Research & Innovation

Copycat Model a Success for Start-ups

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Copycat Model a Success for Start-ups

Copycat Model a Success for Start-ups
March 12
09:48 2014

From its low-key offices near the centre of Berlin, Rocket Internet has turned the usual business model for technology companies on its head, compiling a team of high-flying finance and management specialists and arming them with the money they need to mimic already successful internet companies – applying these proven ideas in other countries, often in emerging markets.

Since 2007, Rocket has backed about 75 start-ups in more than 50 countries that now generate more than $3 billion annually and employ about 25,000 people.

The business model stands in sharp contrast with the ethos that dominates Silicon Valley, where originality is perceived as the main currency for successful start-ups. It also has raised questions over whether Europe’s tech sector can ever foster the same level of innovation that has led to a conveyor belt of successful US tech giants like Oracle, Google and Facebook.

Still, Rocket balks at criticism that it is purely a copycat machine. It says that all successful business ideas are somewhat borrowed from others and that the ability to take proven tech ideas to emerging markets is a skill in itself. The small start-ups that Rocket supports are often given as little as six months to succeed or face being shut down.

“If there’s a clear business model that is proven to work, we will look at it,” says Oliver Samwer, who started Rocket Internet with his brothers Marc and Alexander. “Every new company is like a speedboat and we want them to become aircraft carriers.”

Rocket Internet and the startups it incubates are known for aggressively expanding into new markets and squeezing out local rivals. Zalando, a German copy of U.S. e-commerce firm Zappos, has spread to 15 European countries since starting in 2008 and reported a 52 percent rise in its sales, to $2.4 billion, last year. Rocket Internet recently sold its remaining stake in Zalando, which is valued at around $5 billion, to Swedish investment company Kinnevik, one

of Rocket’s main investors, although the Samwer brothers retain a stake through their own investment firm.

Other Rocket-backed startups, including Latin American e-commerce site Dafiti and its Russian counterpart Lamoda, also have secured large market shares in some of the world’s fastest-growing developing economies. To succeed, they have had to tweak their business models for emerging markets. That involves offering cash-on-delivery services where few consumers have credit cards and running large fleets of delivery trucks where local logistics and infrastructure remain basic.

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