If you have heard of either Sawmer brothers or Rocket Internet, you know where this discussion is heading. Others can enjoy this journey with familiar company names and similar services you may have heard or used in your daily life.
For more than a decade, we are seeing thousands of startups every year across the world. Anyone who is looking closely into what these startups offer would notice that a big bunch is just a replica of a startup from another region, or sometimes even from the same region. Once you realize that a lot of familiar startups are pure clones of bigger names from around the world, you enter into a world of confusion – what are startups for, is cloning legal, why do clones get so much love even after everyone knows, and so on. Let’s try to decipher some of it now.
“Amazon and the Amazon logo are trademarks of Amazon.com, Inc. or its affiliates.”
Why clone? What is so lucrative about cloning that a lot of folks are doing it?
1. Proven business model – Every startup is working to find a successful business model. If a successful business model from another environment is served on a silver platter, why not take it.
Amazon.com has been cloned so many times in different countries that it would be a few pages naming them. These include Flipkart (India), and Alibaba (China) too.
2. Easy to explain to VCs – Entrepreneurs know the pain of pitching their ideas convincingly to others, especially to VCs. Clones make this task a lot easier.
Think of explaining an app like Mitron or Chingari on their own versus a clone of Tiktok and you would understand what I mean.
3. Easy to receive funding – Pitches may still be liked but getting investors to open their wallets on your dreams is even more difficult. A proven business model makes it easy for VCs to invest in your startup.
Continuing from the previous example, Chingari even won the Digital India AatmaNirbhar Bharat App Innovation Challenge in August 2020.
4. Easy to promote business – Since startups save a lot in their initial phases due to cloning, they have more money left in their pockets to gain customers. Also, the story is easy to tell as a lot of folks already know about their well-known peers.
Jabong, a venture of Rocket International, was rolling in money at its peak, even when competing with other eCommerce bigshots in India.
5. Well defined exit – Most startups suffer from a well-defined exit strategy – they take it on-the-go. For clones, the exit strategy is clear – acquire and compete or get acquired – both beneficial for founders and VCs.
Myntra (India) was acquired by Flipkart (India) for INR 2000 Cr. (USD 280 million) in 2014. Both Myntra and Flipkart are Amazon.com clones in India.
It is not all hunky-dory for the clones though. There are some heavyweight problems inherent with cloned startups.
I. Go big or go home – Since the startup knows that there is nothing original about their business model, they must take big risks and stay on the top of the game.
The Uber Eats vs. Zomato vs. Swiggy fight in India is for everyone to see. After a long-drawn fight for the customers, User Eats surrendered to Zomato in 2019.
II. Continuously fighting imitators – Ironical but true. Now the clones themselves have to fight other clones which is a waste of resources.
Take TikTok and the dozens of apps trying for a piece of the pie. Now even Instagram has joined in with Reels.
III. Additional costs and reduced profits – Acquiring customers for clones become increasingly costly as others join in. This pushes costs higher and higher, reducing profits more and more till a bunch of them exit and the one with the deepest pockets remain.
Uber and Lyft in the USA are classic examples of this – how the fight for ridesharing evolved with multiple startups but in the end, only 2 seem to be surviving.
What do you think about cloning? Are you a part of a cloned startup? If you have other interesting insights that you wish to share, please add them to the comments section or let us know at contact@booleanidea.com.
