A growing respect for the Samwer brothers

http://posts.richoakley.com/post/rocket-internet-respect

by richoakley • 14 years ago

117 54 14 years ago

posts.richoakley.com

cs702• 14 years ago

As Steve Blank tirelessly repeats, a startup is NOT a business, but a temporary organization searching for a viable business model.[1]

The Samwer brothers don't invest in startups! They invest in viable business models. They don't fund search; they fund only execution.

[1] http://steveblank.com/2012/03/05/search-versus-execute/

arbuge• 14 years ago

Steve Blank (and the rest of the lean crowd) are entitled to their own opinions. To most people, "startup" just means new tech companies...

Even going with his definition of a startup, a viable business model in one country does not guarantee viability in another.

You could argue these are not startups because of the massive organization now backing each of them, but that's a different line.

inthewoods2• 14 years ago

I don't think they really care if they are viable business models - see their investment in a Groupon clone. I think what they are doing is simply copying companies, creating them with the sole purpose of being bought by the company that originated the idea. There's nothing in any of these articles that says they're creating viable businesses (they may have some however). So what they are doing, in my opinion, is similar to what patent trolls do - extract money/stock from VC-rich startups. Wash, rinse, repeat.

It will/would be interesting to see how they do in a down startup environment where the VC money isn't flowing quite so freely.

ttrt• 14 years ago

I'm very happy they do what they do. Cool online services often take a long time to become availiable Europe. Because of people like the Samwer brothers, that delay has a cost.

lobster_johnson• 14 years ago

Just because some startups don't start out with a viable business model does not mean that all startups follow this model; there are plenty of startups being created with clear ideas about how to turn their idea into a business.

The definition of a startup is, technically, a newly established company. There is no reason to subvert the terminology.

josephcooney• 14 years ago

I'm glad you reminded me that Steve Blank is the only living authority on start-ups, and that the word start-up can only mean precisely what he says, and nothing else.

edoloughlin• 14 years ago

Can you not make your point without the sarcasm and snarkiness? When I found HN, the reasoned, respectful discussions were what made it different from other sites. Posts like yours make this feel more like Slashdot.

philwelch• 14 years ago

When Steve Blank writes about how to run a startup, he's really writing about how to search for a viable business model, so he defines "startup" to refer to an organization that does that. The definition has mostly to do with the internal coherency of Steve Blank's writings; it's not especially useful to reapply that definition to somebody else's writings since you don't know what they mean by "startup".

Once you get past the semantics, I fail to see what substantive point you're making here.

brackin• 14 years ago

They're incredible at what they do and that isn't building innovative, new businesses. They've probably made more successful (in terms of revenue, exit, etc) web businesses than anyone else has. They've scaled up ideas into big companies by bringing on a lot of capital.

I don't respect them because they don't use this to build new, long term businesses and tear into others intellectual property but I can acknowledge their success thus far.

From what I've heard in the inside it's not the kind of place you'd want to work, people are fired and quit daily and it's cut throat but it seems to be working for them in terms of business.

oiciruam• 14 years ago

The way I see it the major difference between Rocket and startup foundries (Betaworks, Science, Sandbox) is how original the ideas are. And the only difference between foundries and VCs investing in shared assets for their startups (data analysis in Google Ventures, distribution in 500startups) is the belief in founders. If the costs of starting up fall it´s just time before some investors with operational backgrounds consider removing founders as part of the risk. Rocket is a model for a new form of ´startup corporation´, which, beyond clone sites, seems like an original idea.

kurtvarner2• 14 years ago

Being able to paint copies of a Picasso does not make you a great artist. Nor does it deserve respect from the artistic community. All it says is that I have enough skill to operate a paint brush when given an exact template.

dopamean• 14 years ago

"Being able to paint copies of a Picasso does not make you a great artist." That is true. I don't think the Samwers (or anyone for that matter) think of themselves as visionaries with great ideas. They are businessmen who know how to a run a business. I think many would say that the Samwers do not operate in the artistic community at all. They run businesses and a business is not a piece of art. Are the ideas copied? Yes. Does it lack class? Perhaps. Are the ideas well executed. Absolutely. If it was so easy that it didn't deserve any respect at all then everyone would do it. The Samwers are good at what they do and it deserves respect even if part of what they do is copying existing ideas.

squarecat• 14 years ago

Being able to paint copies of a Picasso does not make you a great artist.

It makes you a great reproductionist and it's probably a marketable skill.

Nor does it deserve respect from the artistic community.

"Respect" is a highly subjective thing that is often achieved at a net negative cost. Historically, many respected artists were under-appreciated by their contemporaries, dying broke and alone.

All it says is that I have enough skill to operate a paint brush when given an exact template.

The skill of an artisan is not necessarily measured by originality. And unlike a quality such as "great artist", skill is largely quantifiable, the rarer the ability, (typically) the greater the demand for it.

silverbax882• 14 years ago

This is true, but art and business are not exact mirrors. Business has a lot more in common with sports and war than art. Sports teams copy each other like crazy when they see something working.

Facebook was a copycat. Google was a copycat.

Every television network in existence would be considered a copycat of the DuMont Television Network.

NASDAQ is a copycat.

Best Buy is a copycat.

American Idol is a copycat.

Not sure where you draw the line on originality.

kurtvarner2• 14 years ago

There's a big difference between your examples and copying a company down to the pixel level. Come on, copying literally every pixel. As a designer and entrepreneur, I strongly feel there is something wrong with that. It is purely theft.

theorique• 14 years ago

Why is originality so important? If they execute well and earn return on investment, that is the purpose of a business.

This is not art - it's creating and serving customers.

mrkurt• 14 years ago

It also gives people a chance to own a decent Picasso painting who would otherwise never have the opportunity, which deserves respect, I think.

qznc• 14 years ago

The problem is I would have to wait a long time until Picasso comes to my country. Thanks to the Samwer brothers there is already a local painter, who provides similar services.

baddox• 14 years ago

And yet, classical musicians (and orchestras) are considered great artists for performing compositions by Bach, Beethoven, etc.

therandomguy2• 14 years ago

If you can replicate art I will respect your talent to replicate. Not everyone can.

jedc• 14 years ago

The Samwer brothers fill a (pretty big) hole in the market. They execute proven business models in countries before the market leader can get there. If US-based companies would put more emphasis on international expansion the Samwers' business would melt away. (I'm a American who's lived in the UK for years and gets really irritated that a lot of great US companies don't bring their services here.)

side note -- I have to think there's a market for a group of experts based in major European/Asian markets that would specialize companies in clearing the hurdles to expanding internationally. Get a handful of people in the UK, Germany, France, Spain, Italy, Russia who are experts in local regulations and can work fast to expand a US-based business.

vidarh• 14 years ago

I agree.

I'm in the UK, and has done quite a bit of work in the payment space, and I've kept seeing this all the time.

On one hand, a lot of US companies just ignore the European markets. On the other hand, a lot of the ones that try demonstrate why:

Assumption after assumption about regulatory regime, languages, culture etc. need to be beaten out of them. When they grasp multiple languages, you can bet a lot of them will get caught out with multiple languages in a single country (this one always confuses me - so many US companies deal with at least Spanish that you'd think more companies would be prepared to deal with this). Then there's inevitably issues around VAT/sales tax, and engineers who don't have the faintest understanding for just how strict handling of invoices are in some European countries (I remember when my dad still had to print out every electronic invoice he issued and glue them in on numbered pages in a book to satisfy the auditors - thankfully things have moved on somewhat, but US engineers: Stop making systems where invoices can even theoretically be mutable after issuing already, and you'll be vastly better placed for international markets).

ArbitraryLimits• 14 years ago

> so many US companies deal with at least Spanish that you'd think more companies would be prepared to deal with this

Actually it's the opposite - inside the US, Spanish-speaking markets are mostly served by companies that only serve those markets and not the English speaking ones.

sarnowski• 14 years ago

I am working for Zalando, the biggest fashion eCommerce platform in Europe, founded by Rocket. I am astonished that this does not happen more often. In Germany, there are just some local companies who try to compete. UK is a tough market but those companies also don't expand beyond UK. Europe is a big market where eCommerce just recently started to evolve and competitors are rare.

(This is my personal opinion and view of the situation)

richardjordan• 14 years ago

I think that's a great idea. There definitely should be market for this kind of thing. That being said the startup world tends to be notably consultant-shy when it comes to things like this. VCs appear (and this is not scientific, purely my subjective opinion based on personal experience) to not like writing checks to consulting firms for such business-development related activities.

tegogob2• 14 years ago

They hurt local innovation and ecosystem development in emerging markets from Asia to LatAm to Africa. They come in, hire away talent only to fire them in a few weeks. they damage the budding trust the consumer has in ecommerce.

They are bullies and have a superiority complex boasting about their capacity to execute. They do not have a monopoly on execution. That's a farce.

They are greedy, selfish and generally think only of themselves. Not the consumers they serve, the local markets or their employees.

I have witnessed them come into markets, destroy the lives and dreams of entrepreneurs and employees in emerging markets and shut down abruptly.

Finally, this operation (thier ecommerce operations in particular) is a house of cards. Service quality sucks, customers are lied to and they engage in an epic waste of money

It is impossible to build online retail operations in 1-2 years. Yet this is their objective. Build fluff and sell to some unsuspecting corporate development team.

The problems groupon is facing is inextricably linked to the involvement of the samwers as far as I'm concerned. Elsewhere, flash sales and couponing operations do well. Anything these guys touch is ultimately unsustainable and fluff. Now they want to try online retail with its logistics, warehousing, etc in emerging markets without a long term horizon. Ha! In a few years time you will realize how stupid the praise in this article is.

http://e27.sg/2012/09/10/is-rocket-internet-losing-its-grip-...

http://sgentrepreneurs.com/2012/09/05/is-there-any-method-in...

tolos• 14 years ago

I'm going to assume you believe what you're saying.

You make it sound as if customers hand away money to a shady stranger who quickly disappears, and that the entire point of the company is to trample employees into the dirt. I have a hard time believing this, especially after all of the examples given in the article.

tegogob2• 14 years ago

Let's not debate this. Go to

http://www.facebook.com/home24.my?filter=2

This is what they do in many cases. Comments about refunds can be found on FB page of virtually all ecommerce operations.

With regards to employees, imagine you live in the developing world, you have a well paying job at a mobile company. The sort of job 95% of the population will kill for.

Rocket shows up, doubles your salary. You quit your job and join rocket. One month later, they decide they are shuttering operations. You are fired through no fault of yours.

This may be fine (actually it isn't) in the developed world but is terminal to career and financially disastrous in emerging markets where job market is not liquid, job opportunities are prized and one individual sustains an entire extended family.

bosch2• 14 years ago

If they were after the quick buck then they would definitely do this. Also, if you're working for a company who's only purpose is to copy other companies, you should realize it's all about money...

omarkassim• 14 years ago

I'd have to agree. We saw this very recently in the Middle East & Turkey as well.

Out in Dubai it hurt us in terms of talent drain at crazy prices from a number of well established local firms. Their marketing spend helped to grow the local and regional e-commerce market (and still does via ventures that are still operational), but the nature of some of their exits when shutting down has ended up forcing consumers and other stakeholders to re-consider whether to trust e-commerce start ups and businesses in general. Not ideal when the sector is still very nascent.

Coverage: Wamda: http://www.wamda.com/2012/08/rocket-internet-to-exit-turkey-... http://www.wamda.com/2012/09/goodbye-mizado-hello-jumia-insi... Venture Village: http://venturevillage.eu/rocket-internet-to-shut-down-turkey...

As an aside, JP Morgan has put in a significant amount of money recently into some of Rocket's ventures: http://venturevillage.eu/lamoda-jp-morgan-zalando and http://venturevillage.eu/jp-morgan-rocket-internet-the-iconi...

davidspinks• 14 years ago

The Samwer brothers definitely deserve respect in a world where execution is paramount. Often, they execute more efficiently than the companies they copy.

If anyone says it's easy to just copy a company, they've never built a company before. There are so many intricacies that go into building a company and culture the right way. When you look at a company, you're only seeing the tip of the iceberg. You can copy the part that you see, but without everything under it, you won't succeed.

One thing I would have loved for Rich to speak about a bit more is their treatment of the founders and employees of Rocket companies. I've spoken to employees before who shared stories of very harsh work environments and high turnover rates. Founders get very little equity. Employees get none.

From a business perspective, obviously they're doing something right and if people find enough value in being a part of these companies to put up with the downsides, that's their decision.

Still would love to see a deeper look into the negatives.

yardie• 14 years ago

Often, they execute more efficiently than the companies they copy.

Easy to say when the guy out front is taking all the arrows. Onlive went out of business because they had too much capital tied up in servers and not enough customers. Competitors now know that tying up money in servers is not the way to go. A fatally, expensive lesson learned by a technological leader.

swombat• 14 years ago

My response: http://swombat.com/2012/9/20/rocket-internet

The short of it: This is, in my opinion, perhaps the most innovative company in the startup industry today, the first of a new industry. To declare them non-innovative, as some people do, is either short-sightedness or just jealousy.

I'm sure a lot of people were jealous of YC too when it first started turning the angel/VC investing world on its head. Same difference.

richoakley2• 14 years ago

Good post! Thanks for responding..

sandGorgon• 14 years ago

Their strategy looks good - however what many people are assuming (that they do great execution ) is not correct. They have a record of hiring the top management in their investee companies from consulting firms. There has been a series of hire and fire events in their portfolio at the CEO level because of this.

I see a lot of comments in this page highlighting the fact that they open and shut companies in a matter of months. Actually, the problem is what I mentioned earlier. Poor choices of executive mangement (with no execution experience) results in runaway spending, disproportionate salaries, etc. In 6 months time the Samwer brothers take one look at the margins, decide that the business is unsustainable (as opposed to changing the execution) and shut it down.

In fact there is a recent article floating around that talks about this (my google-fu isnt good enough).

I personally think that Rocket's model is a brilliant strategy, but lacks appropriate execution structure.

trotsky• 14 years ago

its as if they want to make it known that they are unashamadly, and without apology, cloning to the pixel, rather than taking the same idea and taking it into a new market. There is an element of cheek and disrespect that detracts from their credibility as entrepreneurs.

I wonder if this has (accidentally?) become part of their winning formula. Psychologically it seems quite likely that a competitor will give less respect (and therefore thought) to a company that seems cheap and uninspired.

bosch2• 14 years ago

I'm going to go against what most people are saying and disagree that this is a good thing. Too often companies like this are only after the money. For some reason their company STRONGLY reminded me of Zynga, which in my opinion is not a good thing.

Sakes• 14 years ago

I am blown away, these guys have hacked innovation.

What this says to me is innovation is relative. If you've never seen an iPhone, and someone shows you a Samsung Galaxy, you would think it is mind blowing.

As far as the true innovators are concerned, because this is clearly a massive hack and not innovation, maybe this means there is a problem that companies have when trying to take a domestic company/app/service global.

Is there someone that could figure out how to deliver a service that simply takes any company's app and makes it globally distributable?... By removing government obstacles and language barriers...

drpgq• 14 years ago

I'd be curious to know pg's opinion on the Samwer brothers.

erichocean• 14 years ago

I wonder if this is actually a knock against the common incubator/VC idea that "founders/team are everything".

Clearly that's not how the Samwer brothers operate, where a viable business model that "clicks" for whatever reason is all that matters.

They simply hire qualified people to execute an existing idea, and then pump massive marketing dollars to establish the company. There's ZERO evidence that they go into a market because they have "a great team", which AFAICT, is all something like Y Combinator really cares about.

It's interesting nonetheless -- perhaps there's multiple ways to start and scale new companies?

mschaecher• 14 years ago

At Airbnb we respected them as a competitor, enough to know that we needed to crush them. Forgive the sports metaphor, but it's like in sports when you have respect for an opponent that you will face, but come game time you're at war.

Gotta say though, it was damn fun absolutely decimating them in a global game of 'Risk'.

I'll just leave these numbers here....

Airbnb vs Wimdu in Berlin - home of Rocket & Airbnb clone Wimdu - Airbnb - 5830 listings (https://www.airbnb.com/s/berlin) - Wimdu - ~504 listings (http://bit.ly/P3XcLA)

Airbnb vs Wimdu in San Francisco - home of Airbnb (and yes, they tried to compete with us here) - Airbnb - 3904 listings - https://www.airbnb.com/s/san-francisco) - Wimdu - 294

confluence• 14 years ago

First thing - this is written by a "media guy" and looks essentially like a practice PR piece - http://paulgraham.com/submarine.html.

Second - whatever the source of the article it still has a point.

The Samwers do execute reasonably competently and they do help bring new things to market. The thing that most people don't like is that they succeed and put bed to the lie that original ideas drive markets - when timing, location and execution matter more. See Apple's success in bringing copied tech to mass market consumption - one of the biggest companies in the world is a copycat and that is perfectly fine for Apple buying consumers.

therandomguy2• 14 years ago

Business 101 teaches you that if barriers to entry are low there will be many competitors. Why is this so surprising for people? It is good for the consumer. It always has been.

In the SWOT section of your business plan, under W, if you didn't have Samwer brothers you need to rethink it a bit.

rebelnz• 14 years ago

I trialled for their Aus arm and promptly walked out after finally getting an answer to how much they (don't) pay. I took a job a week later for double what they offered which is still an average wage. I have no respect for these guys.

anuraj• 14 years ago

Execution is key, ideas can be easily copied.

javajosh• 14 years ago

The Samwers are exploiting the incredibly inadequate web of trust we have on the internet. It's incredible to me that we're willing to spend money with completely virtual entities and expect things to work out. Is our trust in regulation and the rule of law that solid? Especially in emerging markets?

mammalfriend• 14 years ago

There isn't an issue in creating a process to bring business models into new markets that are working. It's innovative in a way and that's cool.

But it's not cool how they at least used to operate: contact US startups that had traction, and tell them they wanted to invest and bring them into EU. Ask for info on the business. Then, clone it.

As a side note it actually isn't great to have such a short cycle between startup traction and inevitable cloning. It means small startups have to rely on things like (gasp) the patent system to protect themselves from paying upfront to work out a business model only to have someone come in immediately to fragment the market.

benackles• 14 years ago

We often hear that "ideas are worthless, execution is everything", so it comes as no surprise that someone who executes well, should reap the rewards. I've heard many times about how terrible the Samwer brothers are for "ripping off" others innovations, but the truth is they have proven that they can out execute the original innovators.

In the case of Groupon, there was very little innovation, so riding the wave over an incumbent seemed on obvious. However many have tried, but few have executed as well as Samwer and in the end Samwer proved the business was too simple to emulate.

I don't think in the case of Stripe and Square that emulation will be a viable strategy. Payments by their very nature suggest an extremely high level of trust. Short term emulation would seem to breach that trust. I wouldn't invest the time nor money in a platform which is inherently built to sellout.

Pinterest on the other hand...well...good luck!

A growing respect for the Samwer brothers

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