A growing respect for the Samwer brothers
posts.richoakley.com
posts.richoakley.com
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...
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.
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.
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...
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.
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).
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.
(This is my personal opinion and view of the situation)
The Samwer brothers don't invest in startups! They invest in viable business models. They don't fund search; they fund only execution.
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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.
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.
The definition of a startup is, technically, a newly established company. There is no reason to subvert the terminology.
Once you get past the semantics, I fail to see what substantive point you're making here.
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.
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.
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.
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.
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
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.
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...
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.
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.
The word "theft" implies that someone is being "wronged" by the action.
If we ask ourselves "is this the case? Is anyone harmed by the actions of the Samwer brothers?" then, after we force ourselves to really sit and think about the answer to the question, and after we attempt to find real-world examples which support our point of view, then we find ourselves in the uncomfortable situation of being inexorably pushed, prodded, and shoved toward the inevitable conclusion: No. No one was harmed. In fact, just the opposite: the people who now have access to the cloned services now enjoy a higher quality of life due to it.
In short, inasmuch as I share your prejudice, I cannot figure out any way of reconciling that prejudice with the honest assessment that the world is now more enriched than it was prior to the Samwers.
This is not art - it's creating and serving customers.
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.
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.
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!
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.
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?
In the SWOT section of your business plan, under W, if you didn't have Samwer brothers you need to rethink it a bit.