The “Me Too” Startups

by Katie Nadler

As an aspiring entrepreneur I’ve heard the same thing over and over again. Professors, students, investors and (some) entrepreneurs all emphasize that in general good ideas are cheap; it’s the ability to execute on them that creates valuable businesses. Of course in reality it is some combination of the two but it’s an interesting point to consider when looking at copycat businesses, which is the focus of this blog post.

The potential for copycats is likely in the back of all entrepreneurs’ minds. In my Launching Tech Ventures class this week we were lucky enough to have Fred Wilson of Union Square Ventures as our guest. He shared some very valuable insights into what makes a successful startup. During the conversation he was asked what he thought about copycats. Immediately his tone changed from upbeat and energetic to solemn and annoyed. He said very curtly, “I hate them.” On the one hand I agree completely with Fred. Entrepreneurship is about innovation, new ideas, and inspired founders; copying someone else goes against the spirit of entrepreneurship. However, on the other hand, the copycat approach might not be pure evil… it might even cause some (gasp) good. I mean isn’t it in Strategy 101 where you learn that competition (in the form of copycats or other similar entrants) is what forces companies to continually improve, expand and achieve greater success than if they did not have challengers at their heels?

As I’ve learned the hard way, few, if any, entrepreneurs think of a completely new idea. Someone somewhere has likely tried something similar before. The difference is that many entrepreneurs think of their idea in isolation and then research existing solutions. Is this the only ethical approach or can an entrepreneur not first find an interesting company and then decide how to use it to their advantage? Additionally, startups routinely look to more established players for ideas on new product features or strategic expansions with proven success. Is this copying unethical or against the spirit of entrepreneurship? In my opinion it is not. 

Copycats come about for similar reasons as “original” companies do: there’s a problem or pain that needs to be fixed and the existing players are not meeting these needs. This is why copycats often occur in different geographies. For example, Wish-Want-Wear is a Rent the Runway clone in London. RTR had proven success in the States however shipping costs made international expansion prohibitively expensive. The British were left with a pain potentially worse than that of American women; they aspired to wear designer dresses and knew about a solution that was out ¬of their reach. In the digital media era, news is rarely contained within a small region. Therefore, women everywhere learn about RTR and want to benefit from its services. The problem is that they can’t.

Rent the Runway (original)

Wish-Want-Wear (London copycat)

Gilt Group provides another interesting example of the intricacies of the copycat model.  I’m a loyal Gilt fan but for all intents and purposes, Vente-Privee was the pioneer in flash sales.  In an article covering Vente-Privee’s entrance into the U.S., BetaBeat blogger begins by stating that “before there was Rue La La or One Kings Lane or even Gilt Groupe, there was Vente-Privee.”  Now I don’t think anyone would question the entrepreneurial spirits of Alexis or Alexandra and I would be interested to hear Fred Wilson’s perspective on this… is one of the most respected startups coming out of Harvard Business School in fact a copycat?