricardo Diz

            Totally agree!

        2. William Mougayar

          Clonetrepreneurs ūüôā

        3. jimmystone

          I agree that cloners can still be entrepreneurs. I think a good example is the oil & gas business. “Wildcatters” all want to find black gold and often copy others drilling in the same basins. That said, they typically (when not completely sponsor-backed) take on a lot of risk and rely on execution…and luck…Entrepreneurs such as Floyd Wilson (no relation to Fred ūüôā are not terribly creative but there is no doubt that they can create tremendous value (i.e. Petrohawk sale to BHP).¬†

          1. Emily Merkle

            it takes a village

      2. Boogie

        Everybody clones, if only just the business model. Who knows who was the first to introduce SaaS ? I don’t, but I will surely use it .

        1. William Mougayar

          Some big ideas become building blocks for other ideas. Features, concepts, methods can be copied, but entire companies cannot be easily copied. Too many interchangeable parts are at play. E.g. there are SaaS failures. What did they copy?

    2. Adam B.

      Perspiration eh? Thats a new one for me. Just giving you a hard time.

    3. JamesHRH

      I have never agreed with this 1% deal.Innovation is 100% commitment to turning inspiration into value.Execution captures the value, but does not create it.Ideas are a dime a dozen; turning an inspiration into innovation that is adopted s not.

      1. LIAD

        the seed of an idea has no intrinsic value. go try and sell an idea.all the value is created in execution.

        1. Matt A. Myers

          You’d have no execution without the idea, and ideas evolve, so in reality there are potentially hundreads, if not thousands, of ideas captured within an overall idea.Just because an idea or ecosystem is obvious once it exists doesn’t take away the value of it; It does take away the cost and execution time of copying it though, because all of the foundational/creative/research/discovery work has been done for you.

        2. JamesHRH

          Personal pet peeve here LIAD……The sandwich is stacked like this:3) EXECUTION2) INNOVATION1) INSPIRATIONI have worked with some people who can execute. They were inspired too. They all failed because you can’t execute without a market fit, which they were never able to attain.Why is The Lean Startup Approach all the rage & Steve Jobs considered a magician?Steve Jobs did market fit (‘cracked it’) without talking to customers. Eric Ries has to scream at techies TO TALK TO CUSTOMERS to try and see if they have a market fit (apparently its a revelation that your idea is of little value until it aligns with market needs – Geoffrey Moore must shrug a bit).Value creation is in the alignment of inspiration with market need. As Marc Andreesen puts it, roughly: ‘focus on product / market fit and nothing else, until you find it.’That’s not ideation or execution.FYI – not a Lean Startup hater. I just see it as the evangelist version of a religion that has been around a long time.

          1. FAKE GRIMLOCK

            IDEA REQUIRE EXECUTION. UNLESS IDEA NO ONE WANT. THEN IT REQUIRE NEW IDEA.

    4. fredwilson

      I missed that seth godin quoteClassic SethAnd I agree with you

    5. leigh

      My favorite Blake Ross quote is “the next best thing is whatever made the last big thing more usable” (or something close to that ;)Clones don’t do that. ¬†They just copy. ¬†They don’t make it better. ¬†They just copy. ¬†They have no original ideas. ¬†They just copy. ¬†Wikipedia has the¬†definition¬†of an¬†entrepreneur¬†as: ¬†who makes money through risk and initiative. I’d say the clonetrepreneur as¬†@wmoug:disqus¬†coined them isn’t about either of those things at all.

      1. LIAD

        i think it takes risk and initiative to launch a clone of a successful US company in another location

        1. awaldstein

          Localizing business concepts like flash sales or services into different cultures has long been a value producer.Most of us have taken some business or another into Europe or Asia and either partnered or bought something local to do it.

        2. Zo

          I think the problem is, clones are unoriginal by definition, so often need something else (read: significant financing) to beat the incumbent.This makes it seem more like an investment strategy then a product/service strategy. Take people with product ideas but no money, and sure we’re going to be resentful.Was in Japan recently, and recall hearing about Q:Pod.In mid-2010 a local VC put a team together and invested about $2.5M. Two months later, they sold majority stake to Groupon for $10M. Not a bad return, but not something an average group of students with no marketing dollars could possibly pull off.

      2. William Mougayar

        I’m opening an entry in Wikipedia for Clonetrepreneurs ūüôā and will just put images of companies that copied others, but failed to grow that way.

        1. LE

          Totally original word.¬†We know that because it hasn’t been registered yet as a domain. Should it go into widespread use going forward it is now noted that William coined this term.

          1. William Mougayar

            True, domain lookups are good checkpoints for original ideas.

        2. JLM

          Love the word invention creativity. You have your own word! Well played!

    6. LE

      “What gets me juiced is being innovative and creative.”But as Jack Horner (Burt Reynolds) said in “Bogie Nights”:”Money it’s an important part of the process”.

    7. FAKE GRIMLOCK

      WHEN LOWER STANDARDS BAKED INTO FOUNDATION OF PRODUCT, PRODUCT WILL ALWAYS LESSEN WORLD IT EXIST IN.

  5. Dan Cornish

    Edison and Tesla. Edison had the backing (JP Morgan) and marketing. Tesla died broke and broken. Who won? We all use AC power and not DC. Edison was interested in maximizing his economic benefit, but having to build a power plant every few miles filled with his generating equipment. ¬†I think about this a lot as I often question why certain companies grow. Sort of ¬†group think. For instance, the entire investment community got behind Facebook. Why didn’t some fast moving investor fund a better version of Facebook to split a $100 billion market? I would love to hear your thoughts in a post. Does it open up market opportunities, just because everyone assumes winner takes all? In other industries this kind of behavior happens all the time. Coke and Pepsi, McDonald’s and Burger King, Hardees, Wendy’s, Carl’s, etc..

    1. Martin Wawrusch

      At that time most people did not understand Facebook, they did not understand the choices Facebook made (API, Newsstream), the impact of social in general. Not a single competitor (and there were many) at that time understood sharing and platform. Besides this is a winner takes it all market, so there is just no way that there could be two $50b Facebook’s existing side by side.

    2. fredwilson

      not every market goes winner take all

      1. Emily Merkle

        most markets – even in our clubby space – are more nuanced and complicated than most know.

    3. Matt A. Myers

      It depends what your intent is. Something that’s potentially bad for society is that one innovation that perhaps has higher profits and a better marketing team, may become the norm – when in reality the other product is better overall for people.Sure, eventually people could switch over but with things like physical products then people will already own them, and they’ll be “good enough.” This is more of an issue when things affect us longer term – like things that pollute or allowed continued perpetual disease, etc.. Or perhaps for online – privacy issues and holding/controlling your data to try to keep the ecosystem alive when it might crumble otherwise.Re: “Why didn’t a fast moving investor fund a better version of Facebook”I think you’d need to provide something that gave a higher value to its users. And then the risk would be very high. Also, if Facebook can only be disrupted because of needing to offer higher value then it can be disrupted at any point, and doesn’t need to be at the point of origin. If you look at Pinterest and Pinspire vs. Facebook, there’s no action required to start browsing Pinterest/Pinspire photos for inspiration, however you need to signup and then have friends also using Facebook. Otherwise, the cost of developing a Pinterest clone or Facebook clone is relatively small.Something I tell people too is if you have two services/products that are identical, the next thing that matters and will determine who’s more successful is its brand name. The service with the ‘better’ name will ‘win’; Google chose quite well with Google+ and Circles.

    4. JamesHRH

      B2C internet matures at a rate that is 100x of any bricks and mortar segment.By the time it was evident that Facebook was a really interesting new category of internet services, it was over. Network effect.That may not be true for the next major category,,,but tech matures very fast.

    5. LE

      It’s particular to the internet biz and rooted back in web 1.0 by the need to hype something with no revenue and only future potential. ¬†

  6. Rohan

    “the problem is that people make money doing it……..these people should just internally understand that they are not entrepreneurs and not creating true value.” I agree with Jeff on that.–This goes into the ‘who is a real entrepreneur’ territory – contest of machoism.It takes all sorts to make this world. Not everyone is super creative.. and if there are those who make money by executing an existing concept better, so what?YouTube was not the first in the online video space. You could argue that YouTube was a Metacafe clone.Does that mean Chad Hurley and co. are not entrepreneurs?

    1. Emily Merkle

      Why is diversity being held up as the sole measure of “adding true value”? Who are we to crown the True Value Kings?¬†The beauty of a free market is that it is just that. People vote with their mice and wallets. Anyone threatened by “copycats” or “cloners” has a little more to worry about.

      1. Matt A. Myers

        The problem I see is when there’s infrastructure setup/a specific ecosystem to rapidly copy/clone.

  7. andyswan

    “the problem is that people make money doing it……..these people should just internally understand that they are not entrepreneurs and not creating true value.”This is total nonsense.Building a better mousetrap will always have value, and will be rewarded in the marketplace as will the original.From each according to his ability, to each according to the value he creates!Entrepreneurship does not mean you have to steer clear of existing ideas. What an absolutely boring, non-competitive and uninspiring world that would be!Original ideas are best. They are inspiring. But ideas are a dime a dozen. Boys have ideas, men create companies.They get you the lead and that’s all you can ask for in a world of carnivores. It’s all you should want and all you should need.May the best man win.

    1. Rohan

      Agree 100%.Meant to say the same thing. As usual, you said it better…

    2. LIAD

      agreed.the market decides value not us pontificating about definitions of an entrepreneur.

      1. Modernist

        what market?

    3. ShanaC

      Not necessarily – if your mousetrap is good enough at the right price it may not be necessary to build a more innovative mousetrap.

      1. andyswan

        Well then the market will sort that out. But don’t call me “not an entrepreneur” because I tried.

        1. LE

          It’s easy for people to be idealistic when a) they are young and haven’t been around the block (meaning seen how the world operates and how you get trampled) b) they haven’t tried any of their ideas and fallen flat on their face.¬†It’s like Obama thinking all it would take to end the middle east crisis is to just sit down and talk rationally to both sides and everyone would just get along. It would all work itself out.

        2. ShanaC

          I’m not, I just think it is an idea worth mentioning…

      2. Emily Merkle

        well said.

      3. Stuart Campbell

        ¬†Bah.. that’s just an excuse not to try.

        1. ShanaC

          Its worth mentioning the idea of satisficing here – you can and should try, but the wedge you should be aiming at has to be better than one that is already satisificed.EG: Gmail – webmail already existed, but not webmail with lots of storage. If you needed lots of storage, you needed to go local, and that caused a major pain point when you needed to move with your mail. .

    4. LE

      “not entrepreneurs and not creating true value”Totally ridiculous I agree. I wonder if he really meant that. ¬†Doesn’t even go with the dictionary definition of entrepreneur but more importantly the everyday usage of the word.¬†

      1. Cam MacRae

        I think it’s easy to develop a habit of conflating innovation and invention with entrepreneurship when you’re a tech startup wonk.

      2. FAKE GRIMLOCK

        JUST COPY = ADD ZERO VALUE.ALWAYS ADD VALUE TO WORLD. THAT IS ENTREPRENEUR.

        1. LE

          “ALWAYS ADD VALUE TO WORLD. THAT IS ENTREPRENEUR”Making money. That is entrepreneur. ¬†Value doesn’t always pay for college and health care.¬†“JUST COPY = ADD ZERO VALUE.Besides copying is competition for the copied enterprise.¬†A company with competition (that has been copied) has to work harder to keep the business from flocking elsewhere. That is only one of the ways that competition from copying adds value.That’s what happened with phones once iphone came along and that’s why aspects of local cable service sucks so much. Of course that is not the objective of the company copying. They don’t go into the business to make their competition wake up and make a better product. ¬†But that’s what happens when companies are copied.¬†Compare the responsiveness of restaurants (as only one example) when they face competition and when they don’t. You go out in any dense area of NYC where the rent is high and if the service and food isn’t good you can go literally 50 feet and find another restaurant to eat at. The service and food is phenomenal compared to what you get in the suburbs where there is so little to choose from.

        2. Druce

          Right on my reptilian brother.It’s not adding zero value, it’s SUBTRACTING VALUE.Because when people do sketchy things with patent lawsuits, abuse of market power, blatant stealing, it means the true innovators have to spend their precious resources dealing with that, instead of building great companies.In worst case, companies won’t get started/funded because people think, well company XYZ can just block it and company ABC will copy it and we’ll have to spend all this money on lawyers and patents.Kind of like when shrink-wrap software investment was stifled when Microsoft had absolute power over the ecosystem. It was unlikely you could build a new category without either selling out to Microsoft and become part of Office, or a Windows feature, or getting crushed by them.It’s Kant’s categorical imperative, act in a way that would be optimal, if everyone did it.The economic system is supposed to reward what moves the world forward. If it does, it’s a good system. But the fact that something is rewarded in a certain system does not make it something that moves the world forward.

          1. FAKE GRIMLOCK

            THAT GOOD POINT.IF ADD NOTHING MAKE MONEY, THEN WHY BOTHER ADD SOMETHING?REWARD ADD, OR EVERYONE JUST SUBTRACT.

          2. Matt A. Myers

            I feel like logging out so I can give you an extra anonymous Like.

          3. LE

            ”¬†It was unlikely you could build a new category without either selling out to Microsoft”Nothing wrong with that. Their money is as good as anyones.¬†

          4. Druce

            There might be some people who want to do a startup that isn’t a long term defensible standalone company, and has exactly one natural buyer that could also be a fierce competitor. But a lot of people would think twice. And that means fewer companies get built. There are other benefits to a monopoly ecosystem. But innovation isn’t one of them. Subject: [avc] Re: A VC: Cloning Successful Startups

        3. Pete Griffiths

          What about copying the concept but with high quality localization? And great marketing? Is that adding value? I say yes. The people who decide if an entrepreneur is adding value is the consumer who does or doesn’t buy their product. Evidently plenty of people buy from the Samwers.

    5. FAKE GRIMLOCK

      PROBLEM IS COPIED MOUSETRAP NOT BETTER, JUST CRAPPIER, STILL MAKE MONEY.

      1. Aaron Klein

        I have given up on the idea of owning 100% market share in the category I’m creating.I’ll probably have to settle for 70% because of cloners or wannabe competitors.I’m cool with 70% of this huge of a market.

      2. Pete Griffiths

        Not necessarily. As i understand it Samwer execute to a very high standard.

      3. Josh Ledgard

        Is the iPad just a clone of the Tablet PC? ¬†If the clone is better executed or better timed for the market it IS the better mousetrap. ¬†BillG saw the future… but it took Steve to clone his vision and do it better. ¬†And now I’m sure I’ll be flogged by everyone here for saying that. ūüôā¬†

        1. Martin Wawrusch

          Well, actually it was Hollywood who saw that vision first (ever watched an episode of Star Trek?).You deserve a little bit of punishment for bringing BillG into this ūüôā

    6. richardgarand

      And Fred isn’t a blogger, because the idea for the post came from someone else! :)Without arguing about semantics I have to respect anyone who takes a risk to create an improvement even if that’s just more competition that pushes other players to do better and earn their marketshare. Unless they’re relying on government monopolies or other barriers to get all the upside with none of the risk, they are doing someone worthwhile.When we aren’t involved or creating or buying something, and even if we are, how can we judge if a new offer in the market is a valuable option for someone else or just a cheap knockoff? As Clayton Christensen points out in one of his books a lot of category creators and innovators get eaten from below because people don’t need everything they’re trying to sell (and the expenses tied to their innovative leadership).Personally I don’t take someone who starts a website called “facelist.com” as a role model. That’s just my preference. But the opposite, thinking everything you do has to be completely new, is just as much of a mistake. Which is to say that it works for some people and you can specialize enough to create value doing it, but only a small fraction of worthwhile businesses are likely to be created through either approach. And it’s great that Fred is supporting the ones who do choose to start far away from everyone else.The idea reminds me of a few similar mindsets including:- I can’t tell my idea to people because it’s the only good idea in the world and they will steal it- There are no new ideas so you have to copy someone else- It’s not possible to create new value, you can only take what someone else already has and they will fight you for it- Someone somewhere has created something similar before and they will soon provide every variation of this product/service everywhere in the world (not to mention that they have perfect execution, foresight and long-term vision, lots of excess capacity, enough sales channels to reach everyone who could possibly want it, and the funding to do this in the next few days/weeks) so there’s no point competing with them- Everyone who chooses not to buy our product is stealing from us

    7. John Rorick

      Agree 100%. Lowes was founded in 1946, Home Depot in 1978….should the one have ceded to the other?Not to be snarky, but work market is, from my understanding/reading, awfully similar to elance.com, guru.com, etc. My presumption is they think they have a different special sauce for the contingent workforce, which is great; but using the above commentary as a guide those other sites could make the same claims about Jeff’s startup.¬†Let the market decide who wins in the end. It usually tells the truth.¬†

      1. chrisbenskey

        Work Market is similar to elance and guru because all three of us have built marketplace models in the contingent labor space. Contingent labor is a broad term.Work Market is unique in that we are focused on managing ANY kind of onsite labor event that last from 30 minutes to 30 days. And at any given point in time, our buyers will be managing hundreds to thousands of labor events using a ‘variable-ized’ labor supply chain staffed by the Work Market network. Its a very hard process to make efficient but we’ve done just that.I’m not aware of any other company building a network-based, variable, on-site labor force engaging in short duration assignments.

        1. juest

          You’re a temp agency, is what you’re saying. With innovation like that who needs entrepreneurs?

          1. chrisbenskey

            This is a great illustration of how nuanced the contingent labor space is.Temp agencies manage opaque pools of labor supply and monetize them at a significant margin. They can use that margin, along with perception of brand to compete with other temp agencies. Temp agencies do not use a marketplace model and benefit from the consequential inefficiencies. Though arguable, many will posit that this works to the disadvantage of the laborer.We are different than a temp agency in many ways. A few of those are 1) Work Market is a transparent network 2) we are a software company; we built a way to manage engagements at comparatively massive scale 3) we work with people that do work that you don’t typically see from temp agencies. things like field marketing, it services, legal services etc… 4) we do not directly manage engagements – our customers do 5) the efficiencies created by our marketplace give the labor supply more continuity of work and variety of assignment opportunities, which lead to a power shift to the laborer

          2. John Rorick

            So you are elance…;).My comment above was making the point that work market could be called a copycat as well, a concept I disagree with. No need for the business case; you feel your model innovates in the space, and that is entrepreneurial. But be careful about trashing a square ripoff. Glass houses…

      2. fredwilson

        they are very different from elance and odesk. they don’t make labor markets for offshore developers

    8. David Semeria

      If I could unlike your post Andy I would click on the button 100 times.I know that at the end of the day startups are all about making a buck – but then again they’re not.They’re really about people creating something out of nothing, about turning dreams into reality. And when honest people fail, they fail with honour. At least they tried.Bear in mind Fred used the word “clone” in his article. A clone is a bare-faced copy. It brings nothing new to the table. If it did, then it wouldn’t be a clone.So I’ve got no problem with Google improving search, or FB improving social. But I do have have a problem with the German brothers copying sites wholesale (often even including the CSS).To sum it up, I’d much rather drink a beer with some guy who gave it his best shot and lost, rather than sip champagne with some loser who made it big by just ripping people off.

      1. andyswan

        If it is purely a clone, how could it possibly win?

        1. David Semeria

          Only a Pappy-drinking American could say that :)Have you ever looked at the Samwers’ portfolio (and their exits)?Here’s the latest Star Bangled creation rendered in the uber¬†tongue:¬†http://www.pinspire.de/Look familiar?

          1. andyswan

            Fine. Why do people use/buy from a pure clone instead of the original? Ps I completely agree on who I’d rather drink with. I’ve got friends in low places..

          2. Emily Merkle

            what at the end of the day is the differential in the eyes of the consumer?

          3. andyswan

            Exactly. If the customer can’t tell the difference, what value has the ORIGINAL created.There is more to biz than an idea and code. A lot more. Original ideas get the lead but they need to do the rest to win.On Apr 5, 2012 9:08 PM, “Disqus” <>

          4. Pete Griffiths

            in the case of the S’s bros – localisation

        2. Emily Merkle

          why would it not – being a pure clone as you say?

        3. Michael Diamant

          It’s really hard to clone trust. ¬†That’s what the original usually brings to the table. ¬†

      2. Michael Diamant

        On the one hand dealing with copycats, knock off artists and out-and-out counterfeiters are a drag, infuriating, and even demotivating after you’ve created a market and shown the opportunity where nobody’s seen it before. ¬†You either can spend *all* your resources fighting it or put that capital towards new innovation. ¬†Yes, protect your IP, but patents, copyrights, etc are only worth what you’re willing to spend to defend them. ¬†Usually, only the lawyers profit when you choose the litigious strategy. ¬†The one day, you realize that the imitators are a byproduct of success, unavoidable and maybe you need to be more concerned when nobody is trying to steal your ideas anymore.As far as an investment opportunity, knocking off is rarely a stable long term strategy.

    9. Mark Essel

      yup.Plenty of great counter arguments for entrepreneurs who copy the best and throw out the rest.

  8. Guest

    Fred, you fascinate me always with your mind and ideas.My question is:”And when the category creator executes well”What if the category creator does not execute well, how does USV pursue the relationship with that creator?

    1. fredwilson

      We fail with them. Our portfolio has a number of examples. I will spare the names in honoring the entrepreneurs involved

      1. Emily Merkle

        been there done that. 

        1. Guest

           Do you mean you had a bad execution for your idea?What went go, please?Incoherent team?Too much money?lack of money?lack of experience?Vision not clear?

          1. Emily Merkle

            if it were only that simple.¬†one example – a first to market ad exchange. literally first to market.downfall was – so first to mart there was no market to be first to.¬†too early.another go round – cloud hosted text ad network.¬†downfall was – we’ll there were a few but one serious problem was technological; spinning servers up on the fly & synching the database in time. this was a challenge.¬†so – vision there. first to ¬†market – there. brought down by challenges anticipated but untested until we were in the trenches.¬†learn. move on.¬†

          2. Guest

            My mistake for example is trying to think big. What about building a small community with 50,000 or 60,000 people, then add some banners and make some advertising and win for example 500 or 600 dollars a month. -Tax free-Easy money, plus working full time as an engineer, and practicing sport and having a lot of free time to enjoy life, is that not good ?

          3. JamesHRH

            These issues tend to hang out together.Unprepared founders make all of these mistakes.

          4. Guest

             Or maybe i think that i am an entrepreneur and i am not.Or maybe i think that i am a creator and i am not.I am just a daydreaming person, who want to win from the first shot.

          5. Emily Merkle

            all to often when you are trying to be an entrepreneur in this field we have al chosen, bleeding edge technology, you go to market with all you’ve got, with your best effort, stars aligned, fingers crossed, and you know – you can never be truly prepared enough. Not all initiatives worth funding get funded. Happens!¬†

      2. Guest

        ¬†You mean after being one of your portfolio, they failed to execute well. I meant before being one of your potfolio, well execution needs a strong team and investment. So after having a new idea, the following step will be the strong execution…..

    2. JamesHRH

      directly, I bet.

  9. kidmercury

    disagree. no shame in being a cloner. if your game is so easily cloned, you didn’t have much to begin with.¬†what the samwer brothers are doing is fine in my opinion. if anything it reflects the challenge of going international and the value of having a localized approach when doing so.¬†

    1. Modernist

      part of the problem is establishing a baseline¬†hypothetical¬†in terms of, what would the world look like if the samwer brothers weren’t doing this? ¬†what positives might arise, versus negatives. how would others fill the space

  10. Emily Merkle

    Executing successfully on an existing business model is not cloning. It may not be burning down the house with white – hot IP, but innovation comes in all shapes and sizes.

    1. Martin Wawrusch

      If you copy the HTML, as StudioVZ did with Facebook, verbatim into your code and forget to remove the original notes from Facebook than this is blatant cloning.

      1. Emily Merkle

        yep.

  11. Paul Sullivan

    What about the blatant copying of brand that often accompanies the cloning? Working to establish the brand in the market takes significant resources. While the clones may be able to succeed by simply copying functionality, mimicking the logo of the pioneer shouldn’t be one of the arrows they are able to use.

  12. Emily Merkle

    i agree that copyright infringement is not okbut if all that sets you apart is your logo you have bigger fish to fry

    1. Martin Wawrusch

      The one factor in creating a successful startup is having the right product at the right time, and for most people this means trying a lot of different things until one product sticks. Once you hit that all you have left is the first mover advantage as pretty much everything on the web can be cloned in 6 months or less.

  13. Steve Reis

    figuring out how to take an idea into a new market is entrepreneurship (even with a cloned idea). ¬†perhaps not as creative, but brings with it a new set of challenges and opportunities that are valuable. ¬†the early american economy was built by immigrants “cloning” ideas from western europe and adapting them to a new market.

    1. JamesHRH

      Sorry Steve, cloners of category creating ideas are taking someone else’s idea into the market.And, its proven to work otherwise they wouldn’t clone it. Not the same.

  14. Tom Labus

    There is a huge difference between outright theft of an idea and refining a business model and moving ahead in the market.

    1. JamesHRH

      Tom, I agree – see¬†@kylegporter:disqus¬†fast follow question….

      1. Tom Labus

        Thanks

    2. fredwilson

      I agree with that statement but sometimes it isnt easy to tell the difference

      1. Tom Labus

        Maybe you can’t.Some thefts may evolve into something unique on their own and good.

  15. Kasi Viswanathan Agilandam

    “I think the biggest lesson I have learned from the last decade is that to be a good¬†leader, you don‚Äôt need to be liked or loved by everyone. “Guess who?.

  16. Kyle Porter

    Do you see a difference between copy cat and “fast follow”? What about between business & consumer apps?

    1. JamesHRH

      Kyle – this, I think, is a great question.Fast follow is, I believe, intended to choose spots where competitors are close to a market fit, but are not there yet. If you fast follow, you basically join the race late and try to get to market fit first.Its interesting, because I think it is meant to reduce risk. But I don’t think it does, as losing the race (i.e., tablets) is worse than joining the race too early…..

      1. FAKE GRIMLOCK

        DIFFERENCE BETWEEN RUN LIKE MAD TO GET AHEAD AND CLIMB ON LEADER’S BACK AND GO FOR RIDE.

    2. fredwilson

      Do you?

  17. Kasi Viswanathan Agilandam

    “Cloning is not bad…. but is not innovative enough for me invest.”Is that what you are saying? ¬†

    1. fredwilson

      I was hoping to say a bit more than that

  18. Venerable101

    Sometimes the pioneer in a market is cloned while in local semi-stealth as was the case supposedly with groupon. It seems sometimes a VC can notify that first cloner before you even get enough of a first mover advantage. ¬†From Elad Gil’s blogGroupOn was completely off the radar for its first year or so. ¬†As a Chicago-based company, no one had any idea about who they were, or what they were doing. ¬†Then GroupOn came to Silicon Valley, and spoke to a bunch of VCs about¬†raising a round. ¬†A number of these VCs told their portfolio companies or friends about GroupOn (and their amazing financial numbers), and a few months later there were a dozen GroupOn clones in Silicon Valley, including¬†LivingSocial¬†who pivoted into the space (and just raised¬†$400 million to compete). ¬†Given that GroupOn’s primary customer acquisition vehicles are email lists, social media shares and SEM, having a lot of PR hype and other types of attention may not add much to customer or merchant¬†acquisition relative to the cost of creating competitors. ¬†Is GroupOn still the market leader through sheer execution? ¬† Absolutely. ¬†Would they have been better off with an extra year to innovate, gain share, and expand internationally? ¬†Probably.full post here¬†http://blog.eladgil.com/201…If this is true, this is despicable behavior by whichever VC did this.

    1. fredwilson

      Hard to defend those VCsSome of the unannounced USV investments are or were unannounced for exactly that reason

      1. LE

        Old school business basics. Loose lips sink ships. ¬†Totally appropriate with of course a few exception as always.Tech deviated from this to their benefit with vaporware. Apple on the other hand turned secrecy into a way to generate hype and more sales.That’s why it’s always important to understand the reason for the “rule”. I fear that most people whose only knowledge of business comes from what they read are at a significant disadvantage.

    2. kidmercury

      i’m not sure it’s that despicable. if your whole business can so easily be destroyed in a brief conversation with a VC, you did not have much of a business at all.¬†there are some ethics here, but that’s so subjective and i feel hard to accurately assess without being intimately involved in the situation at hand. entrepreneurs are better off just using their good judgment in all dealings and understanding the need to have users/customer loyalty. if you have that your business will not be destroyed via a presentation to VCs. ¬†

      1. Venerable101

        The point being made here is that in the absence of an NDA, trust is all you have. How can you go into a VC meeting knowing that one of their portfolio companies might be in need of a pivot and trust that your idea wont be passed around. Despicable is tame in my opinion.

    3. LE

      ”¬†Is GroupOn still the market leader through sheer execution? ¬† Absolutely.”Because of the amount of money they have thrown at the problem. If Elad wants to call that execution, fine.¬†

  19. Matthew Newton

    Fred, your approach is to invest in the category creator and that is great. That it doesn’t inspire you is fine. I think people are taking your approach too far and saying it is not only lacking in inspiration, it is somehow morally wrong or unworthy of entrepreneurs.To the commenters – guess what, someone started the first bakery once. Then there were two, then a million. The rest are all copycats? Really?The very reason this sort of thing is able to happen is because Americans are obsessed with solving problems for Americans and ONLY Americans. Do any of you have any IDEA how annoying it is for us to use the internet outside of America? These guys aren’t creating value?¬†I beg to differ. They are creating value for the world which gets forgotten by founders who think our planet consists of The United States and noone else.Paypal. Amazon. Zappos. Spotify. Hulu. Netflix. Square. Google Checkout. Google Voice. These things which you all take for granted – ¬†try using them in Australia. (Paypal does exist but with highly limited functionality for merchants and Amazon refuses to ship anything bar the Kindle, CDs, DVDs and physical books). Apple charges us 30% more for the exact some product, as do Adobe, Microsoft, EA and the list goes on and on…It’s even worse if you don’t speak English!¬†Try using the internet in Spanish – it’s a horrendous experience and resembles internet-land circa 2001.Sorry for the rant guys. The truth is that until you experience it for yourself, you can truly have no way of knowing what it’s like to visit multiple websites every week that refuse to deal with you because you were born on the wrong side of the border.Just don’t criticise us when we have the nerve – the nerve! – to try to make a good internet for ourselves as well.Fred, as a very influential VC you would do your company’s bank balance and the rest of the world a huge favour if you encouraged your portfolio companies to build for everyone and not leave themselves vulnerable to these kinds of plays.

    1. fredwilson

      Im a tad bit upset at your insinuation that I dont care or our portfolio companies dont care about users outside the US. Twitter is available most everywhere it is allowed to be. Same with Tumblr, Foursquare, Soundcloud, Zynga, etc etcAnd the companies that arent like Etsy Kickstarter Turntable are spending large amounts of time and money working to get everywhere.This is something I understand and care deeply about

      1. Matthew Newton

        Fred – apologies. I have re-read it and see what you mean.I more meant “encourage them even more” but that last sentence was poorly worded. I’m happy to hear that you understand and care. Just while I have your ear, if you know anyone who has has any freelance sites in their portfolio – eLance, oDesk, Freelancer etc – all of those companies need a serious rocket up their ass.Social and Content networks are perhaps the two big areas of exception in this field.(I have edited this comment multiple times for clarity, apologies to anyone confused by it)

        1. JamesHRH

          Matt – track record. Fred’s invested abroad……

        2. FAKE GRIMLOCK

          FINANCIAL, IP ISSUES NOT FAULT OF STARTUPS, FAULT OF OTHERPLACES.TAKE UP ISSUE WITH GOVERNMENT OF OTHERPLACES.

      2. Humberto

        Well, Fred, to be honest:- Tumblr, Foursquare, Soundcloud, Zynga, etc etc…those are content driven and user driven pieces of software. they are obviously everywhere because… it’s easy! how many people do they have working in cities other than NY? in countries other than the US?sure thing, internet = scale, but that is not the main premise anymore.¬†users like to feel proximity. working only off of the US kind of implies the company thinks there is no need for inspiration from around the world for design, business model or even work methods and team org..i’d love to see etsy going abroad. and i don’t mean the UK. i want to see pieces made in china and india, and i want to buy them from portugal, spain, NY or wherever i am at the moment.but its also very inefficient from a cost perspective, to launch everywhere. so, meanwhile, the War of the Clones will likely go on for a decade more at least.¬†when the world has a unified payment system, shipment system, consumer regulations… then you’ll be able to launch simultaneously everywhere. until then, we have the Samwer brothers.

        1. fredwilson

          it takes a lot of behind the scenes work for etsy and other markets to do that with a single global marketplace. they are pretty close to getting there. and when they do, it will be awesome.

          1. Humberto

            keeping my fingers crossed!i love both approaches (cloner and clonee) just because its the consumer who wins in the end.

          2. Humberto

            BTW, interesting numbers on market sizes for eCommerce alone:(2010)- EU: 195b USD- US: 166b USD- Asia: 156b USD- Rest of the world: 56b USDThe US is not the largest market, thought it is by far the best opportunity at start (education, all same currency, all same language, all same laws)..(2013)- EU: 283b USD- US: 235b USD- Asia: 323b USD- Rest of the world: 122b USDLargest growth in absolute terms for Asia, in percentage terms for the rest of the world. Rock is doing it right.

      3. Pete Griffiths

        I’m not surprised you’re upset. Any such companies who aren’t looking outside the US for markets aren’t going to be category leaders for long. It’s a global market out there guys and that means you have to do exactly what you said to make it in the big bad varied (!) world out there i.e. spend large amounts of time and money and work hard.

    2. Luke Chamberlin

      Do you really think Paypal or Netflix or any of the companies you mentioned don’t want to be in China or the EU or Australia? There are legal, political and cultural barriers keeping them out. It’s not due to a lack of interest or America-centric worldview.

      1. Matthew Newton

        The point wasn’t to call out those specific businesses, it was to tell commenters that our internet experience is so different – so much worse – to America’s that people should really be thinking twice before they criticise outsiders for cloning.Walk a mile in our shoes etc.

        1. Luke Chamberlin

          Thanks I’ve lived in Australia and elsewhere outside the US and I know exactly the feeling you’re describing.You seemed to be implying that the rest of the world was neglected by American entrepreneurs because they only want to do business in America:”They are creating value for the world which gets forgotten by founders who think our planet consists of The United States and noone else.”Those founders want to be all over the world. It isn’t a lack of interest that keeps them out.

          1. FAKE GRIMLOCK

            PART OF WORLD THAT NOT AMERICA CLEARLY HAVE STRONG ANTI-AWESOMENESS BIAS.

          2. Pete Griffiths

            hahahahahahahahhahaha

          3. Kasi Viswanathan Agilandam

            ANTI-AWESOMENESS … that is the word for me today to take away from this cloning madness comments.

      2. Pete Griffiths

        China yes. But not the EU. (I’m not competent to comment on Australia). There has long been huge opportunity for US companies in Europe and still is. And guess what – if you view ‘culture’ as a barrier you’d better give up on any international aspirations and that is precisely an America-centric worldview.

        1. Luke Chamberlin

          PayPal was only able to offer limited services in the EU for a long time because they wanted to classify PayPal as a bank and subject it to bank regulations (PayPal is not classified as a bank in the US). PayPal finally gave in after years of appeals and applied for an EU bank license (http://en.wikipedia.org/wik….This is just one example of local laws creating barriers for business to expand to new territories. I am not judging one set of laws against another, but adapting to new laws takes time and money. Additional time and money is a barrier to entry, obviously.And I’m a bit perplexed by your culture comment. Of course adapting your business model/marketing/etc to a new culture is a barrier. It takes additional people, time and money. I never said it was an impossible or insurmountable barrier.

          1. Pete Griffiths

            There will always be obstacles in any new environment but to my certain knowledge many many US companies have adjusted easily to the EU. My point with respect to culture is that viewing it as a barrier is ethnocentric.

          2. Luke Chamberlin

            If you don’t view culture as a potential barrier you will not do well expanding to new territories.I am not using the word barrier as a pejorative. I use barrier to mean anything that will cost your business time and money. There are legal barriers and geographic barriers and, yes, cultural barriers.Some products that do well in one country won’t do well in another. You have to change the product, which takes time and money.When the Wrigley gum company entered the Chinese market they struggled because many of their popular flavors didn’t sell very well. So they invented new flavors like cantaloupe, coffee and rose. Today they are the largest manufacturer of gum in China with over 60% market share.In this example, not understanding the food culture of their new market was a barrier to entry. Ethnocentrism is to pass judgement on another culture. This has nothing to do with passing judgement, but recognizing differences and taking the time to adapt.

          3. Pete Griffiths

            I understand what you mean. My concern with the use of the word ‘barrier’ is that whilst you don’t mean it pejoratively it does have that connotation, particularly in the context of international trade. So to talk of ‘culture’ as a ‘barrier’ is not without risk. One person’s non-pejorative usage can easily elide into another person’s frustration with the way those foreigners behave.(You are of course absolutely right that it presents challenges and such challenges cost time and money to be overcome)

    3. RichardF

      I think you make some interesting points Matthew.¬† Although I think US entrepreneurs may care about countries outside of the US the fact of the matter is that it’s the single largest, most developed homogenous market in the world and it has to be the primary focus.This does of course mean that there are huge opportunites for entrepreneurs in markets outside of the US to serve the users in those markets.¬† Language and local culture are fantastic barriers of entry for a US company.

      1. Pete Griffiths

        You make a great point that the US is the “single largest, most developed homogenous market in the world” and that has long been a huge advantage of US companies. Growing with such a market as a base has given US companies a massive advantage over (for example) European companies who may start at the same time, may have as good or indeed even a better product, but don’t have such a market and hence quickly fall behind in investment.The true challenge that China and the BRICs pose is that as they industrialize and their domestic markets mature the US will for the first time in its history be punching at its own weight. And only then will we be faced with what we are really made of as entrepreneurs and businessmen.

        1. Emily Merkle

          bring it

          1. Pete Griffiths

            Haha ūüôā

    4. sigmaalgebra

      Good news!In http://www.theatlantic.com/…about Google is in part:> as international revenue now outstrips U.S. revenue.For “Spanish”, my project has been designed so that it is not important for users to know English or really any natural language! Upon launch, the Web pages will be in English, but about the only knowledge of English needed will be a few simple words on a few push buttons, and people who don’t even know the Roman alphabet could learn how to use the site just by exploring for a few minutes or having a friend who knows a few words of English show them. The world has billions of people who know no English who are bright enough to figure out how to use the site!Why design the site this way? Yes, in part to make money outside the US. But in part the key to the site is to get at meaning, and I’ve found a way to do that, but doing that with English or any natural language, e.g., via semantics or natural language understanding, is so far too hard. So wanting to set aside much role for English is easy enough.If my project is successful in the US, then I will have versions of the site with text on the push buttons and in the help files in as many languages as I can! Thank you Unicode!For one more point, my site needs only meager Internet bandwidth so could work on nearly any Internet connection. For a second, the work for the past few days has been to find, looks successful, a good way keep the needed user session state in place with a good user experience and with a user whose browser does not accept HTTP cookies! Right: A hidden field and cross-page posting! For a third, each Web page is no more than 800 pixels wide! So with the second and third, the site should work for most mobile devices! For JavaScript, I’m not writing any, or making any use of Ajax, but ASP.NET is writing a little JavaScript for me; so a Web browser will need to support some simple JavaScript.So, my site should be international enough for you? Gee. don’t need to know English, the Roman alphabet, or any natural language; nearly any Internet connection will be fast enough; can use a small screen; and the Web browser need not be advanced! One more: So far the Web pages look essentially the same in both Firefox 3 and Internet Explorer 8! Why? I’m using only simple HTML!

    5. kidmercury

      a good rant is like fine wine. this was a beautfully brutal diss, i only wish i had penned it myself. sincerely appreciated. 

    6. LE

      The truth is that until you experience it for yourself, you can truly have no way of knowing what it’s like to visit multiple websites every week that refuse to deal with you because you were born on the wrong side of the border.Although it is quite common to hear negative comments here and elsewhere about middlemen, this is an example of where a middleman could provide a valuable service.I’ve sold some machinery to companies overseas (latin american market and Beirut, Lebanon) by way of middlemen who facilitate the transaction and dealt with the import export issues.¬†It is well know that many people operate out of South Florida that export all sorts of goods (cars and machinery) into Latin America.I would think there is an opportunity for someone (if what you are saying about Australia is correct) to provide that type of hub a link between goods here and that market.It’s hard to believe actually that this isn’t being done. It certainly is for industrial machinery obviously but not for smaller ticket items and things being sold on etsy.

      1. JamesHRH

        This is true.The issue is that South America does not scale, because there is no middle class. The big advantage in the US is that wealthy early adopters turn into a premium upper middle class buyers who then turn into the huge middle class.That stack only exist in NA, western Europe (maybe Russia soon) & Asia.In Africa & SA, it is 1% UHNW & 99% poverty.

        1. FAKE GRIMLOCK

          ASIA.RUSSIA TOO BUSY IMPLODING.

          1. Pete Griffiths

            I agree. Russia is a passive kleptocracy. Asia is a whole different thing – aggressively dynamic.

          2. FAKE GRIMLOCK

            ALSO OUT OF FOOD, MASSIVE HEALTH ISSUES, CRIME. WHOLE THING BARELY HELD TOGETHER BY PSEUDO-DICTATORSHIP OF PUTIN.

        2. Pete Griffiths

          We are presently crushing the middle class in the US.

    7. FAKE GRIMLOCK

      ME, GRIMLOCK, SUGGEST WORLD GET OWN IDEAS OR SHUT UP AND STOP COMPLAINING ABOUT ONES US BUILD.

      1. jason wright

         CERN is outside the US.

      2. Ricardo Diz

        Or simply shut up and go and do what an entrepreneur does: create a company in their geography that solves the problem, since it wasn’t solved before. I just cannot see any wrong doing here…I’m all for innovation, and agree with Fred when he says he’s not inspired by copycats. I wouldn’t do it. Still, I see reasons to do it, as I’ve mentioned above. I imagine the reason Samwer brothers’ startups copy the design of the webpage/interface is time to market. It’s plain dumb not try to innovate and improve on what was achieved before…Oh, and by the way Fred, thank you so much for writing this blog entry. Here in Europe there’s a huge debate regarding the Samwer brothers and I’ve wondered your position on this.

        1. FAKE GRIMLOCK

          NO ONE COMPLAIN ABOUT SOLVE PROBLEM.STEAL CODE, SLAP DIFFERENT LOGO ON IT?THAT PROBLEM.

          1. Pete Griffiths

            If that is what they were doing I would agree. I certainly don’t endorse IP theft. But bear in mind that a huge amount of the value of the kind of companies that Samwer is copying is back end – it can’t be copied. Their recent Amazon clone for example isn’t just a front end – far from it.

          2. Humberto

            they definitely copy the design and the biz model. those are hardly patentable, though there is definitely space for copyright and trademark blocking. i would doubt they copy backend and steal code. you got proof of that?

      3. Pete Griffiths

        hahahha

    8. Guest

      Cloning an innovation that is happening in another geography is nothing more than that – filling a niche -no shame in being a cloner . see pic below

      1. Kasi Viswanathan Agilandam

        That my dear i call “innovation” for him/her self…¬†marvelous.Here is another one … an¬†espresso¬†coffee making machine in $10. Will someone else use it…. may be not …. but is a innovation for self.

    9. Pete Griffiths

      This is an extremely well made point. Localization and understanding the nuances of the local market(s) is value added.

  20. RichardF

    ” these people should just internally understand that they are not entrepreneurs and not creating true value”What a load of tosh….(to put it politely)They might not be pioneers but they are entrepreneurs.

    1. LE

      Thanks for that one. Doesn’t appear to offensive even if you know the apparent definition:tosh: “Slang chiefly Brit nonsense; rubbish”

  21. th_01

    I agree that it is unfortunate that people copy and steal ideas. But it happens all the time.  How many great startups have had their ideas, technologies and products copied or stolen by people or corporations.   Where ever there is money to be made there are people that want a piece of it.In this case it appears that one group has found a way to stay within the law to effectively mimic the original intent of the startup.if Apple/Microsoft or GE had done this you would never had heard about it.

  22. JimHirshfield

    I do think cloners are entrepreneurs. How often do we all say that it’s about execution, execution, and execution? Cloners are executers. Great artists steal, right? All art, science, and ideas are derivative.But I agree with your perspective, Fred, on why you won’t invest in clones. I think the succinct answer is that they are neither innovative nor have they executed. When you see the deal at a seed stage, they haven’t accomplished much and aren’t showing up with anything new or innovative.

    1. William Mougayar

      It’s also more expensive to dethrone or attack an existing market leader. Offense is more expensive than defense.

      1. Emily Merkle

        assuming you can throw money at a competitor to beat them.

        1. William Mougayar

          Which is the thing that Fred avoids usually.

          1. JamesHRH

            But Steve Ballmer & Larry Page like to do it.

          2. Emily Merkle

            would not be my approach and you’d be hard pressed to make the case that the ROI on much innovation from those two shops is optimal…

          3. William Mougayar

            I think the dynamics are different when a VC invests vs. Microsoft/Google. They tend to buy businesses that VC’s already invested in and proved.

          4. JamesHRH

            @EmilyMerkle:disqus¬† not meant as a [email protected]:disqus¬†Chris Dixon calls what I am describing a ‘strategy tax’. Its different from strategically or even tactically accretive M&A. Its throwing money at an establishing category creator / leader because you are ……..any word that comes to mind here is likely libellous. MSN (unreal sunk cost)? Google Buzz / +?

          5. FAKE GRIMLOCK

            LOOK HOW WELL THAT WORKING OUT FOR THEM.

          6. Emily Merkle

            one of the reasons I frequent this joint

      2. JimHirshfield

        But to my point, there isn’t a market leader quite often when the “space” is in the seed stage. Certainly the Samwer Bros are cloning after they see original player gaining traction. But at the point where USV is making decisions, there might just be 4 start-ups in the space – all with no traction, yet one that launched first.Not disputing your point that it’s hard to play catch-up.¬†

    2. awaldstein

      For example…if you built a flash sales, Groupon site, for France and Italy as many did with respect to local culture and businesses process, does this have value?Sure…and many got bought as Groupon spread.Are they entrepreneurs who did this. Yup.

      1. JimHirshfield

        Agreed. Roll the video tape back a dozen years and recall that there were a slew of eBay clones all over the world. Acquired.

        1. awaldstein

          Happening again with Lot 18 in Europe as I type.

        2. JamesHRH

          Jim – this is fair, I think. I beat you to your customer base in SE Asia. Pay up. Its not very innovative though.

    3. ShanaC

      Can you be derivative and still innovate, ala google?

      1. JimHirshfield

        For sure

      2. JamesHRH

        Hard to see Google as derivative…….

        1. Emily Merkle

          look closely

      3. Modernist

        Google understands that all innovation is derivative.

        1. ShanaC

          true

      4. Emily Merkle

         yup

    4. Emily Merkle

      I think Frd’s rationale makes contextual sense given avc’s ecosystemic approach to their investing.

  23. William Mougayar

    It’s easy to clone the OUTSIDE. It’s a lot more difficult to clone the INSIDE.

    1. Modernist

      SERVICE AS PRODUCT.  INSIDE MOVES OUTSIDE.  NEW TOPOLOGY NEEDED FOR INTELLECTUAL PROPERTY FRAMEWORK?

      1. William Mougayar

        Are you a @fakegrimlock:twitter clone?

        1. FAKE GRIMLOCK

          OFTEN IMITATED. NEVER DUPLICATED.

          1. fredwilson

            Whoa. This thread is going meta quickly

          2. JamesHRH

            LOL

          3. William Mougayar

            LOL. Imitation is the outside, superficial part. Real cloning takes it to the inner side, and that- they will never be able to do. Your CORE is original.

          4. FAKE GRIMLOCK

            ME, GRIMLOCK, FULL OF ORIGINALNESS!

        2. Luke Chamberlin

          A wise man once said, it’s easy to clone the outside, more difficult to clone the inside.

          1. William Mougayar

            Isn’t that what I said? I didn’t know it was someone else’s quote. Go figure. Common sense is a common thing.

          2. Luke Chamberlin

            Yes it’s your quote from earlier in the thread. Do you see what I did there?

          3. William Mougayar

            You lost me a bit, but no biggie.

        3. Modernist

          yep, and a second-rate one

          1. William Mougayar

            ūüôā He’s so inspiring.

      2. JamesHRH

        yes – in consumer space, damages for patent infringement can only be awarded based on the devaluation caused to an existing consumer brand.Trolling outlawed. Cloning protection provided.

  24. William Gadea

    In the 90s people talked about first mover advantage. I think that still exists, but I think there’s also a second iteration advantage. Sometimes the mistakes that the first mover makes are baked into the culture and technology of the company, and the preferences of its user base. They are difficult to undo. (Think MySpace/Facebook.) The second iteration can see where the first has gone wrong and correct the mistakes, without encumbrances. I’m sure we’ll have web coupons in the future, but I very much doubt that Groupon will be the sector leader. I think it’s really hard, if not impossible for Groupon to get it right at this stage.

    1. fredwilson

      Im not sure myspace is that much like FB. Closer to Geocities in many ways

    2. JamesHRH

      Groupon is a poor business. It is hugely expensive on the S&M side and the long term value of a customer is close to zero.Anyone with a passing knowledge of local ad sales knows that coupons only work consistently in a limited number of segments.MySpace / FB is a great example though.

  25. Luke Chamberlin

    Must… resist… writing… anti-Zynga… screed…

    1. JamesHRH

      LOL.Fred’s fierce loyalty distinguishes him from 99% of VC. You should be so lucky as to end up on the ‘do not rant about them on AVC list’.

      1. fredwilson

        I like the word fierce

      2. panterosa,

        the equivalent to #noeatfriday a la AVC

        1. FAKE GRIMLOCK

          #NODISFRIDAY?

    2. mdudas

      Fred’s explanation for the Zynga investment in the post actually makes a lot of sense to me. Very early stage companies often change in unpredictable ways, VC’s are in for the long haul, what’s a VC to do…

      1. fredwilson

        Stand by your man

        1. LE

          Hillary Clinton, circa 1992.¬†“stand by my man” comes at 4:20 seconds in the interview.http://www.youtube.com/watc…I’ve always admired Hillary for her practicality.¬†

  26. ShanaC

    I think there is a problem here – all I think about when reading this is Microsoft, DOS and the original Macintosh, or Google and Altavista….How much is copying and how much is innovating?

  27. mdudas

    There are varying degrees of cloning. The Samwer brothers take it to another level by using deception (fake daily deals in Brazil, unauthorized re-selling of designer goods, etc) to make their products and services as similar to the one they are cloning as possible: http://pandodaily.com/2012/

  28. Carl J. Mistlebauer

    Having never heard of the Sawmer Brothers I had to read all the links before I commented….The most interesting aspect of their “business model” is that yes, they are knock off kings, but they expose one major misconception of the world wide web, and that it is “global.”Its not, because the Sawmer Brothers knock off successful start ups in the United States and then repackage them for other markets. So, successful domestic start ups in the US have to then buy their international clone from the Sawmer Brothers.Looks to me as if the Sawmer Brothers have exposed a fundamental flaw and exploited it.

    1. Cam MacRae

      Very insightful comment.I don’t like the ethics of “kitchen sink” cloners like the Sawmer Bros., but they’re undeniably entrepreneurs.

      1. Carl J. Mistlebauer

        Cam,Having visited all of the Sawmer Bros sites today I have to admit, they are real knock off artists. Their Amazon knock off makes sense in the fact that they accept C.O.D. but the Pinterest knock off is a crime….But, they have made more money in the last year than I did! :)I just would like to understand what they see when they knock something off….Pinterest makes no sense to me.

        1. Cam MacRae

          Pinterest was still small and relatively slow rolling out invites – I guess they saw the unsatisfied demand, and figured there was a buck to be made.

    2. kidmercury

      IMO the web is both global and local….it’s only global if you can be mass produce locality…..which is a very, very, very difficult thing to do. sometimes it makes more sense to focus just on local, or to go node by node, long as it may take.¬†

      1. Carl J. Mistlebauer

        Tip O’Neill coined the phrase, “All politics is local….” and I believe the same thing holds true for the web….

    3. JamesHRH

      They are filling  a niche not creating a category.Pretty big degree of difficult differential.

      1. Carl J. Mistlebauer

        James, at the end of a very long day its all about making money. Having spent more time than I care to admit attempting to convince Angel Investors and VC firms that sometimes providing a “niche” with the cutting edge opportunities of recently created “categories” was the ideal business model I am not going to dispute your logic…But with that said…Who benefits society more: The creator of a drug that treats HIV or the non profit organization that develops a way to provide these drugs to villagers throughout Africa?The creator of the drug would be your “creating a category” and African villagers would be “a niche.

  29. PJSweeney

    Fred –¬†¬†“It is devoid of any creativity. It doesn’t inspire me.” is an awfully big generalization for someone as open minded as the Entreprenuerial Czar that you are!Virgin Airlines, Under Armour, Tesla, all are form of “Copycat” businesses with incredible creativity and ingenuity. There is an easily defensible argument that they are more creative and inventive than someone who comes up with a new idea, because everything ad already been thought of int he industry prior to their entry.¬†If you would have said 15 years ago “I’m going to bet $100,000 on a guy selling t-shirts so he can take on Nike” people would have laughed you out of the room – but you’d be a billionaire today.¬†

    1. Martin Wawrusch

      The kind of clones we are talking about here aren’t like those. They copy everything, including parts of the code. Hell they even copy parts of the name (Pinterest -> Pinspire) – Not much creativity here (and to be fair, that’s not what the Samwers are looking for, hence their focus on MBAs to run their businesses)

      1. Modernist

        It’s a question of decent versus indecent inspiration. ¬†“I’ll know it when I see it” and what not.

    2. fredwilson

      I dont think Tesla is copycat. Why do you?

  30. gleslie

    I agree with everything except the comment that they are “not creating true value.” Yes, copy cat’s are not creative or sexy and it is easy for the trailblazer to feel spiteful towards someone who sat on the sidelines while they were out there trying to change the way people think about a market/industry/product. That’s one of the hardest parts right? But to say that they are not creating true value would imply that the world would be better off if the innovator always stayed on top. The market place benefits from the fact that other entrepreneurs can learn from trailblazers and make minor tweaks in products or strategies to appeal to a broader market. Or simply do what they are doing better. Rewarding best, not first, is true value creation.The line also becomes incredibly blurry as a market grows. Everyone is a copy cat in one way or another. A robust economy requires multiple firms competing to produce exactly what smaller and smaller segments of customers want. ¬†

  31. Brian Sirkia

    This reminds me a lot of a Venture Studio interview with Fabrice Grinda, the CEO of Olx.com, which was titled “Why Good Entrepreneurs Borrow, Great Ones Steal” (http://mashable.com/2011/12… with the idea being that Fabrice took the idea of craigslist and applied it to international markets (with great success). I don’t think that this is exactly an example of a copycat business, I think he did a great job taking the best parts of craigslist and added some features for Olx.¬†I think there is the difference between saying “This is a problem that has never been solved”, “This problem is being solved, but not well”, and “This problem is being solved well, so if we duplicate it we can enjoy some of that success.” It seems we all agree that the last is a copycat, and the second one is the one causing some discussion. If I can solve a problem more effectively and add value, and I would say that I’m still an entrepreneur even though the original idea or “category” wasn’t mine. I think Fred is saying that he is most interested (but not exclusively) in the first type of entrepreneur, the one solving a problem that has never been solved before.¬†

  32. pointsnfigures

    Not sure if I agree with you totally. ¬†It’s all in the execution sometimes. There are a lot of good ideas, and a lot of crappy companies. ¬†Or someone takes a good idea and runs with it, adds on to it. ¬†Xerox created email, the GUI interface etc. ¬†Let it sit. ¬†Gates and Jobs changed the world with that same idea. ¬†Jobs accused Gates of stealing-but while they had similar features their business models were certainly different-and they tapped different segments of the market.Based on this blogpost, you think that Yahoo is correct when it comes to Facebook, since Yahoo was first, and Facebook copied them. ¬†Or, Facebook is just MySpace? ¬†Would USV invested in FB since MySpace already existed?? ¬† ¬†I think the Winklevoss twins might be thinking of using this as a “friend of the court brief”. ¬†If I were you, I would tell my entrepreneur to stop whining and get to work innovating. ¬†Examine why other sites are taking market share from them (if they are).

    1. fredwilson

      Facebook didnt copy from myspace or yahoo. They copied a facebook, the analog kind

      1. Cam MacRae

        Actually Zuck copied Hot or Not using the pics from facebooks that were already online.

        1. Jrcarter

          Facebook wasn’t original then. Who cares? zuck executed and FB didn’t suck. There was Facebook before there was Facebook. It wasn’t original in its first form.Artists steal. Entrepreneur’s sometimes steal. Virtually all politicians steal. He best entrepreneurs can adjust, think out of the box and Execute. They aren’t afraid of competition.

          1. Emily Merkle

            ….and there are intangibles. Facebook rolled out to a public ready for both the technological embrace of the platform and the desire to connect with others. FB nailed key biz dev deals like Zynga. Zynga killed it. Stars aligned. 

          2. Cam MacRae

            My point exactly. Ain’t nobody gonna argue Zuck’s not an entrepreneur.

      2. panterosa,

        Yes, just like the Exeter Facebook. The paper copy we used to draw notes in. Still have mine.

        1. Emily Merkle

          got mine from Duke. 

  33. panterosa,

    I agree with Fred but my example comes from the art world.¬†You the artist create an original body of work which has real punch.¬†But then without somewhere new to go you learn to recycle that style without putting the meat in so you end up with pieces that appear the same but are rehash. Instead you should be on a new body of work with new content and style.If you continue making things in the same vein long enough without producing new/original content then you get called “facile”. ¬†Being called facile is something which brought great shame at RISD. I won’t even tell you the shame of knocking off someone else’s work unless you bring big new spin which then makes it new and yours. Like sampling and music, which was the music of the my years at RISD coincidentally, and so that argument was a clear parallel and often cited.Fred, since I know you are an art viewer and lover I wonder whether you agree with my analogy.

    1. FlavioGomes

      Someone once said “good artists borrow, great artists steal”

      1. panterosa,

        smart borrows, genius stealsthats the one I know.

  34. gorbachev

    I do think the business model of the Samwer brothers is despicable, and I would never in my life want to work with of for them.However, there is one point of view I can think of these leeches being a positive thing for the business they’re cloning.It’s an alternative approach to taking your company global. Since you have no controlling or financial interest in the copycat(s), you essentially outsource all the risk to the copycat(s). If they become successful who cares if you have to pay a p/e multiplier.That being said, I do hope they run into IP issues with companies they’re cloning at some point.They’ve got it coming.

  35. Adam Feldman

    I like this bit:¬†“Our approach at USV is to invest in the category creator, the innovator”Not to say that there isn’t creativity and innovation in anything but category creating industries, but that is where the really powerful growth happens. And it’s also where it’s hardest to succeed.

    1. Emily Merkle

      Every investor and user is entitled to their approach. Market will shake a good deal out. Theft must be policed – but copying a biz model is not theft.

  36. lisa

    I am a big fan of this blog, but I’m disappointed in both the post and Jeff Leventhal’s reply. ¬†If they weren’t creating value, they wouldn’t have customers and wouldn’t be making money. ¬†Competition is good thing and makes everyone better.Jeff has chosen to innovate in a very competitive and hot space right now. ¬†Entrepreneurs have been creating various online markets for job seekers and employers for years, so I’m not sure that Work Market is a “category creator”. ¬†His angle is interesting, though. ¬†As far as I’m concerned, anyone who puts themselves out there to start a company, be it a scalable venture or a lifestyle business is an entrepreneur. ¬†I”m disappointed that you would attach some sort of litmus test to this.

    1. JamesHRH

      Degree of difficulty is a fair axis for discussion. And, accurate labelling is also a fair discussion.Guy who owns the hotdog cart РentrepreneurSamwer РentrepreneurBezos РinnovatorZuckerberg Рinnovator

  37. Thomas Vladeck

    isn’t the true shame not that these guys are copying “ideas” but rather that they are copying the “product-market fit” that successful startups have found and created?i think everyone on this site, myself included, would agree that ideas have relatively little value when compared with executing, but developing product-market fit is a long road of work down from just an ‘idea’. when the samwer bros. copy the entire ui / ux, as well as the entire business logic of a site, they are not just copying the ‘idea’ of a product, but the entire product itself.¬†a lot of people have tried image-sharing and pinboard websites before, but pinterest is the first to really capture the needs / wants / imagination of this niche; so pinspire is not just using the ‘idea’ of collecting images, but rather the entire product-market fit that pinterest found & developed, right down to the font of the title on the front page.¬†finding this fit is often the hardest part of the start up cycle, because it comes almost by definition without external validation. doing it this way means that there is a lot less that the samwer bros. have to successfully create. even if what they do is still hard, i think what they are doing is shameful.¬†

  38. jimmystone

    I don’t have as much of an issue with copying. Didn’t Steve Jobs steal many ideas from Xerox PARC? A good industry example is oil & gas. O&G entrepreneurs all search for “black gold”, often copying others drilling techniques and targeting similar locations. Regardless, they are taking significant risks and their success depends primarily on execution and luck. For example, Floyd Wilson (no relation to Fred ūüôā is not terribly creative but there is no doubt that he has been able to create tremendous value (i.e. Petrohawk sale to BHP).¬†

  39. matthughes

    Another great discussion.Is anyone else finding it difficult to track replies back to the original comment in new, fancy @disqus ?

    1. Emily Merkle

      I have to date not been able to moderate or even read comments on my blogs’ DISQUS – I did not even install it; their CS kindly did.

  40. Jeffrey Leventhal

    Guy who owns hot dog cart = jobentrepreneur = 1 + 1 = 5Samwer = cloner Bezos = entrepreneurZuckerberg = entrepreneurcloners are just another pothole along the way

  41. Andrew J Scott

    There’s access to his Thesis here¬†http://www.kernelmag.com/fe…¬†on¬†@kernelmag:twitter¬†

  42. Eric Leebow

    This is the best approach, yet the VC will need to understand why something is different, and it will take the consumer a while sometimes or the entrepreneur longer to reach their vision. ¬†A better or different mousetrap, is not the same as a copycat. ¬†Sometimes, the entrepreneur came up with the idea or concept before the market leader did, yet didn’t execute on it until later after the leader has become a household name, yet have a better mousetrap. DuckDuckGo wasn’t the first search engine, yet still don’t understand the difference between it and Google. Because it came many years later, some may say it’s a knockoff, but it’s a different approach, and at the end of the day it’s a search engine. There are other examples as well.

  43. Louis Chatriot

    Although I agree that startups with innovative ideas are way more inspiring, I don’t think that copycats should be viewed as not creating any value. For example, Groupon’s European clone Citydeal was able to open the European grouped coupons market to Groupon, which bought them after a few months. Thanks to citydeal, the European (esp. German and French) discovered the concept of grouped coupons, and were ready to become Groupon’s customer when they came in.That’s why I wouldn’t say copycats are not entrepreneurs, or create no value. But it’s certainly true these kinds of companies are less inspiring than, say Kickstarter !

  44. guest

    I liked WorkMarket better the first time around, when it was called craigslist.¬† But they have innovated in capitalization usage, I’ll give them that.(Taking off my sarcasm glasses now.)

    1. fredwilson

      there is very little similarity between workmarket and craigslist

  45. Richard

    Great comment. The issue is what is a clone? Is it a clone if it was independently created and not copied ?

  46. Alex Buds

    The comment about the copiers “not creating true value” seems to be a bit “looking down” on their approach to me… if it was true, presumably the Samwer brothers’ companies would not be valued as high as they are. There is value in adapting a successful concept to different geographic and cultural markets, particularly if the category creator is in no position to do so anytime soon and people are clamoring for the product/service in question.

  47. Igor Taber

    Fred, generally speaking “copy catting ” is am emerging market phenomenon, even though there are exceptions like Samwer brothers.¬† In large emerging markets, it is simple risk/return decision both for a VC and enterpreneur.¬† I diagree with you that this form enterpreneurship creates no value.¬†These enterpreneurs create success stories and enterpreneurial culture that are so critical for development of these markets.¬†¬†Without these businesses there would very little VC investrment, as emerging market risks combined with technology and business model risk is usually a deal breaker for most VCs. Removing business model/customer adoption risk attracts venture capital that otherwise wouldnt be available in these markets,¬†Finally, dont underestmate execution complexities of successfully running these businesses.¬† While concept maybe adapted from elsehwere, usually these businesses innovate on execution…Think launching an ecommerce copy cat in complexities of Russian infrastructure – operational exellence required to make this a successful business deserve no less praise then enterpreneurs that disrupt the markets under your definition.

  48. Modernist

    In 2012 people are still equivocating money and value?

    1. Modernist

      Clearly there are market incentives for copycats, drug dealers, and warlords to do indecent things. ¬†Even if we’re purely concerned with money, the fact that these activities warrant money from customers doesn’t mean there’s not a larger financial spillover cost.

  49. Dave W Baldwin

    Would be better to look at bigger picture:1)¬† Most everything is an improvement of something else.¬†2)¬† If your idea has merit, it will be copied.¬† To sit there and think it can’t grows the balance in another bank account (not yours).3)¬† What is your innovation?¬† Is it forward looking with intent of disruption?¬† You are foolish to think you are only one with basic idea.¬† How to make it happen, understanding when it can happen and there being a market for it is important.¬† Doing so allows time to truly do the due dilegence that keeps you ahead of the competition/copycat, for they will be there.4)¬† The copycat/competition will come from all sides.¬† If you do something that is working great on iPhone, in a Ford, on a missle… Android, Toyota and so forth will be very interested in having your innovation in their product.¬† Question is, can the competition truly do it?¬† If you have what it takes, you can stay a step ahead due to knowing what they’re doing wrong and that gives you ability to know their next step.

  50. Rishi Khullar

    I think the key is that copycats will always be one step behind, scrambling to duplicate the latest feature. They forever live in the dust, staring at the backs of founders with longterm missions.¬†A bunch of features don’t add up to a vision, it’s the other way around.

  51. Karl Nieberding

    How about in terms of providing competition so the market leader is forced to keep innovating?

    1. fredwilson

      i’d rather do that from a different angle of attack. kind of like facebook did to google and google did to microsoft.

  52. Youssef Rahoui

    “they are not entrepreneurs and not creating true value”I have to disagree with this sentence and agree with¬†@andyswan:disqus. This statement sounds like romantic. If you make money¬†¬†from your customers¬†at a significant scale and during a sufficiently long period, that means that you create value on the market. It does not really matter if you are the inventor or not of the concept.So USV’s policy to only invest in innovators (which I like) is just that: a policy.

    1. Jeffrey Leventhal

      You didnt create value – you stole it…

      1. Youssef Rahoui

        OK, let’s be precise: you brought value to the market (regardless of the fact that the idea was yours or not and regardless of the fact that, to the eyes of your customer, you really create value). BTW, there is no stealing where there is no ownership.

        1. Modernist

          You brought value to the market of dollars.  So what?  So do pimps.

          1. Youssef Rahoui

            Yes, and so what?

  53. Humberto

    I DON’T CARE FOR AN ENTREPRENEUR WHO DOESN’T CARE FOR ME.i think the Samwers are doing the right thing. they ADD tremendous value to the world.US startups have grown used to a lot of facilities: educated internet-prone customers, easy transactions, volume of sales and purchase power.they thought the international markets were kind of lame. plus, the US was so good there were different business models competing with each other back at home ‚ÄĒ so why bother going somewhere else when there was enough heat and profit back home?¬†they left a lot of unhappy customers abroad. it’s ridiculous we in Europe have to wait months on a row to get similar products and features abroad as they get in the US. so they took advantage of this and started firing away…¬†i for one would like to thank them. its because of them Amazon is speeding up their entry in Europe, where in the past they were so reluctant to enter. they have so many eCommerce operations in so many countries it’s hard for amazon to get a global footprint without buying them here and there. and when eCommerce is growing at 28% a year in¬†ASIA, 13% in Europe¬†and 12% in the US, you know who’s doing it right. Rocket is.i think they were the first people to really try and make the World Wide eCommerce a reality.it’s not the prettiest approach, but it works for the 99% of us.

  54. Humberto

    true that.

  55. Andrew

    This is similar to a lot of other points about the value of people perfecting something. It reminds me of Malcolm Gladwell’s article about Steve Jobs that argues he is a “tweaker” rather than an innovator, and it’s tweakers who have really moved things forward.”One of the great puzzles of the industrial revolution is why it began in England. Why not France, or Germany? Many reasons have been offered. Britain had plentiful supplies of coal, for instance. It had a good patent system in place. It had relatively high labor costs, which encouraged the search for labor-saving innovations. In an article published earlier this year, however, the economists Ralf Meisenzahl and Joel Mokyr focus on a different explanation: the role of Britain‚Äôs human-capital advantage‚ÄĒin particular, on a group they call ‚Äútweakers.‚ÄĚ They believe that Britain dominated the industrial revolution because it had a far larger population of skilled engineers and artisans than its competitors: resourceful and creative men who took the signature inventions of the industrial age and tweaked them‚ÄĒrefined and perfected them, and made them work.”(http://www.newyorker.com/re…So are you a copying something, or making it better? That’s the difference.

  56. Leslie

    Please…. spare me. Investing is your sole role in this process. Innovators create – you invest. And, save for a lucky deal now and then, you make your returns on incremental me-too products & services. Why? Because its safe. Regardless of what you might say publicly or maybe even believe – no risk / high returns are what you seek – That is what you invest in. Anyone raising capital knows this. That’s why all their investor pitches to you contain the phrase “it’s kinda like…..” (fill in the blank)

    1. fredwilson

      spare me a poorly informed comment. i agree that i am only an investor and that the entrepreneurs create the value. the rest of your comment is incorrect

      1. FlavioGomes

        I would argue that investors and entrepreneurs have joint responsibility in value creation…just sayin.

  57. eketabch

    It is so refreshing to hear you say that as I am an entrepreneur with similar views on the matter of innovation vs creation. I think people forget what “innovate” really means and how difficult it is to actually do it. Anyone can create something but whether it is truly innovative is something hard to produce and to prove and a lot of times it can change into some thing innovative over time. The question behind my passion for starting a new company is always whether I am changing/creating something vs innovating so it’s awesome to hear someone cares.p.s been a reader of your blog for a while now, I always read it in the morning before my meeting so I never actually end up making a comment but here we are.

  58. Chris Lamprecht

    We watched Indeed.com get copied so many times over the years.¬† They’d copy the good, the bad, and the ugly.¬† It must have been demoralizing to work for the copycats.¬†

  59. JLM

    Arbitrage is the science of taking advantage of the inefficiencies of markets to create a less risky and sometimes more profitable transaction.In a sense what is being discussed is the reaction to finding out that ideas and businesses can be the “victim” of arbitrage which reduces the risk attendant with the origination or the original creator or creative force.If I can buy pelts directly from a trapper and thus forego the risk of getting scalped, then I have reduced the risk through arbitrage and if I can do it at the same or lower financial cost, why not?An awful lot of money is made by being the second person to do something — proof of concept in hand — in a different location or better delivery mechanism.Are we serving customers, making a better mousetrap, building great companies or making a buck?

    1. Tom Labus

      A lot of the time, it’s the pioneer who gets the arrow in the back. Maybe it’s not so good to be first guy through but we all want to be Lewis & Clark.

      1. JLM

        Tom, I was just waiting for the pioneer analogy. A fast second makes a lot of money.

    2. Emily Merkle

      buy low sell high. a.k.a. arbitrage. what else is there, essentially?

      1. JLM

        Arbitrage is all about taking advantage of inefficiencies and price differences in such a manner that an otherwise risky transaction is materially improved from a risk perspective.In its ideal application, it is a risk free transaction or profit at a cost approaching zero.In its simplest application it would like buying 100 Ralph Lauren shirts on a wholesale basis at $5/each while holding in hand 100 “one off” individual retail sales at $25/each.The arbitrageur’s sweet spot is 20 shirts @ $25/each which equals his entire $500 investment.Once the arbitrageur has sold 20 shirts @ $25/each, he has covered his nut of $500 and the balance is pure profit.

        1. Emily Merkle

          ūüôā I was being fascetious. I know arbitrage quite well.

        2. FlavioGomes

          Some of the brightest roman candles were arbitrage based… But lift off was a hell of a ride.

  60. Pete Griffiths

    The irony of the Samwer brothers is that they are the logical conclusion of the widespread meme that ‘ideas mean nothing, it’s all about execution.’ This is not a meme that I have ever subscribed to, but a quick perusal of Quora will reveal just how widely it is held.So if you do believe in execution over all you should hold the Samwers in high esteem, for that is their modus operandi. They may copy the concept but nobody achieves their level of success without first rate execution.Can’t have it both ways, I’m afraid.

  61. JLM

    If you overlay the concept of arbitrage on top of previous discussions about the inability to capture and patent ideas and processes with the growing global nature of markets, it is absolutely inevitable that idea arbitrage is going to provide huge opportunities across the entire globe.This is the end game of globalization that an idea which originates in NYC can be deployed in other parts of the world almost instantly.Couple that w/ the implications of languages and the magnitude of the opportunity is enormous.

    1. Cam MacRae

      Very insightful comment, and you may have forced me to reevaluate my litmus test for an entrepreneur; loosely, the assumption of a particular type of risk.

  62. Emily Merkle

    okay – can we all stop dancing?

  63. KaptainKumquat

    What about cloning ideas into markets that are significantly different? ¬†For example, cloning an e-commerce/auction site in most countries outside of the US, Western Europe, and the other Most Developed countries presents different challenges in terms of how people pay (mobile payments), how people access the site (almost exclusively mobile web), the infrastructure for delivery, different cultures of trust… etc…I’d agree that most cloning is obnoxious and I can’t fathom why someone would want to build a business that way. ¬†However, many markets are different enough that the original company inspiring the clone is only providing a well-grounded concept, but execution is just as hard as it was for the original company.

    1. fredwilson

      I agree that if the service needs to be modified significantly then its not cloning

  64. Brad Lindenberg

    VC is about 10 X returns. Clones won’t generate 10 X returns.I agree – something worth investing peoples hard earned money in needs to be category defining, game changing and in a massive market. I’d rather favour the sideline as an investor than commit capital to anything less. These kinds of ideas are few and far between.

  65. Christian

    I think you’re spot on with many of your posts but this one is nonsense.Being an entrepreneur is about creating businesses and if there’s a market out there with customers looking for alternatives to the market leader and you make money off that, I would admire that and call your entrepreneurial endevour successful.If you’re not interested in investing in that, fine, but it doesn’t diminish the achievement or the potential for success. Not every service is a global one, and for almost every service there’s an unexploited niche even if it means that you might to large extents do something that’s already been done.If there’s a thousand bars in a city and you open one more, and it’s hugely successful because of its location/atmosphere/whatever you’re no less an entrepreneur because the differentiating factor is minor.

    1. fredwilson

      It is nonsense to say “dont waste your time pitching me”?i think im doing entrepreneurs a favor

      1. Christian

        I‚Äôm glad that you clarified your investment strategy in this context, and I am sure some will benefit from that clarity.I do however disagree with your assessment of what it means to be an entrepreneur, and that creating competing services is ‚Äúdevoid of any creativity‚ÄĚ. No two businesses are the same, even if they are competing in the same market. If someone is competing with the market leader, and doing so successfully, they are probably doing something right and I believe that they can create ‚Äútrue value” doing so. Business is business, and the people creating it are entrepreneurs, whether or not they’re the first ones doing something.And I would always encourage entrepreneurs who believe that they can create a business to do so, even if what they‚Äôre doing is very similar to something that already exists. Maybe they will make a success of it, and maybe even become the market leader. It‚Äôs not always that the first-mover wins.Having said that, I completely understand the logic in your strategy of capitalising on the first mover advantage and that it makes it easier to identify the ones that are on to something at an earlier stage.

  66. Web Design Birmingham

    If the customer can’t tell the difference, what value has the ORIGINAL created.Original ideas get the lead but they need to do the rest to win.

  67. Robert Holtz

    Fred isn’t talking about folks who are trying to build a better mousetrap or who believe the market Brand A may dominate is somehow underserved.He is talking about blatant shameless copycats that have no imagination to speak of and just rip off genuine innovators on the pure almost lemming-like judgement that they’re making money and come into his office pitching a “let’s do the exact same thing because we like money too” business model.No one says that it isn’t legitimate to go do that as a business model but it isn’t something Fred respects. That’s the key point. Am I right, Fred?I think anyone who has ever ventured out on their own to try and really add value to the world and fill the need for a product or service hates this too. Its annoying for consumers as well. For example, there must be at least a dozen clone coupon/group deal sites now that all do exactly the same thing without any creative variation or improvement on the concept. Its obnoxious.

  68. timrpeterson

    “It is devoid of any creativity”…”I am not looking down on your approach”you make no sense

    1. fredwilson

      Sorry about that. I will try harder

  69. Mark Essel

    “Good artists borrow, great artists steal”Entrepreneurship includes adapting a product to best fit market category, whether it’s innovative and creates a novel category or mimics features from other products already in that area. Copycats succeed when they selectively steal essential features while removing all the cruft that doesn’t matter.

  70. Guest

    It’s gonna’ seem like I’m nit picking but I’m not.You say “If you are successful, you will be cloned.”I want to add that you (the business) is not being cloned. They are just copycating a product or service. The people and the processes within the business are what makes a business “the business”.Again sounds nitpicky, but I wanted to add that important point.

    1. Emily Merkle

       not nitpicky at all. in fact that is a super distinction, IMHO.

  71. TechBerlin

    True Story: The Samwers are now also cloning Amazon!¬†http://www.techberlin.com/p…

  72. LE

    “He just knew he had to head westward to find something new.”One of the most valuable things to learn is concepts not specifics. ¬†Most people try to memorize specifics. ¬†In order to troubleshoot you need to know concepts.Following directions you learn (say when doing wash) that the dryer follows the washer. But the reason that is, is that the dryer takes the moisture out of the clothes (ok and it fluffs as well). Consequently if the clothes are already dry (you left them by mistake in the washer and they don’t need to fluffed) there is no reason to put them in the dryer.¬†It’s a simple example but there are many cases where people can’t figure out what to do if they get lost (either literally in a car) or because they learn specifics.Most people who have a hard time with computers have that issue because they try to learn by memorization and completely ignore the basic concepts.

  73. Tim Morgan

    Great post Fred and a subject close to my heart. What’s your view on US startups cloning European startups? It certainly gets less tech press attention than the other way around. Here’s something I wrote about it¬†http://picklive.com/blog/th…

    1. fredwilson

      I feel the same way

  74. Andraz Tori

    As someone mostly being based in small European country of Slovenia I’d like to add my two cents. :)While the entrepreneurs bringing clones to different regions aren’t innovating much, they definitely are bringing value. If some new idea works in US market, it usually takes years for that company to decide to take it international. Doing it sooner brings value to local ecosystem (not that of the start-ups, but maybe commerce or whatever the field is).

    1. fredwilson

      what do you think about cloning something like twitter which is available everywhere but just not in a local language?

      1. Andraz Tori

        That’s a hard question – copycat services in the field of high network effects find it hard to survive in any market that is not closed-off in one way or another. So I don’t think it’s a smart business move.At the same time – good luck trying to get Slovenian-targeted advertising on Twitter. If you consider this kind of advertising to bring value, then someone bringing it to some other region or country is bringing value there.When you say “Twitter is available, just not in local language” … it’s only half true, Twitter is not available at the same level as it is in the US.[I have some successful copycats in my mind. They all brought value to local economy by bringing in foreign innovation earlier than originating innovators would]

  75. georgebc

    Speaking as someone who lives outside the US, cloners could be a good thing if their existence encourages US startups to spread internationally faster.Speaking as an entrepreneur though, I despise the Samwer brothers. I could live with it if they were adapting and improving for a local market, but an exact replica (including layout, colours, functionality, etc.) just seems like theft. I hope someone successfully sues them for “passing off” soon.(And I have now popped my AVC commenting cherry! I hate what the Samwer brothers stand for enough to have registered an account after lurking here for years…)

    1. fredwilson

      yay. welcome to the commenting community!

    2. ShanaC

      a) Congrats g_B_C – feel free to sound off at any timeb) what do you think should be done about the fact that many people don’t want to improve for a local market? About wholesale copying as opposed to copying and tweaking?

  76. Dave W Baldwin

    Headline from today’s Drudge: Energy Dept. offers $100k prize to create mobile apps that already exist…

  77. Tobi Bauckhage

    At the end of the day cloning just is part of the economic process of disruption. Clones pick up good ideas and contribute to leveraging them globally more quickly. Without clones this process would take much longer. Or would not even reach some countries. So, cloning from a broader innovation and disruption perspective should be seen as a good thing.¬†I find the whole discussion about who can call himself “creative” or “entrepreneur” completely unimportant. It seems much more like a discussion about, who are the cool guys on the playground and who are not. That’s fair enough. But kind of boring.As a founder i take a lot of pride in being part of economic disruption, contributing my little share to changing an industry. But in this disruption clones might be just as important as great unique innovations or even failed concepts that inspire new innovators to pick up the ball.Why so serious, self-righteous about the good and the bad entrepreneur?It’s all in the game.¬†

  78. Ela Madej

    On the topic – ¬†here’s an interesting and supposedly not as commonly known paper on successful US startups by Oli Samwer a friend recently shared with me:¬†http://f.cl.ly/items/053E0Q… (but do note it’s pretty old, from 1998)

    1. Martin Wawrusch

      Very impressive. I glanced over the first couple of chapters and frankly it seems that they predate Steve Blank and Eric Ries by 6 years.Quotes like: Proposition: There is nothing like talking to customers. It is the single most important part of your homework to tell if your idea is real.Thanks for sharing this, I wish I had read that book in 98

  79. F√°bio Arruda

    Dear Fred,I work for Rocket Internet as EIR on one of its portfolio companies in the Brazilian office.¬†I agree with you that create a total innovative company is nobler than copy one as long as usually you create higher value. Nevertheless, is too strong to say that the ones who launch a copycat is not an entreprenenur as you agreed with your colleague¬īs opinion. Speacially in our case what we do is to bring now to dozens of developing countries some solutions that would probably take 2-3 years to be available to them. And to be sincerily we are very skilled in execution, doing it quickly and well. That leads me again to the question: what matters most, an exeptional idea or an exceptional execution? Yep, I know ¬†both are important to be very successfull, but is good to keep it in mind when say that copycaters are not real entrepreneurs.

  80. fredwilson

    Great comment. I will pick up that book. Thanks

  81. JamesHRH

    Paul:Trout & Ries still are the top dogs – category creators are innovators & everyone else is an entrepreneur.Innovators grow. Entrepreneurs run a business. Often, entrepreneurs grow like crazy but are merely filling a niche (customer segment or geographic) in a category. Cloning an innovation that is happening in another geography is nothing more than that – filling a niche.Hat World could be either. In Canada, a retailer called Sleep Country is known as a high growth awesome business. The founder copied the idea from a US retailer. I think I read somewhere that instead of stealing the idea, she went right to the founder and asked how he did it, told him she wanted to do it in Canada and basically got his blessing (not sure on this, but have this memory from 15 years ago…..)

  82. JamesHRH

    Paul – Yes, Jack Trout & Al Ries – I don’t think they have any work in the area specifically. The basis of the T&R insight is that category creators innovate more than others.

  83. JLM

    Fabulous comment.Most folks on this blog are not old enough to know that Apple was a computer company that went into the phone business with no real warning.It was a matter of some considerable note at the time. But nonetheless, they were a computer company.Now they are a integrated “cool stuff” company. Wow!