Understanding business replication: Impacts and best
practices for developing countries
by
Olivier Paccot
B. Eng., Industrial Engineering
Pontifica Universidad Cat'lica de Chile (2004)
Submitted to the System Design and Management Program in Partial Fulfillment of the
Requirements for the Degree of
Master of Science in Engineering and Management
MASSACHUSETTS INslyIUTE
OF TECHNOLOGY
at the
Massachusetts Institute of Technology
JUN 2 6 201
June 2014
©2014 Olivier Paccot
All Rights Reserved
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1
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Acknowledgments
Firstly, I would like to thanks Professor Dania Dialdin for her guidance and full support. Her
advice motivated me to go deeper in my analysis. She provided me tremendously valuable
ideas and insights on how to quantify and organize my arguments.
I would also like to thanks the whole SDM staff, especially Pat Hale for the excellent
program at MIT. In addition, I would like to thank my study group and classmates at the
program. They made the program enjoyable as well as learning from their personal history
and background which are inspiring and encouraging.
Last but not the least, I would like to thank my wife Coni and my children Philippe and
Sophie who followed me on campus and supported me throughout the program. I would
not have been able to complete to program without their constant support and love. I
would also like to thanks my parents who have always pushed me to explore new ideas
and live life with optimism and energy.
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Table of Content
I Introduction
.........................................................................................................................----.
Literature review........................................................................................
and
Background
2
Entrepreneurship is a driver for development..............................................................
2.1
Levers for Entrepreneurship Ecosystem Development ................................................
2.2
Imitation as a new lever?..............................................................................................
2.3
Is imitation a recent phenomenon?...............................................................................
2.4
How to imitate or replicate?..........................................................................................
2.5
Can copycats foster the entrepreneurial ecosystem? (Part 1)................................................
3
M IT startup ecosystem framework ...............................................................................
3.1
The dynamic startup model ............................................................................................
3.2
The startup process in the United States......................................................................
3.3
Startups lPOs/M&A or exits over time ..................................................................
3.3.1
W ealthy entrepreneurs turned VCs ......................................................................
3.3.2
Innovative Capacity ...........................................................................................................
3.4
Entrepreneurial capacity .................................................................................................
3.5
The creation of a vibrant entrepreneurial ecosystem ..................................................
3.6
The startup process in developing countries - The Chilean example............................
3.7
Startups lPOs/M&A or exits over time ..................................................................
3.7.1
Innovative Capacity in Chile ...................................................................................
3.7.2
Entrepreneurship Capacity in Chile ........................................................................
3.7.3
The dynamic process in Chile .................................................................................
3.7.4
Can copycats "spin the wheel" of entrepreneurship?......................................................
3.8
Case study I: Groupon Chile - ClanDescuento ......................................................
3.8.1
Case study II: Mercado Libre Argentina .................................................................
3.8.2
An example of a "Clone Factory" ...................................................................................
3.9
The story of Rocket Internet, a successful clone factory (so far)..........................
3.9.1
9
10
10
11
13
13
16
17
18
19
21
21
23
27
27
29
30
30
31
32
34
35
35
38
41
41
47
The critics ..................................................................................................................
3.9.2
3.10 Copycats are not easy to replicate in emerging countries............................................ 48
50
3.11 Conclusion part I ................................................................................................................
51
11).................
(Part
copycatting
better
for
Principles
Analysis of Latin American Copycats
4
52
The method .......................................................................................................................
4.1
52
The Sample ............................................................................................................
4.1.1
53
The Variables.............................................................................................................
4.1.2
57
Characterization of the copycats studied .....................................................................
4.2
.. . .. .. . .. .. . .. . .. .. . .. . .. . .. .. .. . . . . . 57
W hat has been mostly copied?.........................................
4.2.1
59
W here are copycat developed? ............................................................................
4.2.2
60
W hen were they founded? ...................................................................................
4.2.3
61
copycats?........................
the
were
W ho were the founders and how successful
4.2.4
62
Statistical analysis of the copycats .................................................................................
4.3
62
The model..................................................................................................................
4.3.1
5
4.3.2
The results.................................................................................................................63
4.3.3
Robustness................................................................................................................66
4.3.4
Analysis of the results ............................................................................................
67
4.4
Principles for copycatting ..................................................................................................
4.5
A sim ple fram ework for copycatting .............................................................................
5
Conclusion and future research............................................................................................
6
Bibliography ..............................................................................................................................
Appendix 1: M &A history in the US (Source: NVCA)....................................................................
Appendix 2: Interviews......................................................................................................................86
68
79
82
84
86
Appendix 3: Descriptive statistics and correlation matrix .............................................................
87
Appendix 4: Logit m odels results ...................................................................................................
Appendix 5: Com plete Database.......................................................................................................
89
91
6
Figures
Figure 1: Southwest exponential growth (Source: new.edu) ........................................................
Figure 2: Heinz brand versus ow n-brands......................................................................................
14
16
Figure 3: MIT IDE Framework (Source: MIT REAL). .......................................................................
19
Figure 4: M IT IDE stakeholders .........................................................................................................
Figure 5: A simple model of the Startup Process ..........................................................................
Figure 6: Venture-Backed Exits by year 2009-2013 (Source: NVCA)..............................................
Figure 7: Companies that spun off Fairchild Semiconductors (Source: PanchoDaily&Crunchbase)
Figure 8: The PayPal mafia (Source: mercurynews.com).............................................................
Figure 9: The ecosystem generates a virtuous circle ....................................................................
Figure 10: the total investment has grown over the years in Silicon Valley (Source: CB Insight).....
Figure 11: Innovative Capacity in the US and Chile.........................................................................
19
21
22
24
26
29
29
32
Figure 12: Entrepreneurial intentions is higher in Chile than in the US (Source: GEM) ...............
33
Figure 13: Chile ranks top 10 in the world in entrepreneurial intentions (Source: GEM)............. 33
33
Figure 14: Entrepreneurship Capacity in the US and Chile ...........................................................
Figure 15: The ecosystem does not generate a virtuous circle.....................................................
34
17: Needish w ebpage in 2009............................................................................................
18: ClanDescuento webpage which is very similar to Groupon's page ..............................
19: ClanDescuento's pages when acquired by Groupon ....................................................
20: Nazca Ventures w ebpage...............................................................................................
35
36
36
37
Figure
Figure
Figure
Figure
Figure 21: Copycats can spin the entrepreneurial ecosystem ..........................................................
38
22: MercadoLibre and eBay (Source: Webarchive).............................................................
23: Copycats can spark the virtuous cycle ..........................................................................
24: Alando.de and eBay in 1999 (Source: PCMag and Techno.net)...................................
25: Firms backed by the Samwers and sold to its rivals (Source: The Economist) ............
26: Rocket Internet funding over time (Source: cbinsights.com) .......................................
39
41
42
44
45
Figure
Figure
Figure
Figure
Figure
Figure 27: Internet users and buyers (Source: The Wall Street Journal)....................................... 46
Figure 28: Example of dataset used for the analysis......................................................................
53
Figure 29: Distribution of the copycats in Latin America ...............................................................
59
Figure 30: Ecommerce market size Latin America (source: fnbox.com).......................................
60
Figure 31: Copycat year of founding ..............................................................................................
61
Figure 32: Tim e in years to copy .....................................................................................................
61
61
Figure 33: Year of experience prior to found copycat ...................................................................
62
...................................................................................
of
copycats
distribution
Success
Figure 34:
65
Figure 35: Odd ratios ranking for Logit model ..............................................................................
Figure 36: Odd ratio ranking for oLogit m odel............................................................................... 65
Figure 37: Variability of the odd ratio for different models........................................................... 67
Figure 45: Adoption curve for various products in the US (Source: Federal Reserve Bank of Dallas,
19 9 5 ). ................................................................................................................................................
68
Figure 40: Structure of successful copycats ...................................................................................
70
7
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
41:
42:
43:
44:
46:
38:
39:
47:
Relationship between Link with local business and probability of success.................
Sonico webpage which is similar to Facebook .............................................................
Pinterest (original) versus Pinspire. (Source: NYT).......................................................
Value versus Tropicalization..........................................................................................
Distribution of copycats by B2B and B2C......................................................................
Comparison of capabilities for copycats ......................................................................
Success of copycat according to Execution and Experience .........................................
Framework for copycatting ..........................................................................................
71
72
72
73
74
77
78
79
Tables
Table 1: Innovative Capacity in the US..........................................................................................
Table 2: Entrepreneurial Capacity in the US .................................................................................
Table 3: Innovative Capacity in the US and Chile...........................................................................
Table 4: Entrepreneurship Capacity in the US and Chile ...............................................................
Table 5: Background of Mercado Libre's cofounders ...................................................................
Table 6: Selected Kaszek Ventures investments ...........................................................................
Table 7: The Rocket Internet model..............................................................................................
Table 8: Barriers for imitation across industries .............................................................................
Table 9: Model description ...............................................................................................................
Table 10: Summary of results for Logit and oLogit model .............................................................
Table 11: Odd ratios and P-Value for robustness check ...............................................................
Table 13: Advantages and disadvantages for B2C and B2B startups relative to the size of
opportunity. ......................................................................................................................................
Table 12: Original company's market value ...................................................................................
27
28
32
33
38
40
43
58
64
64
66
75
76
8
1 Introduction
Copycats have generated a lot of debate over the past years. On the one hand, Rocket
Internet (a German online startup incubator) has been successfully copying or replicating
business models from the US to other economies. For example, they created CityDeal (a
Groupon copycat) that was acquiring by the former 2 years later for $ 126 million. Because
of their business model the Samwer brother (cofounders of Rocket Internet) have
received comments such as; "The Samwer brothers are despicable thieves, How do they
sleep at night?'" said serial entrepreneur Jason Calacanis or "I hate Rocket, I hate the
Samwer brothers, I hope they die, but 1, right now, I want to stay, like, super quiet so they
don't come after me2" said Neil Blumenthal CEO of Warby Parker.
On the other hand, imitation has been around for long time and most of the industries
have benefited from imitation others. In 1966, Theodore Levitt wrote in that imitation is
not only more abundant than innovation but "actually a much more prevalent road to
business growth and profits" (Levitt, 1966). Or take Les Wexner, owner of Victoria Secret
that takes a month off every year to travel the world looking for other companies' ideas to
adopt 3 . He says that "business should celebrate imitation".
In this paper I study copycats in Latin America with the objective understand the role that
copycats can play in developing the entrepreneurial ecosystem. The research objective
can be summarized in two questions: 1) How can business model replication (copycats)
impact the entrepreneurial ecosystem in developing countries? 2) How can the odds of
success in replicating business models in Latin America be increased?
The first part of this work propose an answer for the first question by suggesting a simple
dynamic model to illustrate how copycats can become an additional lever to develop the
entrepreneurial ecosystem by decreasing the risk of new startups and increasing the
probabilities of exits. Using Chile as an example, I show that developing countries have a
1 http://www.wired.co.uk/magazine/archive/2012/04/features/inside-the-clone-factory
2 http://pando.com/2013/08/30/best-way-to-deal-with-copycats-dont/
3
http://www.economist.com/node/21554500
9
high passion for entrepreneurship but low capacity to innovate. I argue that this
combination is very suitable to foster the creation of copycats that combined with
traditional lever can accelerate the development of the ecosystem.
The second part of this thesis proposes a simple framework and a set of principles that
may increase the probability of success of a copycat. By studying 120 copycats in Latin
America and using statistical analysis and interviews with entrepreneurs and business
leaders I make recommendations that may maximize this probability: 1) identify major
trends in the industry, 2) choose an idea that solves a local problem and requires strong
links with local businesses to deliver value, and 3) build a team that has strong execution
capability.
2 Background and Literature review
2.1 Entrepreneurship is a driver for development
Entrepreneurs
are defined as people who transform ideas into companies which
eventually turn into profitable commercial enterprises (Lederman et al, 2014). These
entrepreneurs and theirs firms play a strategic role for countries. They take risks and
challenges incumbents, which encourages competition
and fosters innovation at
corporate levels. Often they develop new markets, new products and create value for
countries. According to the OECD report Startup America Latina4, new companies foster
structural changes in the economy by introducing new products and services. At the same
time they provide dynamism to industries and create quality jobs.
By fostering economic development, entrepreneurship is "a fundamental driver for
growth" (Lederman et al., 2014). Arguably, startups are among the most dynamic firms in
the economy which can be created, developed and destroyed depending on the market
conditions. Scholars (Aulet and Murray 2012, Lerner and Schoar 2010) segment these
startups in two broad groups: Small and medium enterprises (SMEs) and innovation4 Oecd.org
10
driven enterprises (IDEs). SMEs are companies that serve local markets and have limited
capacity for growth (for example a neighborhood pizzeria). In contrast, IDEs take
advantage of "global opportunities by bringing to customers new innovations (...) and a
high growth potential" (Aulet and Murray 2012) such as Google, Amazon and Apple. The
impact of these IDEs has been an important economic force in the US. According to the
National Venture Capital Association (NVCA) of the United States, venture capital firms
have invested more than $ 456 billion in 27,000 companies. IDEs created 12 million new
jobs between 1970 and 2008, comprising 11% of the total employment created in the
private sector5 and generating revenues of $ 2.9 trillion (which is equivalent to 21% of the
US GDP). Thus, due to the positive impact of IDEs many governments and scholars have
started to develop strategies to foster startups by strengthening their "entrepreneurial
ecosystem". This ecosystem is usually defined as the different stakeholders who influence
the creation of startups and affect their posterior success or failure. Stakeholders include
governments, universities, risk capitalist, corporations and entrepreneurs.
Thus, many authors have tried to determine how to build entrepreneurial ecosystem in
order to create value for local economies. The next section explains the common levers
encountered in this literature.
2.2 Levers for Entrepreneurship Ecosystem Development
Scholars on entrepreneurship differ in their perspective about the role of government. On
the one hand, Brad Feld (Startup Communities, 2012) argues that entrepreneurship
communities have to be developed and led by entrepreneurs who have a long-term
commitment to the community. Other stakeholders such as government, universities,
investors and large companies should help the community. Feld's argument challenges the
prevailing wisdom that government or investors should lead the community.
On the other hand there are those who argue for the government involvement in
developing the
ecosystem.
For example, Josh Lerner (Lerner 2009) argues that
s Nvca.org
11
government should play a key role in fostering the development of entrepreneurship
ecosystems. He postulates that entrepreneurship development won't occur "in a vacuum"
and thus that entrepreneurs depend on other partners. Lerner argues that government
should set the rules and let the venture capital and the market decide. For example, policy
makers should set rules to leverage local academic research through corporate incentive
such as tax deduction for R&D investments. However, he also recommends that
government
not
to
over-engineer
the
entrepreneurship
ecosystem
by
limiting
geographical location of startups or preferred industries.
Additionally, Daniel Isenberg (lsenberg 2010) offers nine ways for governments to create
an entrepreneurship ecosystem. These include stopping the emulation of Silicon Valley
because many of its elements are hard to replicate (for example Stanford University) and
shaping the ecosystem around local conditions where the country has a certain
competitive advantage. Also, based on his research he postulates that government should
favor the high potentials ideas rather than focusing on quantity. He notes that "one
success can have a surprisingly stimulating effect on an entrepreneurship ecosystem by
igniting the imagination of the public and inspiring imitators". Finally, governments should
provide an "easy to do business" environment where legal and regulatory frameworks are
respected and can be trusted.
Yet another point of view is proposed by the MIT. Its framework proposes that the
ecosystem should be leveraged by accelerators, diaspora networks and immigration
policies, early-stage capital approaches and prizes and competitions. The goal of
accelerators is to bring together resources to launch a new idea and at the same develop
entrepreneurship capacities for would
be entrepreneurs. Diaspora
networks and
immigration policies develop local human capital (for example the Startup Chile program
where international entrepreneurs are given $ 40,000 and a work visa to start their
company in Chile). Prize and competitions such as the MIT 100K can also foster innovation
by attracting different competitors (MacCormack et al 2001).
12
2.3 Imitation as a new lever?
The previous literature on developing entrepreneurship ecosystems doesn't include
imitation as a lever. However, many scholars have examined the notion of imitation or
replication in their studies on corporate firms. In the following section I summarize these
findings.
Many scholars postulate that firms have a first mover advantage. Lieberman et al (1988)
suggest that these advantages are related to proprietary learning effects, patents and
preemption of assets and location and buyer switching costs. However, other scholars
have postulated that it is better to be a strategic second (Markides and Geroski, 2004).
They postulate that one set of factors produces radical innovations while another set of
factor consolidates those innovations and profit from them. An example is Amazon.com
which in 1994 was a fast follower from books.com created in 1991 which is now unknown.
The appropriate timing to enter a new market is when the dominant design is crystallizing.
Moules (2012) goes even further by recommending entrepreneurs not to innovate but to
imitate arguing that most entrepreneurs are not inventors and that it is more important to
be able to "out-execute" everyone else in the market on that idea. Levitt (1966) and
Shenkar (2010a, 2010b) argue that imitation has more value than innovation for the
corporate world. Levitt (1966) said "a simple look around us will, (...) quickly show that
imitation is not only more abundant than innovation, but actually a much more prevalent
road to business growth and profits". However, Shenkar (2010b) explains that imitation is
not "mindless repetition; it's an intelligent search for cause and effect" thus good
imitation is difficult and requires specific capabilities that have to be developed.
2.4 Is imitation a recent phenomenon?
Imitation has been part of the general business strategy for many decades and in various
industries. As noted by the Economist "the iPod was not the first digital-music player; nor
was the iPhone the first smartphone". In fact Apple didn't launch the first 100% touch
13
phone; it was HTC a Taiwanese company which focuses in smartphones and tablet
manufacturing. Examples are very common in the corporate world where copycats or
imitation is considered normal and not challenged by society.
Shenkar (2010a) uses the example of Southwest and its European copycats to illustrate
that business replication has present for many year and is accepted by customers and
investors. Southwest is considered one of the most successful airlines of our time. It was
established in 1971 in Dallas, Texas, by Rollin King and Herb Kelleher. Today Southwest
has revenues of $ 17 billion, more than 46,000 employees and 3,400 flights per day.
Kelleher created the company on an apparently very simple business model (Shenkar
2010):
" Fly short flight and point to point (established airlines would fly through their
hubs).
*
Use one type of aircraft, specifically Boeing 737 (standardization provide cost
advantage in maintenance and training).
*
Turn the plane around quickly.
*
Use secondary airports to reduce cost and increase efficiency.
Southwest created the first "low-fare" airlines in the world and it bold strategy has been
successful carrying more than 100 million passengers in 2010.
Southwest Airlines Passenger Growth
100.
5
80
S70
.o
-
.s601
50
40
10.
1970
--
__
1975
1980
1985
1990
1995
2000
2005
2010
Year
Figure 1: Southwest exponential growth (Source: new.edu)
The success of Southwest generated many imitators in the US and in the world. In the US
the model was copied by AirTran and Spirit Airlines and established airlines created their
own "inside" copycats. However, one of the most interesting imitators is RyanAir, a
14
European airline founded in 1985, which has grown to 6 billons in revenues, 8,000
employees and 300 planes. RyanAir's strategy can be summarized quoting Michael
O'Leary, its current CEO: "All we've done is copy Herb Kelleher's (Southwest founder)
successful model. In fact, we're maybe the only people to take it beyond where Southwest
has gone with it."
There are many other industries where imitation or direct copycats are generally accepted
as usual business practice:
"
Pharmaceutical industry with generics and biosimilars: When biotech companies
develop new drugs their invention is protected by patents for a fixed number of
years generating a monopoly where companies can recuperate R&D cost and make
profits. After the patent expiration "generics" appear making the market more
competitive. These generics are basically copycats of the previous drug developed
by another laboratory.
"
Supermarket generic brand: In recent years many supermarkets have adopted
their "own-brand" which are labelled and formatted similar to the original brand
(see picture below). These are copycat examples of the original grand which are
sold at a lower price to final customers. In some cases the "own-brand" is
produced by the original company but in many other cases these are 100%
imitations done by third parties in partnership with the retailer. It seems that it is
generally accepted by the market as providing good value for the final customer.
Thus, imitation is not a recent phenomenon and has been present in many industries.
15
Figure 2: Heinz brand versus own-brands
2.5 How to imitate or replicate?
Winter and Szulanski (2001) identify two basic activities when replicating business. First is
the exploration phase where the main objective is to discover the Arrow core (Arrow
1962) which can be understood as the "what, how and where should the replicator be
trying to replicate". Second, comes the exploitation phase in which the business model is
"stabilized and leveraged through large-scale replication". One factor that can increase
the barriers to imitation, however, is the complexity of the strategy. Based on the work of
Simon (1962), Riskin (2000) defines complexity of the strategy by two factors: The number
of decisions that the strategy conveys and the interrelations among them. When the
strategy is very complex (for example Nucor6 business) it is more difficult for the imitator
to develop a good copycat and thus the probability of an imitator to emerge is low. Thus,
the more complex the business the more difficult it is to find the Arrow core and thus
executing a replication strategy.
On medium complexity strategies the dilemma that the original company faces is that in
order to expand their business they have to follow a "recipe" which can visible for others.
Riskin (2000) postulates that the more visible the "recipe", the more copycats will emerge.
White Castle is an example: They are recognized as the pioneers of fast food and grew fast
in the early days. However, their replication strategy was so visible and the "recipe" so
6 Nucor is a Fortune 300 company which is the largest steel producer in the US.
16
easy to copy that many copycats appeared on the market (many of them even copied the
name: White Palace, White Log, White Tavern, etc.). In the long term some imitators out-
executed them to become worldwide players such as McDonalds.
Thus, the success of replication strategies should be a function of the complexity and the
visibility of the original business and the execution capacity of the replicator.
Much of the past work on imitation/replication has focused on large corporations. Very
few scholars have examined the notion of copycatting for the startup world and its
potential impact on the ecosystem. In. the following section, I propose a simple model to
illustrate how copycatting can be a potential lever for the entrepreneurial ecosystem
development for emerging countries.
3 Can
copycats
foster
the
entrepreneurial
ecosystem? (Part 1)
In part 1, I illustrate how copycats can foster the entrepreneurial ecosystem development
in emerging countries by addressing the most important pain point of these markets: the
lack of exits. Copycats have two principal advantages to solve this point: they reduce the
risks for potential buyers (due to replication) and have a natural potential acquirer (the
original company). The broader transmission mechanism is simple.
More copycats mean increased funding because VCs perceive less risk due to the fact that
the business model has been proven elsewhere. Some of these copycats will have
successful exits either by mergers and acquisitions or an initial public offering. This
generates wealthy entrepreneurs as well as role models for the ecosystem. Some of the
wealthy entrepreneurs will turn into Angel or VC investors increasing the number of
startups generated in the region. Others will become serial entrepreneurs creating more
startups. Both will become role models and might mentor other startups increasing the
17
probability of obtaining funding. Ultimately more funded startups means more successful
possibilities and thus generating a self-fulfilling loop. I use two case studies (MercadoLibre
and Clan Descuento) to illustrate how these copycats have impacted the development of
the ecosystem in Latin America.
To explain the importance of business replication instead of innovation I use the MIT
startup ecosystem framework. I show that the capacity to innovate for emerging countries
is very limited when compared to more developed countries. However, I show that some
emerging countries have the same entrepreneurship capacity as the US. Thus, these
emerging countries have an "entrepreneurship" willingness that could be invested in
replicating business (which are less risky and can spin the wheel) instead of competing on
innovation with more developed countries. To illustrate the argument I compare the
differences in innovation and entrepreneurship capacity for Chile and the US.
The structure of the first section is the following. I start by briefly explaining the MIT
startup ecosystem and the concepts of innovative capacity and entrepreneurial capacity.
Then I explain the dynamic model of the entrepreneurial ecosystem and illustrate how it
works in the US and Chile with their associated level of innovation capacity and
entrepreneurial
capacity. Then,
I illustrate how these copycats can foster the
entrepreneurial ecosystem by using two case studies from Latin America. I conclude the
first part by explaining the elements of a successful copycatting strategy (Rocket Internet)
and the difficulties associated with this strategy for emerging countries.
3.1 MIT startup ecosystem framework
The
MIT startup ecosystem framework
identifies the
key stakeholders
in an
entrepreneurial ecosystem and the different capabilities that have to be combined to
generate an important economic impact in the country or region. It focuses on IDEs rather
than SMEs because it recognizes that IDEs need different set of capacities to foster its
development.
18
The framework recognizes that a region (i.e. country) must build both the capacity to
innovate and the capacity to be entrepreneurial. Both capacities with the appropriate
linkages will lead to economic impact as shown in Figure 3. Five stakeholders are critical to
build and use these capacities: entrepreneur, risk capital, corporate, government and
university (as shown in Figure 3 and Figure 4).
Innovation capacity (I-Cap) refers to the ability to develop new products and services for
the world from inception to the market. Entrepreneurial capacity (E-Cap) refers to the
ability to startup and build novel businesses from inception to maturity. Both E-Cap and ICap are divided into people, funding, infrastructure, policies & programs, network and
norms & culture.
ECONOMIC IMPACT
UWRS"T
AAIKCAPTAL
Figure 3: MIT IDE Framework (Source: MIT REAL).
Figure 4: MIT IDE stakeholders
3.2 The dynamic startup model
Using the MIT Framework and the experience from entrepreneur Jerry Kaplan embodied
in his book "Startup: A Silicon Valley Adventure" (1996), I construct a simple model to
explain the dynamics of the entrepreneurial ecosystem.
The process starts with an aspiring entrepreneur and an idea (IDE ideas). Usually the
entrepreneur has no money and the only currency is the company's shares. For the
entrepreneur the objective is simple and clear: increase the value of those shares because
in the end it will be exchanged for money.
19
The next stage of the process is to finance the early stage of the company. Entrepreneurs
do not seek for all the money at once because they would have to sell too much stock.
They look for money to allow them to achieve the next important milestone which will
increase the theoretical value of the shares. Thus the entrepreneurs are willing to
exchange shares for financing which will be used to grow the business (i.e. develop a
minimal viable product, customer validation, etc.). The entrepreneur also exchange shares
with other people to convince them to join the team (usually using a mix of shares and
below-market salary).
Once some milestones and results (such as first paying customers) are reached the startup
looks for venture capital (VC) financing in exchange for more shares (usually preferred
shares) to continue the business growth and expansion. More challenging milestones have
to be met to keep the value of the company increasing and to find money to keep growing
the business. If no money is found before achieving the milestones, the company won't be
able to sustain itself and closes or is acquired at a low valuation by another company.
The final step for successful companies is to achieve an exit. Generally this has two forms:
An IPO (Initial Public Offering) or an acquisition by another company. At this time shares
become liquid, have a real market value and thus can be exchanged for cash (for both the
investor, entrepreneurs and early employees). At any time the process can end if the
growth or profitability targets are not met.
The few entrepreneurs who achieve a successful exit will have plenty of cash in the bank
as well as an incredible amount of experience and knowledge about how to go through
the process successfully.
These entrepreneurs become role models for local aspiring entrepreneurs and thus foster
the creation of new startups (Bosma et al., 2012). They illustrate to these aspiring
entrepreneurs that it is possible to create value and monetize it. Because of the received
mentorship on their company, successful founders are usually willing to provide
mentorship to other aspiring entrepreneurs on how to overcome the challenges of the
process (this is the reason behind organization such as Endeavor and others movements
where successful entrepreneurs give advice to other entrepreneurs).
20
If these successful entrepreneurs decide to do another startup or join the investor
community, the process starts again.
The following model shows how this process can be illustrated:
Ru Mos +
R&D
Figure 5: A simple model of the Startup Process
3.3 The startup process in the United States
In the US, the startup process has generated a virtuous cycle generating more
entrepreneurs, more exits and more VCs over the years as well as fuelling local and
worldwide ecosystems. In the next section, I provide examples of exists in the US, and
illustrate the importance of successful entrepreneurs for the ecosystems. I use the MIT
framework to show how the innovation and entrepreneurial capacity has contributed to
build the vibrant ecosystem.
3.3.1 Startups lPOs/M&A or exits over time
According to the National Venture Capitalist Association (NVCA 7 ) in 2012 there were
almost 50 IPOs with a market value of $ 122 billion. More than 87% of the value of these
http://www.nvca.org/
21
IPOs came from US companies3. The top five IPOs for 2012 were 1) Facebook - $ 16,000
million, 2) Workday - $ 637 million, 3) Vantiv - $ 500 million, 4) Palo Alto Networks - $
260 million and 5) Splunk - $ 230 million.
Another form of exit is M&A. According to NVCA there were 449 acquisitions, 121 of
which terms of the deal were disclosed. The sum of the disclosed deals was $ 21.5 billion
and that "over a fifth of companies were acquired at 10 times or greater than the
cumulative venture capital investment in those companies".
VenSteacked Exlts syYear200 -2013
2009
2010
2011
2012
2013
Figure 6: venture-Backed Exits by year 2009-2013 (Source: NvCA)
According to PrivCo9 , a private company market analysis which track also smaller deals, in
2012 there was 882,357 private tech firms bought for a total market value of $ 84 billon. The
top acquires of private companies are: 1) Facebook, 2) Google, 3) Groupon, 4) Twitter and
5) Cisco.
Thus, the exit possibilities for successful startups are abundant. This generates wealthy
entrepreneurs who create or contribute to VC funds and who are willing to take risk in
exchange for a high return. The next section illustrates the example of entrepreneurs
turned VCs with the case of Fairchild Semiconductor, Netscape and PayPal.
SPwC - https://www.pwc.dk/da_DK/dk/nyt/brancher/assets/pwc-global-tech-ipo.pdf
9http://www.privco.com/prod
ucts/2012-m-and-a-ind ustry-overview-technotogy-sector-volume-
22
3.3.2 Wealthy entrepreneurs turned VCs
The Fairchild example' 0 :
Fairchild Semiconductors was founded in 1957 when 8 engineers" left William Shockley's
lab to create their own company. Their objective was to make silicon transistors which
gave the name to Silicon Valley. In 1959, they invented the integrated chip and grew
rapidly during the following years. Fairchild founders had an important influence on the
ecosystem. Leslie Goff from CNN wrote "Fairchild Semiconductor would establish a model
for entrepreneurship (...) for the rest of the century". In fact, most of them had a direct
impact on the ecosystem:
*
In 1968 Gordon Moore and Robert Noyce left the company to found Intel which
became the largest semiconductor chip company in the world and an important
corporate VC.
*
Julius Blank and Sheldon Roberts founded successful companies that were
acquired.
*
Eugene Kleiner started the venture capital firm Kleiner, Perkins Caulfield & Byers
(KPCB) which is one of the leading VC firms. Since 1972 they have backed more
than 500 companies including Google, Amazon, Netscape and more recently,
Twitter, Nest and Waze.
In all, hundreds of companies and VCs had their origin from one single company and 8
engineers. The multiplying effect is illustrated in the following two diagrams (the first from
1957 and the second for 2005) where every non-yellow point is a company linked to
Fairchild founders:
10 This section is based on numerous sources online such as PanchoDaily, Wikipedia and others.
1 Julius Blank, Victor Grinich, Jean Hoerni, Eugene Kleiner, Jay Last, Gordon Moore, Robert Noyce, and
Sheldon Roberts
23
The Fairchild Mafia
OA
1957
Dim
CCWtA
Rabeft
GOPOW W"
a1953
n
2013
......... ........
The Fairchild Mafia
edr
....
.....
....
...
..
2005
1953
2013
Figure 7: companies that spun off Fairchild Semiconductors (Source: PanchoDaily&Crunchbase)
The Netscape example:
In 1993, Marc Andreessen a young engineer from the University of Illinois left Mosaic to
create on the first "easy-to-use"
navigators called Netscape. Due to its potential
commercial application it was funded by KPCB venture firm and Ben Horowitz joined the
company as one the first product managers. Due to its huge success Netscape went public
24
in 1995 and became the fastest growing software company in the world. In 1999, they cofounded a software company called Opsware that was later sold to Hewlett-Packard for $
2
1.6 billion. Other Netscape executives went on to cofound or invest in Google, TellMe1
and more recently Flipboard.
In the 2000's they both invested angel money in 45 startups such as Twitter and in 2009
they announced the creation of Andreessen Horowitz with a $ 300 million fund. It grew
rapidly to $2.7 billion under management and became the N01 VC firm according to
Investor Rank
13
They are known because they were the only VC to have invested in all the major social
media companies: Facebook, Groupon, Twitter and Zynga. Examples of their successful
exits are: 1) Groupon - IPO 2011, 2) Instagram - acquired 2012, 3) Skype - acquired 2010,
4) Zynga - IPO 2011 and Nicria - acquired 2012.
The PayPal example:
PayPal was founded by Max Levchin, Peter Thiel, Luke Rosek and Elon Musk to provide
digital payment to the world. The company was acquired by eBay in 2002 for $ 1.5 billion.
Many of them and early Paypal employees could not assimilate into eBay's culture and
started to work together in different startups and invested together. They became known
as the "Pay Pal Mafia" 14 which over time has developed many successful companies and
venture capital firms. Peter Thiel is president of a $ 2.3 billion investment fund and a
managing partner at the Founders Fund with $ 275 million. David Sacks (Paypal executive)
founded Yammer which was recently sold to Microsoft for $ 1.2 billion. Roelof Botha
(Paypal executive) became a partner at Sequoia Capital, one of the leading VC firms in the
US. Steve Chen, Jawed Karim and Chad Hurley co-founded YouTube. Elon Musk founded
Tesla Motors and SpaceX.
Reed Hoffman, former vice president of PayPal, later
cofounded LinkedIn and was an early investor in many startups such as Facebook, Zynga,
Acquired by Microsoft.
13
14
http://techcrunch.com/2011/05/25/top-10-vc-firms-investorrank/
http://money.cnn.com/2007/11/13/magazines/fortune/paypal_mafia.fortune/
25
Flickr, Care.com and Last.fm. All in all PayPal founders and their ex-colleagues run $ 30
billion worth of business1s
The companies founded by PayPal founders and early employees can be illustrated as
follow:
14p'
I
w4i
PayPaI
slide
Figure 8: The PayPal mafia (Source: mercurynews.com)
The examples of Netscape, Fairchild and PayPal demonstrate how successful startups
created a virtuous cycle in the US. As a result, the total VC money under management in
the United States by the end of 2012 was 199 billion,16 by far the biggest fund in the
world.
15
http://www.nytimes.com/2006/10/17/technology/17paypal.html?ei=5088&en=943bf3f552dO9fb2&ex=131
8737600&partner=rssnyt&emc=rss&pagewanted=all&_r=O
16
www.nvca.org
26
3.4 Innovative Capacity
As illustrated in Figure 3, the creation of new IDEs depends on the number of
entrepreneurs and the VC money available and more importantly on the innovative
capacity. The US is the country that invests the most in Research and Development (R&D)
estimated at $ 439.0 billion for 2012 equivalent to 2.8% of the GDP. To put the number in
perspective, this is more than 10 times what the UK spends in R&D per year.
Another measurement of the innovation capacity of a country is its patent activity. In this
indicator the US is among the top 3 countries in the world. As an example in 2011, more
than 224,000 patents were granted to the US whereas only 7,000 in the UK 17
US universities are also constantly ranked as the best in the world: 70% of the world best
universities are from the US (according to QS rankings'8 ).
The following table summarizes key indicators of innovative capacity for the US:
Table 1: Innovative Capacity in the US
us
I-Cap
Global Innovation Index Rank
Innovation Capacity Index
Human Capital & Research
Gross Expenditure on R&D
Expenditure on R&D $ billion
University ranking
Domestic Patentsap/bn PPP$ GDP
High-tech exports
University /Industry research colaboration
University rank+Patents+Citations
5
1
6
2.8%
439.0
2
16.4
12.8%
3
240
Source: The Global Innovation Index 2013, National
Innovative Capacity (Porter, Stern)
3.5 Entrepreneurial capacity
According to the MIT framework, the creation of IDEs also depends on the country's
Entrepreneurial Capacity. As explained before, Entrepreneurial Capacity refers to the
1 http://www.wipo.int/portal/en/
18
http://www.topuniversities.com/
27
ability to build and scale up startups and is influenced by the local culture, government
policies and processes, and education. Particularly the local culture is influenced by the
presence of role models. For example, according to Bosma et all (2012) role models have
an important influence on aspiring entrepreneurs when they decide to start a business.
The influence is even more important when gender, country and sector of work is shared
with the role model (i.e. the impact of Steve Jobs is higher in male entrepreneurs, in the
technological sector within the US). The US has many iconic entrepreneurs that are widely
known because of their achievements: Steve Jobs, Bill Gates and Mark Zuckerberg are well
known by almost every aspiring entrepreneur. Sergey Bring, co-founder of Google once
said: "From the earliest days of Google, whenever Larry and I sought inspiration for vision
19
and leadership, we needed to look no farther than Cupertino (Steve Jobs)" .
Other measurement of entrepreneurial capacity include: low fear of failure, ease in
starting a business or closing it down.
The following table summarizes key indicators of entrepreneurial capacity for the US:
Table 2: Entrepreneurial Capacity in the US
us
E-Cap
Entrepreneurial intentions
Fear of failure
Nascent Entrepreneurs
Government Entrepreneurship Programs
Entrepreneurship Education
Ecosystem Ranks
Engineers Graduate
Role Models
# procedures to start a business
# days to start a business
12%
31%
9.2%
2.6
3.1
1
10.5
Many
6
5 days
Source: Global Entrepreneurship Monitor 2013, World
Bank, Startup Genome
19
http://www.wired.com/promo/memorial/stevejobs/
28
3.6 The creation of a vibrant entrepreneurial ecosystem
Thus, using its innovative capacity the US generates many IDEs which in combination with
its strong entrepreneurial
capacity could generate many successful startups and
consequently exits. This should lead to successful entrepreneurs, role models and mentors
for the entrepreneurial ecosystem. The cycle closes when these successful entrepreneurs
start again or goon the venture capital industry. The entrepreneurial ecosystems in the US
(particularly Silicon Valley and Boston) are self-reinforcing loops that increases their value
over time.
Figure 9: The ecosystem generates a virtuous circle
As a result the number of dollar invested and the number of deals has increased steadily
from 2009 in Silicon Valley20.
Silicon Valley Financing History: investmnent Deals and Dollars
01 2009 -3 2013
h oaivsmn
~~~~~Figure
209
9: Thesecoyte
gnerte
sanvituoun cirley(ur: Bnsg)
h er nSiio aly(oreBIsgt
e
fromr
2009 in Siioalieytethsgonoe
Aa rttp://wwwhebnumbers of/dollarietea-scn-datheynme fdashsicesdsedl
w Figure://
10:ins
htota/ivetmrenctasilown
-e h
ernSlcnvalley
(ore
BIsgt
29
3.7 The startup process in developing countries - The Chilean
example
In developing countries, the startup dynamic process doesn't work as in the US. The low
innovative capacity and the lack of exits obstruct the generation of roles models and the
creation of new startups. However, many developing countries have generated an
important stock of entrepreneurial capacity though this is not sufficient to trigger a
virtuous entrepreneurial cycle. In the next section, I illustrate the differences in the
innovative capacity between the US and developing countries as well as the similarities
between them in terms of entrepreneurial capacity using Chile as an example.
Chile is a small (17 million people) developing country in Latin America that has grown
steadily from 1990 to date. Most of its growth has been base on natural resources such as
copper and stable macroeconomic policies. Due to the high dependence on natural
resources, the Chilean government has tried to foster innovation to migrate to a
knowledge based economy (instead of the resource base economy as today). However,
the entrepreneurial ecosystem is changing slowly and remains insignificant when
compared to the ecosystems in the US. The next section summarizes the difficulties
encountered and a comparison of the innovation capacity in Chile and the US.
3.7.1 Startups lPOs/M&A or exits over time
One of the main differences is that there is no active exit market for startups. For
example, no Chilean startup has done an IPO in the US (for example at the NASDAQ). Such
an IPO would be a sign of technological innovation created in Chile for the world and
which is valued by the market. On a broader perspective, the quantity of M&A in Latin
America shows low activity: There were 144 M&A deals for the last 3 years in Latin
30
America 21 (compare to more than 450 deals in the US only in 2012). Then, VC backed
startups have very low possibilities to have a successful exit (going public in local markets
has historically been reserved for mature companies2 2 ). Most of the startups have to
target value from the real cash flows rather than targeting exits. This makes the startup
market riskier for the VC since there is no clear way to monetize the fund at maturity
other than potential dividends. According to Juan Pablo Cappello, (co-founder at Patagon
and one of the most respected entrepreneurs/investor in Latam) the low ratio of
successful exits "are lowering the moral of future entrepreneurs".
Because of the lack of exits, there is no wealthy tech entrepreneur that could form his or
her own VC fund or be an important role model for aspiring entrepreneurs. Thus, the
government had to foster the creation of VC through it national development agency. This
is done by co-financing VC funds (in some cases the government finance 2/3 of the fund)
to lower the risk of the private sector and foster the creation of these funds. Today, Chile
has a total of 21 funds with a total of $ 400 million under management equivalent to
0.15% of the GDP (in the US VCs funds represents 1.3% of the GDP, almost 9 times higher).
This amount is equivalent to the 0.2% of the total VC funds available in the US.
3.7.2 Innovative Capacity in Chile
The second most important difference between the US and Chile is in the level of
innovative capacity. Chile spends only 0.5% of its GPD on R&D
24
equivalent to $ 1.2 billion
compared to$ 400 billion in the US (equivalent to 2.77% of the GDP 2 5 ). On level of patent
production, Chile applied for 2,700 patents in 2011 compared to more than 500,000 in the
US. Even when controlled for population Chile is well behind the US in patent production.
2 Latin American Venture Capital Association (LAVCA.com).
2 The last Chilean technological company that went public was 30 years old, with operations in 10 countries
and generating an Ebitda of $ 57 million per year.
2 http://thenextweb.com/la/2013/07/06/zombies-are-about-to-invade-latin-america/#!tz55t
2 http://unesdoc.unesco.org/images/0018/001899/189958E.pdf
2s WorldBank.org
31
Regarding universities, the best Chilean ones are ranked 166 and 223 worldwide in the QS
ranking for 2012 compared to the US where 70% of them are world class.
Even though many efforts are in progress to increase the Chilean innovative capacity2 6 the
reality is that in contrast to developed countries, in Chile it is very difficult to compete on
the generation of innovation capacity.
The following table summarizes the innovative capacity for Chile and compares it to the
US (a bigger circle represent better innovation capacity):
Table 3: Innovative Capacity in the US and Chile
us
Innovative Capacity Chile vs US
chile
I-Cap I-capI
Global Innovation Index Rank
Innovation Capacity Index
Human Capital & Research
Gross Expenditure on R&D
Expenditure on R&D$ billion
University ranking
Domestic Patentsap/bn PPP$ GDP
High-tech exports
University /Industry research colaboration
University rank+Patents+Citations
5
1
6
2.8%
439.0
2
16.4
12.8%
3
240
46
35
70
0.4%
1.1
30
1.1
0.7%
37
60
Gil
ank
C
rank+Patwntsl*C
/
60.QHuman Capit
Research
Unvnsitylbdustzy
research naaboration
&
Xi
H
Source: The Global Innovation Index 2013, National
Innovative capacity(PorterSte )
7-Jr
echexportsHlojxedn npoiP\
Domestic Py
PPP$GDP
-I-Cap
un
US -
ndteon
R&D
sty rankg
l-Cap Chile
Figure 11: Innovative Capacity in the US and Chile
3.7.3 Entrepreneurship Capacity in Chile
Entrepreneurship Capacity refers to the ability of a country to start new businesses which
is influenced by the local culture, government policies and processes, and education.
Entrepreneurship is measured using metrics such as entrepreneurial intentions, fear of
failure and time to setup a business.
In Chile, a recent study by the government shows that 41% of young people think that it is
possible to start a company under the current economic situation27 . Additionally, a third
of young Chileans want to start a business of their own and almost 80% think that the
conditions and incentives are better today than 5 years ago to start a business.
26
27
Pfizer, GDF Suez, Emerson and Telefonica will install R&D center in Chile.
http://pulsosocial.com/2013/12/06/chile-uno-de-cada-tres-jovenes-piensa-en-tener-un-emprendimiento/
32
Moreover,
according
to the
Global
Monitor
Entrepreneurship
entrepreneurial
intention29 in Chile are higher than in the US (Chile ranks in the top 10 country with high
entrepreneurial intentions). The following graph compares the entrepreneurial intention
for Chile and the US.
EO"Ifeteial"O,*o
~eued
CVatL4SO$*"f '0
.............................................
.............
111 -,...
........
....
.................................................
....................................
2"u
314
50
250
0
5V 210
200
20
20ti
1 2
Figure 12: Entrepreneurial intentions is higher in Chile than
Figure 13: Chile ranks top 10 in the world in
in the US (Source: GEM)
entrepreneurial intentions (Source: GEM)
The following table summarizes key indicators for entrepreneurial capacity:
Table 4: Entrepreneurship Capacity in the US and Chile
Entrepreneurial intentions
Fear of failure
Nascent Entrepreneurs
Government Entrepreneurship Programs
Entrepreneurship Education
Ecosystem Ranks
Engineers Graduate
Role Models
# procedures to start a business
# days to start a business
us
E-Cap
12%
31%
9.2%
2.6
3.1
1
10.5
Many
6
5 days
Chile
E-Cap
47%
28%
15.4%
3.1
2.7
20
8
Very few
7
6 day
Source: Global Entrepreneurship Monitor 2013, World
Bank, Startup Genome
Innovative Capacity Chile vs US
Entrep Blt55stlons
# daystos
Fear of faire
-
Nascent Entrepreneurs
# procedures tostart
Role Models
Engees Grtr.
-I-Cap
PmE
V
Education
US -I-Cap
Chile
Figure 14: Entrepreneurship Capacity in the US and Chile
As it can be seen in Figure 14, the entrepreneurial capacity in Chile is similar the US.
Therefore, comparing these two economies I find that though the innovation capacity in
28
http://www.gemconsortium.org/visualizations
29 Measure the percentage of people that expects to start a business within three years.
33
the US is clearly superior to Chile, the entrepreneurship capacity of both countries is
similar.
3.7.4 The dynamic process in Chile
Perhaps the best summary of the Chilean situation (also applied to Latin America) can be
read in a recent report about Latin America by the World Bank (Lederman et al., 2014):
"The region has a lot of entrepreneurs but no innovation". This lack of innovation reduces
the number of startups which in turns decreases the number of successful exits which
doesn't generate more role models or additional risk capital. Thus, there is no virtuous
cycle generated.
Figure 15: The ecosystem does not generate a virtuous circle
To solve this problem and spark they entrepreneurial ecosystem, many Latin American
countries are using common levers mentioned in earlier sections such as diaspora
networks (for example Startup Chile), early stage-capital approach and entrepreneurial
competitions as well as financial incentives to increase the R&D spending. However, these
policies can take decades to have a real effect on the ecosystem. In the next section, I
propose a different lever that could spin the entrepreneurial wheel. I propose that
34
focusing on copycats, developing countries can leverage the innovation developed abroad
and take advantage of their entrepreneurial capacity they already have in place.
3.8 Can copycats "spin the wheel" of entrepreneurship?
Instead of focusing the startups on founding IDEs, (which are difficult to generate and
uncertain) developing countries could focus on developing copycats or replication of
business that are already working in other parts of the world. This copycatting could
provide a "fast track" in creating regional leaders that have both the lower risk and higher
possibilities of being acquired by the original company (both appealing for VCs). I illustrate
this point using two case studies: one from Chile and another from Argentina.
3.8.1 Case study 1: Groupon Chile - ClanDescuento
Daniel Undurraga (Chilean) and Oskar Hjertonsson (Swedish-Chilean) founded Needish in
2007. It was a marketplace for integrated services using social networks that enabled
people to find solutions to their local needs. For example, people could post "I need to
find a plumber" and the software would contact them with the plumber in the database.
People in the network could also contribute with answers and tips. Both sides of the
platform win: the clients have access to local services easily and the provider could
acquire clients effortlessly.
Fr
ez-
*M
Afiw)
tnO
16: Nedis weg
n
MI
*35
fiw
OM
Figure 16: Needish webpage in 2009
35
During 2008-2009, they quickly grew the user community but were unable to monetize
the traffic. In early 2010, they were running out of cash and had to travel to the US to
obtain more VC funding (some of their initial VC was from the US). On one these visits,
they noticed that Groupon was a "trending" company with impressive growth. They
figured that the Groupon platform was simple and that they could reuse some of the
knowledge they had developed from Needish. Thus, they decided to take one last chance,
obtained a small investment from a friend and created ClanDescuento, a Chilean Groupon
copycat which was launched in early 2010.
Figure 17: ClanDescuento webpage which is very similar to Groupon's page
The bet paid off when 4 month later Groupon acquired ClanDescuento (CD) for an
undisclosed amount. The news was featured in the most important Chilean newspapers.
Figure 18: ClanDescuento's pages when acquired by Groupon
The CD team stayed with Groupon with the mission to expand the Groupon model to the
rest of Latin America (except Brazil). The CD team was successful and soon after the
Groupon IPO in 2011 they left the company.
36
After leaving the company one of the co-founder of CD created a new VC fund for Latin
America called Nazca Ventures. Recently, they announced a $ 1.3 million investment 30 in
Nubelo3 l a Latin American copycat of ODesk or Elance (both successful platforms to hire
freelancer professional online).
W*
r
the, irst foy-stagg s~gkonat v*ar
CIO, IIS$0
t.$It#
hOI.tMI
0td t l
-It
to
aoatl.WOO4a,%*rnm.IoQ
cgpfttjfma ta8r*,3 to Ltin AMONrC a
00n.. U'
an
.r.I*
b0.
tQ,0
~.,
t N
P ctca.
fPt
-.
W
Figure 19: Nazca Ventures webpage
Thus, in this case a copycat spun the wheel: it generated 3 wealthy entrepreneurs (by
Chilean standards), created important role models (because the deal was widely
publicized in the Chilean media), created a new VC fund "by entrepreneurs for
entrepreneurs" and also created mentors with international experience. Moreover, the
new VC firm started a second loop with their investment in Nubelo which is a copycat of
oDesk or Freelancer for Latin America.
30
http://pulsosocial.com/en/2013/12/02/with-usl-3m-investment-nubelo-has-big-plans-for-the-u-s-and-
brazil/
31 http://www.nubelo.com/
37
SdV{ Fv&
Figure 20: Copycats can spin the entrepreneurial ecosystem
3.8.2 Case study II: Mercado Libre Argentina
Marcos Galperin founded Mercado Libre (NASDAQ ticker symbol: MELI) in 1999 while
finishing his MBA at Stanford Business School. His idea was to create the eBay for Latin
America based on: 1) internet penetration was low in Latina America but was increasing
rapidly, 2) the market of 550 million people and a combined GDP similar to China.
Between 1999 and 2000 Marcos consolidated a team with strong backgrounds:
Table 5: Background of Mercado Libre's cofounders
Education
Previous
Nicolas Szekasy
M BA Stanford
CFO Pepsico
Stelleo Tolda
M BA Stanford
Lehamnn Bothers
Francisco Ceballos
MBA Stanford
Santander Bank
Daniel Rabinovich
Stanford Executive P.
Oracle
Martin Lawson
Stanford Executive P.
Deloitte
Source Author
38
In May 2000, they closed a venture capital round for $ 55 million from JPMorgan, Hicks
Muse Tate and Furst, Goldman Sachs, GE Capital and Banco Santander. The platform was
very similar to eBay's:
._
.....
..
. .....
Mawr
-L
t%___
'k- 40
Figure 21: MercadoLibre and eBay (Source: Webarchive)
However during the early days they had to compete against more than 50 similar sites.
Among these were mercadomania, 123vendido.com, 123remate.com, 123vendo.com,
comercio.com, ebazar.com, deremate.com and many others. Possibly the most serious
competitor was Deremate.com, founded during the same year by Alec Oxenford, an ex
BCG consultant and Harvard MBA. According to Marcos Galperin, MercadoLibre's CEO the
main difference among these companies was execution3 2 .
The years 2000 and 2001 were difficult years because of the dotcom crisis and the
company almost closed. In 2001, eBay bought 19.5% of MercadoLibre and consolidated its
presence in Brazil (the main ecommerce market in the continent). In 2003, it achieved
227% growth of regional sales and one year later it diversified its business with
MercadoPagos (similar to PayPal). In 2005, they reached profitability and acquired their
most important competitor Deremate.com for $ 40 million becoming the absolute leader
32
Interview and HBR cases about Mercado Libre.
39
for the region. In 2007, 8 years after launch, MercadoLibre completed its 1P0 with a
market valuation of $ 1.6 billion. Today, MercadoLibre has a market capitalization of $
4.17 billion.
Nicolas Szekasy and Hernan Kazah, both co-founder of MELI left the company after the
IPO and created Kaszek Ventures33 (KV) in 2011. During their short history, they have
invested in more than 15 startups in Latin America 3 4 mostly copycats from the US such as
Restorando (copycat of Opentable) or Kekanto (copycat of Yelp). The following table
illustrates different investments realized by KV and the original company.
Table 6: Selected Kaszek ventures investments
Investments
ComparaOnline
Restorando
Eventioz
BelezanaWeb
GetNinjas
SaferTaxi
Kekanto
VivaReal
Gointegro
Copycat of
Moneysupermarket.com
Opentable
Evenbrite
Beautystoponline
TaskRabbit
Eazytaxi
Yelp
Zillow
Achievers
Oppa
MadeiraMadeira
PedidosYa/Ja
PetLove
Design Public
Build.com
GrubHub
Wag.com
Serie
Series A&B
Series A&B
Serie A
Series B
Series A
Series A&B
Series A&B
Series A&B
Series A
Venture Round
Series A
Series A
Series A
Source: http://www.kaszek.com/
The two examples of ClanDescuento and MercadoLibre illustrate that copycats can be
very successful and even more important can spin the entrepreneurial wheel and develop
the ecosystem.
33
34
http://www.kaszek.com/
For more details on investment see http://www.crunchbase.com/financial-organization/kaszek-ventures
40
Figure 22: Copycats can spark the virtuous cycle
In the following section, I present the successful case of Rocket Internet which has
followed a copycat strategy (they are known as the "clone factory").
3.9 An example of a "Clone Factory"
3.9.1 The story of Rocket Internet, a successful clone factory (so far) 35
In 1998, the German Samwer brothers came to the US to do internships at different
companies. They realized that many internet businesses that were successful in the US
were not present in Europe. They contacted eBay's management offering them to launch
the portal in Germany but received no response (Kerr, Thor and Brownell, 2012). They
decided to launch this portal by themselves and in February 1998 they launched Alando,
the eBay for Europe, financed with a $ 1.4 million initial investment.
This section is based on numerous magazine articles: Wired, VentureBeats, Pulso Social, Techcrunch and
others.
3s
41
Figure 23: Alando.de and eBay in 1999 (Source: PcMag and Techno.net)
The site went online on March 1, 1999 and was rapidly successful: Less than 100 days
after launch on May 30, 1999 eBay acquired Alando.de for $ 43 million 36. According to
Holger Ernst, a professor of technology and innovation at WHU this acquisition "had a
major impact on the entrepreneurial scene in Germany. [The students] they all wanted to
be like the Samwers".
After leaving eBay in 2000, they founded Jamba which provided content for mobile
phones. In 2004, the startup was purchased by Verisign for $ 273 million in shares and
cash 38 . The Samwer brothers left the company to create their own venture capital firm:
the European Founders Fund. Through this fund they invested in a variety of clones:
*
Frazr which was a German clone of Twitter.
"
MyVideo, was a German clone of YouTube which was sold for $ 36 million.
*
StudiVZ, a Facebook clone which was sold for $ 112 million.
In 2007, Oliver Samwer and his brothers created Rocket Internet with the objective of
creating a new kind of incubator which would provide cash, technology, clever people and
experience. The goal was to quickly copy promising business models and scale them as
fast as possible: "Our goal is to build a global galaxy of firms with Rocket at the center"39
36
http://partners.nytimes.com/ibrary/tech/99/09/biztech/technology/22mcgr.htm
37
38
http://www.wired.co.uk/magazine/archive/2012/04/features/inside-the-clone-factory
http://www.nytimes.com/2006/12/03/business/worldbusiness/03iht-
brothers.htm?pagewanted=all&_r=O
3 Oliver Samwer - The Economist, January 18, 2014.
42
The model of Rocket Internet is to clone successful business models and launch them in
Europe or emerging countries. To execute, they hire MBA from top schools with
consulting background who are given a co-founder title, equity and a competitive salary.
For co-founders it's a safer way to entrepreneurship: less equity, less risk and a probability
of high return. While most of the execution is done
by the team on the ground, the
technology development and marketing activities are done at the central Berlin office
leveraging code and user experiences. The main exit strategy is to sell the company to its
rivals or competitor as it did with eBay.
The model can summarized as follow:
Table 7: The Rocket Internet model
Equity to
CEO/Cofounders
CEO Salary
CEO Profile
CEO leadership
Rocket Internet
0.5%-10%
Similar to BCG, Bain, McKinsey
Post MBA
Wants to be "light" entrepreneur (with safety net).
Focus on execution and short-term
Work under pressure
High work capacity (hours)
Targeted Companies
Target market of $ 1B
Operational/Logistical experience
Quick growth
Replicate
Operations
Strong in-house development team (shared)
Centralized HR and marketing
RI + other VC investments
Funding
Source: Interviews and HBS case 9-813-121
Today, Rocket Internet controls 75 firms in 50 countries with more than 25,000
employees4 0 and $ 4 billion revenues. Some selected firms backed by Rocket Internet with
successful exits include the following:
40Rocket
Machine - The Economist, January 18 2014.
43
Company
Aland*
2009
Online marketplace
Ontine busiress network
Online dating
eHarmony
Virtuatcurrencyforonlinegames SponsorPay
Gruepon
Discoat deats foi consumers
1995
2003
1998
2009
2000
irausacuion
date
50
1999
6.4
2008
30% stake* 2010
no
2010
2010
1261
2003
Online astrology
2Q00
ne
Founded
1999
cember.net
eoarfing
GratisPay
2M00
CityDeat
viversum
2009
2009
Business
Buyer
eSay
Xing
Questico
SoumeGtlndergtene4
Founded
MontobuVmore
Prce, $m
2010
dn~astakefnG~.apen
Figure 24: Firms backed by the Samwers and sold to its rivals (Source: The Economist)
Today, they are cloning Amazon, Zappos and others in different regions41 . For example:
*
Linio, copycat of Amazon in Latin America
*
Dafiti, copycat of Zappos in Latin America. Zalando, copycat of Zappos in Europe.
Zalora, copycat of Zappos in Asia.
*
Wimdu, copycat of Airbnb in Europe
*
eDarling, copycat of eHarmony in Europe
In 2012, they raised more than $ ibillion from investors such as Kinnevik, DST Gobal and
JP Morgan 4 2 . Figure 25 illustrates the growth of Rocket Internet funding since 2012.
41
See the full list at: http://gigaom.com/2012/04/11/revealed-the-full-extent-of-the-rocket-clone-empire/
42
The Economist -January 18, 2014.
44
Funding to Rocket internet Companies
Aggrgate Funding vs. Top 3 Most Weli4unded companies
$M, July 2012 - Judy 2013
220
600
4W
400
200
0
Jut-1
Aug-;12i
Sep-12
Otl-12
Nov-12
Dec-12
noi~rafl
An-23
ftb-IS
Mar-33
Api-13,
May-13
jun-ISJu-i
Z LaMod4UL""d& Z31o,
Figure 25: Rocket Internet funding over time (Source: cbinsights.com)
The strength of Rocket Internet:
The strength of Rocket Internet is their execution capacity. The work culture is of rapid
execution, focus on short-term results and measure everything. Andrew Mason, founder
of Groupon once said "What people have to realize is the idea is the easy part, and that
execution is the hard part, and Marc and Oli [Samwer] are the best operators I've ever
seen in my life-they're just inhuman". The most important points of their strategy and
culture can be summarized in the following:
0
Targeted markets and industries: Rocket Internet only focuses on proven business
models and generally in ecommerce. Most of theirs companies are focused in 4
verticals: Fashion/Apparel, Electronics and Home and Food Delivery. Most of their
companies are launched in developing countries where ecommerce is still in its
early days and growing fast. For example, they have launched several copycats in
Brazil because of its enormous market potential and increasing internet usage.
45
II I
..............
soU.....
1ay-1o
2000 01
02 0.3
04
Figure 26:
05
06
07
00
09
10
11
a...........
12
Internet users and buyers (Source: The Wall Street Journal)
Quick0 launch: According to Alexander Kudlich (Managing Director of Rocket
Internet) "If we see an opportunity, we do it immediately. We would never say "in
Q4 we will do this. If we see something we do it now". According to Kudlich, they
can launch a new company in 3 and half weeks. Most of the times these
developments are done at the central office and thus experience are leveraged by
previous developments (for example other ecommerce platforms). As an example,
Rocket Internet launched Baramang (a Fab.com clone) in 5 countries only 6
months after the launch of the original site.
*
Economies of scale: One of their major advantages is that they have important
economies of scale regarding the technology and knowledge when developing new
ecommerce ventures. For example, when Rocket Internet started EasyTaxi in
Venezuela they reused 100% of the technological platform that was used in other
markets4 3 . It gave them the ability to launch very fast, save $ 500,000 (estimated
cost of the platform) and thus invest more in marketing to position themselves as
market leaders. Once they are already present in a country, they also leverage this
advantage by helping other RI companies for a rapid set up. For example, in the
case of EasyTaxi in Venezuela, they couldn't have an online payment platform
because it takes more than 6 months to get authorization from banks. To solve the
problem they used Linio's which already had an online ecommerce platform (they
also used their office space).
Interview with former employee
46
*
Young Local talent: The RI office will search for local talent to execute the
business 44 meanwhile
developing
the
platform
is
done
at
the
German
headquarters. Most of their employees are ambitious, single, young professionals
(the average is under 30), who see the opportunity to participate in high growth
companies.
"
Measure everything: According to a former Rocket Internet employee, the
company is 100% focused on metrics. Such as customer acquisition, revenues and
profitability. Everything is measured and benchmarked with similar initiatives
around the world.
*
Fail fast and quit: If a certain project is not scaling as fast as expected, RI closes the
business quickly. One of their main metrics is that the business has to generate a
positive contribution margin after 6 months. Failure to accomplish it will close the
business. An example is OfficeFab, a business-to-business e-commerce in south
Asia. The company was launched in June 2012 and closed in July 2013 despite
scaling well.
*
Ruthless culture: Long working hours (9 to 11pm) and pressure to meet the goals
are common characteristics. For example, in a mail send to collaborators Oliver
Samwer said 45 : "Any one of you who does not achieve the following two goals in
the next week will lose his 'Director' title".
3.9.2 The critics
The Rocket Internet business model has generated many critics over time. They are often
called a "clone factory" which is true for many of their startups. Others have said that
"The Samwer brothers are despicable thieves. How do they sleep at night?" 46. Rocket
Internet defends itself saying that they are company builders. Oliver Samwer has dais that
44 Wall Street Journal 2012 - Rocket Internet Leads the Clone War
4s http://www.businessweek.com/articles/2012-02-29/the-germany-website-copy-machine
46 Jason Calacanis, http://www.wired.co.uk/magazine/archive/2012/04/features/inside-the-clone-factory
47
"Someone else is the architect and we are the builders" 4 7. They say that they innovate on
how to execute better and faster than others48.
However, the accomplishments of Rocket Internet are impressive and the best illustration
of their success is the emerging copycats of their model. In Europe, accelerators such as
Project A (former Rocket Internet employee 49) or Springstar are following a similar model.
In Latin America IG Expansion ("focuses on replicating successful proven companies in the
US and Europe"5 0) and Quasar 5' are generating similar business models.
3.10 Copycats are not easy to replicate in emerging countries
In the previous sections, I have illustrated three cases of successful copycat businesses:
MercadoLibre, Groupon Chile and Rocket Internet. However, replicating a business in an
emerging countries pose many challenges and risks:
*
Legal issues across countries: The legal framework in developing countries
handicaps the development of startups. For example, in Chile it can take up to 6
months to open an online account for the clients to be able to pay online because
of bank regulation. In Mexico, only credit cards (which are not very common) could
be used for online transactions reducing dramatically the target clients in the
short/medium term.
*
Low barriers of entry, lot of competition: Many of these copycats have low barrier
to entry to replicate and thus the market becomes crowded with "me-toos". As an
example, according to Forbes, Groupon generated more than 500 copies
worldwide of which 100 were in the US. Most of these markets aren't big enough
for numerous players and as such most of the copycats will die.
47 Wired UK - http://www.wired.co.uk/magazine/archive/2012/04/features/inside-the-clone-factory
48 Venture Beat - http://venturebeat.com/2013/06/25/german-incubator-proves-a-cone-factory-isnt-abad-thing/
4' http://www.economist.com/news/special-report/21593586-how-build-companies-kit-rocket-machine
so http://www.igexpansion.com/eng/baseeng.htm
51 http://thenextweb.com/la/2013/05/12/is-quasar-ventures-the-new-rocket-internet-for-latin-america/
48
*
Logistic resources: Most developing countries don't have appropriate logistic
networks. For example, the delivery distribution networks don't work which is a
key aspect of ecommerce companies (i.e. how would Amazon.com work without a
very efficient distribution partner such as UPS or Fedex?).
"
Cultural differences: Copycats have to adapt to local culture, tastes and economic
regulation. In Latin America, where most countries share the same language, the
culture is very different and thus copycats have learnt how to adapt their value
proposition and operations for each market. For example, MercadoLibre faced
very different fraud rate between countries and had to adapt its technology to
solve the problems accordingly.
"
Risk of the original company expanding: If the original company enters the market
without an acquisition the value of the copycat would probably go down to 0. This
is one of the most important risks that venture capital evaluate when investing in a
copycat for emerging markets. For example, Sonico (a Facebook copycat that
reached 75 million users) failed when Facebook expanded to Latin America
*
52
Limited market potential: Most of the time the copycats have a geographical
limitation. As Eric Archer of Monashees Capital, a Brazilian VC firm says "With
innovation you have a global upside, but with copycat innovation you have
geographical limits's. MercadoLibre, despite of being one of the most successful
copycats in Latin America is limited to Latin America and thus has a market
valuation of 1.6 billion whereas eBay has a market capitalization of 71 billon.
Consequently, copycatting has many advantages such as reducing the overall business risk
(because the model has been proved elsewhere) but also has many market specific risks
such as cultural difference, market size limitation and risk of the original company
expanding in the local market.
52
http://www.economist.com/node/21556269
s3 http://www.economist.com/node/21556269
49
3.11 Conclusion part I
Business replication is not free of risks for the entrepreneurs or investor. It may, however,
present an attractive approach to nurture the entrepreneurship ecosystem in emerging
countries by adapting proven business models to local realities and increasing the
possibility of exit for investors. The cases of Clan Descuento and MercadoLibre, illustrate
the success that these copycats can achieve. They provide a real example of the impact for
the local entrepreneurship ecosystem by creating role models and starting a virtuous
cycle, similar to the one encountered in Silicon Valley.
Some critics argue that copycatting reduce innovation in emerging countries by providing
the "incorrect" example (to copy instead of innovating). For example, according to Loic
LeMeur "[Rocket Internet] is killing innovation in Europe. It's telling young entrepreneurs
that the ideal way to make money is by copying something that works in the US, then
selling it back to the original." 5 4 Additionally, in some cases, fostering business replication
has as a consequence of creating tens of low quality startups that end up flooding the
market making people reticent of using their services and thus making people more
skeptical about certain technologies. For example, many clones of Groupon had problems
fulfilling their order in Latin America and finally not delivering the service. This affects
negatively the development of ecommerce because it slows the cultural transformation
that the country needs.
Overall, I argue that when copycatting is properly done it can be used as a complementary
lever to increase the dynamism of the entrepreneurship ecosystem. Copycats have
demonstrated their value in generating benefit for these emerging countries such as in the
creation of role models, generating more would-be entrepreneurs, development of
startup infrastructure (logistics and distribution) and teaching entrepreneurial capabilities
by learning by doing.
In the next section I focus on the common characteristics of these copycats in Latin
America.
s4 http://www.wired.co.uk/
50
4 Analysis of Latin American Copycats - Principles
for better copycatting (Part II)
In part II, I focus on a follow-up question. If successful copycats can foster the
entrepreneurial ecosystem in emerging countries, what are the characteristics that make
them successful? Is there are a set of principles that could be applied to improve the
probabilities of success and thus the impact on the entrepreneurial ecosystem? The goal
of the second part is to find answers to these questions based on the analysis of 120
copycats in Latin America for the past 15 years.
The structure of Part 11 is the following. First, I describe the methodology used to build the
sample data for the Latin American copycats. Then, I explain the operationalization of the
variables such as Execution Capacity and Industry Experience for the founding team. The
main findings is that the number of copycats is growing over the years and the lag time
(time between original company founded and copycat founded) is decreasing (i.e.
copycatting is happening faster). Another important finding is that most of the copycats
studied were founded by very skilled people (more than 50% have MBA abroad from
leading US business schools) and are in highly visible industries such as business to
consumer markets (i.e. in contrast to Business to Business companies).
Base on this analysis, I created Logit and Ordered Logit models to quantify the most
important variables that affect the odds of success of a copycat. The main finding is that
Execution Capacity (which is a characteristic of the founding team) and businesses who
have a "Link to local Businesses" (which is a characteristic of the business) are the most
important variables for the copycat success. For example, all other thinks been equal,
each variable (by itself) will increase the odds of success from approximately 55% to 75%
Based on this analysis and combined with interviews, I synthesize the knowledge in 9
principles that increase the odds of copycatting success. Finally, I summarize the findings
51
on a simple 3 step framework for copycatting: 1) Identify trends, 2) Choose an idea, 3)
Execute.
4.1 The method
The following section explains how the data was obtained and the method used to code
the variables.
4.1.1 The Sample
The data for my study comprise 120 copycats created in Latin America between 1999 and
2013 (see Appendix 5 for complete dataset). These copycats were obtained according to
the following methodology:
a.
I searched into the portfolios of the most relevant venture capital firms of Latin
America. Some of them are Monashees Capital, KaSZeK Ventures, Redpoint
e.ventures and others.
b. Searched for copycats in all the major technological blogs and magazines. Some
of the one used were: startupi.com.br, pulsosocial.com, techcrunch.com,
webprendedor.com, startups.ig.com.br, venturebeat.com, thenextweb.com/la
(particular edition for Latina America, the monthly section of news about the
region was particularly useful. I.e.: January in Latin America: All the tech news
you shouldn't miss from the past month 55 ).
c.
For each copycat I identified the original company. For example, MercadoLibre
was a copycat of eBay. This was done using again blogs, company websites and
in some cases the Internet Wayback Machine56 .
d.
For every copycat I searched for its most recent milestone. This was done by
looking into local or regional news, blogs, Crunchbase5 7 and Startup Dealbook
ss http://thenextweb.com/insider/2014/02/01/anuary-latin-america-tech-news-shouldnt-miss-pastmonth/#!ubVlg
s6 The Wayback Machine is a digital archive of the World Wide Web and other information on the Internet
created by the Internet Archive, a non-profit organization, based in San Francisco, California. The service
enables users to see archived versions of web pages across time (Source: Wikipedia).
52
Brazil 58 . The most relevant milestones were a form of exit such as acquisition or
IPO (as MercadoLibre did in 2007), closing the business or raising capital.
e.
For every copycat I identified its founder/cofounders using news and primarily
through Linkedln. Based on the Linkedin profile information I obtained
background information on their education and previous business experience.
Thus, the original data collected for all the firms was the following (an example of
Mercado Libre is provided for illustration purposes):
Original 0riginal Brief
Company Company Description
Copycat
Name
Founded
eBay
1995
Online
auctions
Mercado
Ubre
Year
Copycat
Founded
1999
Recent
Milestone
Year
Milestone
Founder Names
IPO
2007
Marcos Galperin, Nicolas Stanford
MBA
Szekasy, Hernn Kazak,
Stelleo Tolda, etc
Nasdaq
for 1.6 bi
Educational
Background
Business
Background
McKsinsey,
Pepsico,
Lehman
Figure 27: Example of dataset used for the analysis
The data was complemented by interviews with entrepreneurs of different copycats in
Latin America. I interviewed formally and informally approximately 15 entrepreneurs 59
and business leader from 4 Latin American countries which had/have participation in a
wide range of startups (successful, not successful) and capital firms (VC, angel investors).
4.1.2 The Variables
Based on the sample, I coded certain variables such as Success, Experience in startup and
others. The list of variables created and the description of the coding process is the
following:
Success - (number 0 to 5): Measures how successful a copycat is (as of February 2014).
The criteria used for the success rates were the following:
Success codification
Criteria (these are OR criteria)
5 - Very Successful
*
IPO.
CrunchBase which is a database of technology companies and start-ups, which comprises around 500,000
data points profiling companies, people, funds, fundings and events (Source: Wikipedia).
58 Dealbook Brazil is a crowdsourced database for the entrepreneurial community
in Latin America.
57
https://docs.google.com/spreadsheet/pub?hl=enUS&key=OAtrBPNMQBfOldEphVO4yayhTXdyZzNEYTQzTS
lrRXc&hl=enUS&gid=13. Recently the website was updated becoming http://dealbook.co/.
59 See
Appendix 2 for list of people.
53
*
*
*
4 - Successful
0
*
*
*
3 - Average
0
*
2 - Below average
*
*
*
*
1 - Not successful
0
*
0 - Failure
*
"
Too soon to know these copycats are not
included in the analysis
because there is
uncertainty about their
success.
*
Acquisition by corporate company or more than $ 20
million.
More than 1,000 employees and leaders in the region.
Example: Mercado Libre, which did IPO in 2007 for 1.6
billion.
Acquisition by competitor or corporate company for
less than $ 20 million.
Raised more than $ 15 million in VC money from
prestigious funds.
Leader in the industry or high growth.
Example: Clan Descuento, which was acquired by
Groupon.
Raised between $ 3 and 15 million (or 30 million for
Rocket Internet).
Example: SaferTaxi which raised $ 5 million after SUP
Chile program.
Seed or angel round.
VC for less than 3 million from local investor
Local startup
Example: Workana (freelance platform) which raised
500K in seed money.
No traction and growth
Small seed money from local investors
Example: Mangacorta, which received fund from Angel
investors without generating traction.
Closed
Example: Shoes4you which closed in 2013.
Founded less than 2 years ago and raised money from
VCs, generating traction.
Years of experience (number, 0 to 25): Corresponds to the number of years of working
experience that the founder had when he/she started the company. This was done using
LinkedIn profiles for each founder. When a company had more than 1 founder then the
average was taken.
54
Experience in industry (binary: Yes or No): Measures if the founder(s) had experience in
the industry where they created the startup. For example, Mercado Libre's cofounder
didn't have experience in ecommerce or online retailing. In contrast, Bod Rossato from
Viajanet.com (copycat of eDreams.com, online travel agency) worked at CarlsonWagonlit
(one of the world biggest travel agents) and Decolar.com the most successful discount
online travel site in Latin America previous to found the company.
Startup experience (number: 0, 1 or 2): Measures the experience in previous startups for
the founders. The variable was coded as follows:
Startup experience
0 - No experience
1- Some experience
2 - Experienced
Criteria
0 Never worked for a startup
* Never been a board member for startup
* Example: Marcos Galperin which had experience in
Goldman Sachs.
0 Founded a previous startup which was not successful
0 Worked for a startup
* Advisor or investor to startups
* Example: Alexis Caporale who launched a startup that
was not successful.
*
Successful entrepreneur, previous exit.
* Founded/co-founded startup
* Example: Kimball Thomas who before founding
babay.com.br cofounded pooltable.com.
Corporate experience (number 0, 1 or 2): Measures the experience of founders in the
corporate world (no startup experience) using LinkedIn profiles. The criteria are the
following:
Corporate experience
0 - No experience
Criteria
*
*
*
1 - Some experience
*
*
Spent most of work life in startups
Started company without experience
Example: Felipe Henriquez, Clan Descuento who didn't
have corporate experience before creating his
company.
Worked in a middle size company before creating
startup.
Example: Javier Cohen who worked in middle size
55
2 - Experienced
0
*
*
media company before creating copycat.
Experience in establish companies, most of the time
multinationals.
Experience as a consultant in prestigious firm
(McKinsey, BCG, etc.).
Example: Alec Oxenford who worked at BCG prior to
founding Deremate.
MBA variable (number 0, 1 or 2): Measures whether the founders did an MBA using the
Linkedin profiles. The criteria are the following:
MBA?
0 -no MBA
1 - Local MBA / part
time
2 - International MBA
Criteria
0 No MBA education at all.
0 Local business education.
*
Part-time business education.
* Full-time international MBA.
Execution Experience (binary 0, 1): This variable captures the capacity of execution of the
founder by merging the 2 previous variables (MBA and Corporate Experience). This is
based in the fact that corporate experience and MBA provide to people a transversal set
of capacities focused on execution. The score were tabulated using the following formula:
Execution experience
0
1
Criteria
0 Sum of MBA+Corporate Experience <= 2
0 Sum of MBA+Corporate Experience > 2
Complexity (number 1, 2, 3): This variable measures the complexity of the strategy as
defined by Rivkin (2000) and Simon (1962) which takes into account the number of
decisions that the strategy conveys and the interrelations among them. As an example,
Eventioz (copycat of Eventbrite) has a very simple strategy since it is an online platform
that link providers with suppliers. However, Officenet (copycat of Staples) has both the
online component as well as the operations to solve making the business more complex
and interrelated.
56
Link with local business (binary 0, 1): This variable measures the relationship that the
startup has with local partners. For example, a Groupon copycat has to develop direct
relationships with local business to generate deals that later will be published on the
platform (Link with local business = 1). In contrast Idea.me (a Kickstarter copycat) doesn't
have a strong link with local business since both provider and customers will interact
through the platform (Link with local business = 0).
Observability (binary 0, 1): This variables measure Rivkin's barriers to imitation which
states that more observable strategies are easier to copy. Observability is related to ability
for aspiring entrepreneurs to try the service/product, talk to providers, talk to customers,
observe the processes, etc. For example, Groupon's process is fairly observable because
all actors can be easily reached and the process followed. However, Vostu (which develop
online gaming) is less observable because most of the value is generated inside the
company without observing the development process (not access to their development
strategy or code).
4.2 Characterization of the copycats studied
The following section presents the characterization of the f the copycats studied providing
information on what has been mostly copied, where (in which country), when and by who.
4.2.1 What has been mostly copied?
The vast majority of copycats are ecommerce businesses that use an online platform to
provide their services. Usually, these copycats are web platforms that generate an online
marketplace which in some cases are complemented with operations. For example,
Eventioz (a copycat of EventBrite) is a web platform that helps event organizers to
administer their events: it connects people who organize events with people that want to
attend to the event. Their service is limited to the online world. In contrast, many
ecommerce copycats expand their services to the physical world having to master
57
operations. For example Dafiti, an online shoe store, has the online marketplace but also
goes into operations by delivering the purchases to the clients.
Why most of the copycats are online platforms? In Table 8 I analyze different industries
through the lens of Rivkin's barriers for imitation (Rivkin, 2000).
Table 8: Barriers for imitation across industries
Sectors
Barrier for imitation
Capacity/Spatial preemption
Switching costs
Poor access to inputs
Dificult to distribute
Lack of brand
Inexperience with similar technology
Specific knowledge
Patent Protection
Complexity of strategy
Lack of templates/information
Inability to observe in use
Investment required to MVP*
lime required to develop MVP*
Regulatory issues*
Based on Rivkin, 2001
*Added by author
The software platform and applications has the lowest barriers for imitation. In today's
world, creating a web platform to provide a service is easier due ever thank to the building
block architecture that software has adopted. For example, an ecommerce platform can
be easily created using Amazon
Web Services for online servers and Magento
(http://magento.com/) or Shopify (http://www.shopify.com) to build the payment engine.
It is therefore easy to test your page online using services such as UserTesting
(http://www.usertesting.com/). As an example, ClanDescuento
(Groupon copycat),
launched its site only after a couple of months of development and launched in several
cities at the same time.
Thus, it is extremely cheap to develop a Minimum Viable Product (MVP) that can be
tested for real in the market. The trial and error cycles is much faster than physical
58
products, lowering the barriers to entry and increasing the probability of finding a market
fit 6. Consequently, it is easy to find the Arrow Core (Arrow 1962) which is the "what, how
and where should the replicated be trying to replicate". This explains why most of the
copycats are software platforms and ecommerce and no company is found in other
industries such as biotechnology or consumer products.
4.2.2 Where are copycat developed?
Most of the copycats in Latin America are developed in Brazil, Argentina, Mexico and
Chile. The distribution of the copycats studied is the following:
Distribution of Copycats in Latin America
Uruguay
Colombia
2%
2%
Figure 28: Distribution of the copycats in Latin America
This result is consistent with the size of the opportunities in Latin America. Brazil has the
highest internet user base (88.5 million) with a 46% penetration. According to eMarketer,
Brazilian ecommerce will grow to 31 billion by 2016 (doubling 2012 figures) which will
represent more than 60% of Latin America6 1. As an example, MercadoLibre generates
more than 50% of its regional sales in Brazil 62 .
http://www.economist.com/news/specia-report/21593580-cheap-and-ubiquitous-buiding-blocks-digitalproducts-and-services-have-ca used
61 http://www.fnbox.com/research-latam-13.php
62 http://thenextweb.com/la/2012/07/24/forrester-brazil-set-to-remain-the-leading-e-commerce-market-in6
latin-america/#!xwBlN
59
Brazil is followed by Mexico (42 m users, 37% penetration and sales of 8 billion by 2016)
and Argentina (28 m users, 66% penetration and sales of 7 billion by 2016). Chile is a
smaller market but with one of the highest levels of internet penetration in the region.
summ
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4.2.3 When were they founded?
Most of the copycats studied have been created in the last 6 to 7 years and the time to
copy has decreased over time. For companies created in the '90 in the US it took an
average of 12 years to copy in Latin America. For example, Hotel Urbano in Brazil (which is
a copy of Hotel.com) was created in 2011 whereas Hotel.com was founded in 1999. In
contrast, for the original companies created between 2004 and 2009 the time to copy
decreased to 3.2 years. For example, Groupon was founded in 2006 in the US and was
copied 4 years later (in 2010) in Brazil by Peixe Urbano (the most successful copycat of
Groupon in Latin America). This acceleration of copycats is consistent with the available
information (for example stratupi.com.br similar to Crunchbase in the US), the maturity of
the markets and the ease of creating these startups.
60
lime to copy in years
# of copycats
60
14
50
10
^--^--
10 -
30
20
- --------------------
ofcopycts
----------Time to copy in Vears
6
- -......
--------- -------
4
10
1
0
-
20
1997-2007
2007-2D10
Figure 30: Copycat year of founding
20 ---
--
2
190&200D
2(10-2D13
20DO-2004
----- -0---
2OD4-2009 2010t2D13
Figure 31: Time in years to copy
4.2.4 Who were the founders and how successful were the copycats?
On average copycat founders have 7.2 years of experience prior to founding the copycat:
Year of experience prior to copycat
45
----
35_
2030
S25-U-..
-
-
m--
............
- ---
-
--
-
--
- ----
--------------------------------------------
15
10
.....
- ----
0
3
6
9
Yews
12
15
18
21
of expedence
Figure 32: Year of experience prior to found copycat
Other characteristics of the group are the followings:
*
98% of the founder had university degrees either in Latin America or the US.
0
56% of the founders have an MBA. Of these more than 50% of them have MBA
from top 10 Business Schools in the US, such as Stanford, Harvard and MIT.
*
66% had corporate experience (either consultants or experience in big
corporations such as LG, Oracle, etc).
*
36% had prior startup experience.
*
73% of the cofounders didn't have prior experience in the industry where they
developed the copycat. For example none of the Mercado Libre's founder had
experience in neither ecommerce nor online retailing.
61
How successful were these startups? The distribution is the following: 0 is not successful
and 5 is very successful (IPO or acquisition):
Success Frequency
45
----
40
35
.30
-
125
- --
__
--------
_--
----
W9 20
15
15
20
0
0- Not
successful
1
2
3
4
5 -Very
Successful
Figure 33: Success distribution of copycats
4.3 Statistical analysis of the copycats
In the following section, I use a logistical model to calculate the impact of different
variables on the odds of success for a particular copycat.
4.3.1 The model
In order to analyze the factors that influence the success of copycats, I built a logistical
model to predict its probability of success or failure. I built a first model that uses as
dependent variable a binary outcome: success or failure. I also refined the Logit model
using an ordered logistical model using a dependent variables with 3 levels: High success,
Medium success and Failure. Both models estimate the odds of been successful (p/(1-p)).
The form of the model is the following:
Log
(T)
= fl0 + Ih.X 1 + fl 2 .X 2 +
Where p is the probability of creating a successful copycat and the independent variables
are different factors that want to be tested (the list of variables are explained in the next
section).
62
In a Logit regression the beta coefficients represent the variation of the log-odds of the
dependent variable. For example, if beta is +1.5 then we expect that for a one-unit
increase in the related variable it will increase the log-odds of the dependent variable. The
variation of the odds are calculated using eft.
For the analysis I used the following independent variables (see appendixes for
independent variable correlation matrix):
number in years
"
Year of copycat created
"
Years of experiences previous copycat -
*
Startup experience, 0/1/2
-
63
categorical variable
*
Execution capacity, 0/1
-
categorical variable
"
Experience in industry, 0/1
-
categorical variable
*
Complexity, 0/1/2
-
categorical variable
*
Link with local business, 0/1 -
categorical variable
*
Observability of the original company, 0/1
categorical variable
-
number in years
4.3.2 The results
As explained earlier I run both a regular logistical regression and an ordinal logistical
regression. The latter is used when the dependent variable has more than two categories
and each category have a meaningful sequential order where a value is higher than the
previous one 64. The summary of the two models used is the following (see Appendix 4 for
detailed results):
6
Factor variable refers to categorical variables. See: Introduction to SAS. UCLA: Statistical Consulting
Group. From http://www.ats.ucla.edu/stat/sas/notes2/.
6 https://www.princeton.edu/-otorres/Logit.pdf
63
Table 9: Model description
Model 1
Logit
Model 2
Ordered Logit
Observation
102 (excluded
observations with
success "too soon to
know")
102 (excluded
observations with
success "too soon to
know")
Dependent variable
Success - binary 0/1
Success - three stages:
high, medium, failure
Independent variables
Same
Same
Model
The main results for the two models are the following (see 0 for detailed results):
Table 10: Summary of results for Logit and oLogit model
oLogit
Logit
Number of obs.
Model significance
102
0.000
LR chi2
44.29
102
0.000
44.05
Odds** Significance***
industry Experience
1.668
5.301
Coeficient*
0.965
-0.355
0.008
1.086
0.039
0.931
0.092
Complexity 2++
0.986
2.681
0.225
0.278
1.321
0.598
1.178
0.848
Variables
Coeficient*
Execution Capacity
Year Founded
Link wit local business
Complexity P
Startup Experience 1++
Startup Experience 2++
Observability
Year Experience
* from regression analysis in Stata
1.879
-0.412
1.196
Odds** Significance***
6.550
0.662
3.305
0.013
2.626
0.046
0.701
2.963
0.000
2.537
0.113
0.013
-0.608
0.544
0.658
0.164
0.962
2.618
0.197
0.472
1.604
0.373
7.103
0.125
0.471
0.966
1.221
3.391
0.397
-0.008
1.487
0.085
0.486
0.883
1.960
-0.67
0.004
0.512
1.004
0.992
** = exp (coeficient)
*** from Stata analysis
+generated because of factor variables with 3 stages.
The odd ratios can be ranked and illustrated according to the significance and level
(significant variables are dark colors; insignificant variables are in light colors):
64
Odd ratios for copycat success predictor
Odd ratios for copycat success predictor
StartupExpuid2ce2
Link wit localbusiness
Execution Capacity
StartupExperience 2
Execution Capacity
Industry Experience
Link wit local business
Complexity 2
:3 Startup Experience 1
Year Experience
Year Founded I
complexity 3 I
observabilty
0
Industy ExPerience
Startup Experience I
Observability
Comnplexityl
Complexity3
YearExperience
Year Founded
2
4
6
Odd ratios (Regular Loglt Model)
8
Figure 34: Odd ratios ranking for Logit model
0
1
Odd rato
2
3
(ordered Loit Modal)
4
Figure 35: Odd ratio ranking for oLogit model
On both models the variables Execution Capacity and Link with local business are
significant and have the most important odds ratios (6.55 and 3.3 respectively). These
numbers represent the odds of Success when these variables increase by 1 unit given that
the other variables in the model are held constant. In consequence, if the odds ratios are
above 1, then an increase in one unit in the independent variable will increase the odds of
success. Conversely, when the odd ratios are below 1 and increase of one unit in the
independent variable decrease the odds of success. Thus, for Execution Capacity we can
say that for a one unit increase (Execution Capacity going from 0 to 1) we expect an
increase of 1.879 in the log odd (log (p/(1-p)) or a 6.55 in the odds (p/(1-P)) of being a
successful copycat given that all the other variables are held constant. In the case of
Execution Capacity, an increase of 1 will increase the chances of success from 53% to
80%65. In the case of Link with local businesses and increase of 1 (no link with local
business versus link with local business) increase the chances of success from 57% to 74%
maintaining other variables constant.
The variable Year Founded corresponds to the year in which the copycat was founded.
This variable is significant in both models; however, the value is small compared to the
other significant factors. An increase of 1 in the year of foundation (i.e. 2009 to 2010) will
decrease the odds of success by 0.66, an effect which is 10 times smaller than the
Execution Capacity.
6s
See 0 - Appendix 4: Logit models results for Stata results.
65
4.3.3 Robustness
I tested different models to check robustness of the results when variations are
introduced. I studied the following variations:
*
Models 2, 3 and 4: I eliminated independent variables such as Year of Experience,
Observability of the original company and Complexity of the strategy. I tested
eliminating
Observability
and
Complexity
because
of
their
subjective
measurement.
*
Model 5 and 6: I eliminated 25% of the data and also tested it without the
previous independent variables. This robustness was designed to check the effect
of the size of the sample in the results.
*
Model 7: We eliminated 18 observation of copycats founded before 2008 and
tested it without previous independent variables. This robustness analysis was
designed to check consistency of the results over time.
The results with the odd ratios and the P-values for each model and variables are the
following (see 0 for detailed results):
Table 11: Odd ratios and P-value for robustness check
Base Model
Model 2
Withou: Year
Experience
Odds
s:
LoEtexi2d.y
Coinlexity 3
d
Year Experience
Palue
0.54
0.51
0.23 2.82:
0
0.61
0.47 0.49:
1.00
0.97
vau
0.191
0.719
0.445
Model 3
Model 4
Model 5
Model 6
Model 7
Withou:
Withou:
With 25% less With 25% less
Without
Observability Observability, observations observations - observation
& Year Exp
Year Exp &
(random)
without
before 2008 Complexity
Observability,
without
Year Exp & Observability,
complexity
Year Exp &
Odds P values Odds:P values Odds P valesds
dsPvus
3.3
1.15
0.125
0
2.14
0.61
0 . I
0.490
0.746
0 834
0.92
0.521
To illustrate the results we plot the odd ratios for the most important variables for the
different models:
66
Odd ratios and variables per model
16.00
14.00
m Base Model
12.00
10.00
-
8.00
-
--
-
-
-
-
-- -----400
4.00 t--
- -
-
-
-
-
K----Model 2
-
-
-
-
-
*M odel 3
m Model43
a Model 4
*Model 5
a Model 6
-
mModel 7
00
Execution
Capacity
Link w/ local Year Founded Industry
business
Experience
Startup
Experience 2
Figure 36: Variability of the odd ratio for different models
4.3.4 Analysis of the results
Based on these results the main conclusions are the following:
*
Across all models the most relevant variables to predict the success of a copycat
are: Execution Capacity, Link with the local Business and Year Founded.
*
Consistent across the models that an increase in odds for Execution Capacity of 1 is
on average 50% higher than the Industry Experience.
*
Startup experience 2 (which correspond to a successful previous entrepreneur) is
significant in most of the cases with ratios similar to Execution Capacity. However
experienced successful entrepreneurs are scarce in Latin America (less than 10% of
the sample studied had a successful previous startup).
*
Other variables such as Year of experience before creating the copycat, startup
experience, the complexity and observability of the copycats are not significant
across all models.
*
Results are consistent across different models. However important changes are
observed when the sample is reduced by 25% even though the main relationships
hold.
67
4.4 Principles for copycatting
Based on the statistical results and on the interviews, I propose 9 principles for
successfully copycatting business models in emerging countries:
Principle N*1: Search and follow trends
Normally, the diffusion of an innovation follows the same pattern over time. As Everett
Rogers noted in Diffusion of Innovations (1962) a diverse group of consumers will adapt a
new innovation at certain rate which is slow at the beginning (innovators & early
adopters), accelerate when the majority adapt it and slows when it reaches maturity. The
adoption curve is widely known as S-curves and an example of adoption of different
innovation is provided below:
of,.) HustOwids
P
100 ....- l ..
...
cow
.. ... ......
CW
Saw*
30
i0
T~~ ~za
Io
I=n
1940
torn
1on
Somrts WAnn BU.*C(~Sa, lUw
2Oo
fls~eqs
Figure 37: Adoption curve for various products in the US (Source: Federal Reserve Bank of Dallas, 1995).
These S-curves holds internationally and thus copycats should search for patterns where
developing economies are lagging behind the US or other more developed economy. For
example, Officenet (copycat of Staples) realized that the office supply market would face
the same consolidation that happened 15 year before in the US when OfficeMax, Staples
and Office Depot changed the game and offered their products in big retail supermarkets
68
with a focus on small companies . Officenet was able to identify the trend and adapt it
for Argentina quickly becoming a relevant player in the industry. Another example is
MercadoLibre who identified the ecommerce trend developing in the US. In 1995, eBay
was launched and became profitable after 6 months. The number of internet user was
increasing at an annual rate of 70% and the value of ecommerce transactions was
doubling each year. However, in 1999 (when MercadoLibre was founded), ecommerce
and internet in Latin America were just starting: User penetration of internet was only
1.5% but was starting to grow quickly. Thus, Marcos Galperin (MercadoLibre's cofounder)
was able to identify the ecommerce development in the region and chose to adapt one of
its most successful businesses, eBay.
Principle N*2: Local need
One of the first steps is to make sure that the problem or need is present in the region.
According to one of the founders of Quasar ventures67, they spent an important amount
of time prior to launch the startup to validate that the idea responds to a need in the
country. Many aspects such as maturity of the market, development of the technology
have to be checked. An example is Restorando, a copycat of Opentable, which developed
a first concept with 5 restaurants in Brazil and 5 restaurants in Argentina to test the
market as fast as possible. Their first objective was to test the "Opentable" concept
because they knew that they had the skills to develop the technology needed. Once they
got the first validation that the problem solved by Opentable in the US was present in the
Latin America they were able to raise VC money from Silicon Valley. In Mexico, Bebe2go
(copycat of Diapers.com) started with a simple webpage with which they collected orders.
Once they had the orders they went to Walmart and delivered the items by themselves68 .
According to one of the founder this was a very simple and cheap way to start and test the
real need of the market.
6
67
68
Conversation with cofounder and Officenet Case (HBR)
Interview with cofounder.
Interview with cofounder.
69
Principle N*3: Link with local businesses
Copycats have an advantage when they provide services that require a direct connection
with local businesses. For example, Groupon requires the platform to negotiate daily deals
with local business. This is hard to do remotely for the source company, thus it increases
the barriers of entry. It is easier for the local copycat to establish those links: they know
the local environment, culture and language. At the same time, by entering this market
and creating those links, the copycat becomes more valuable as a potential acquisition
target. Frequently, the original company will acquire the copycat company to enter a
certain market without having to generate connections which takes time, effort and
money in an uncertain environment. For example, Staples acquired Officenet (an office
69
distributor ecommerce leader in Argentina), to "enter to Latin America" . Another
example is Clan Descuento: Due to their local connection and technical capability they
were able to create the relationships with local business and offer better deals than what
Groupon would have been able to do by itself. Others examples are copycats of taxi
services where one of the main aspects is to convince and evangelize early adopter taxis
to upload their services to the novel platform.
Generally the structure of a successful copycat is as follows:
Local Clients
Online Platform
Local
Business
Local
Business
Local
Business
Local
Business
Local
Business
Figure 38: Structure of successful copycats
69
See SPLS 10-K filed Feb 28, 2006.
70
Based on data the variable "Link to a local business" increase the chance of success by
30% and is consistent across the analysis. To further demonstrate the point I illustrate the
success of the copycat versus the link to local businesses. It illustrates that there are more
businesses that have a strong link with the local economy in very successful startups.
Unk with local business vs success
70%
60%
50%
0 Not Successful
40%
a Below average
a
130%
Average
9 Above average
-__
20%
Very Successful
10%
0%
Link with local business
Figure 39: Relationship between Link with local business and probability of success
A counterexample is when companies copy platforms that don't have any link with local
businesses. For example, Sonico which was once the Facebook of Latin America with more
than 75 million registered users and one of the most visited site in the region (it ranked
392 in the Alexa ranking70 ). However, Sonico was a social network very similar to
Facebook with no link to local business nor community except for the language (Sonico
was first in Spanish and then in Portuguese).
70
http://en.wikipedia.org/wiki/Sonico.com
71
Figure 40: Sonico webpage which is similar to Facebook
Thus, according to the Economist and Nenad Marovac (VC behind Sonico) "Sonico got
"pummelled" when Facebook arrived"7 .
Another more recent example is Rocket Internet's Pinspire which is a copycat of Pinterest.
According to the New York Time72 and Techcrunch, the Rocket Internet copycat has had
difficulties getting traction in the markets.
Figure 41: Pinterest (original) versus Pinspire. (Source: NYT)
Principle N*4: Search for opportunities to tropicalize
Copycat in developing countries are often said to "tropicalize" the US ideas73 because
these startup have to be adapted to the local environment. As pointed out in principle 2
71
72
http://www.economist.com/node/21556269
http://www.nytimes.com/2014/02/28/technology/copycat-business-model-generates-genuine-global-
success-for-start-up-incubator.html?_r=O
72
(Local need) the ideas will have to be adapted to a new environment and the challenge is
to copycat ideas that will have to potential to be modified from the original (however, not
excessive which could lower the possibilities of being acquired by the original company).
As a former Rocket Internet in Latin America says: Adaptation provides barriers to entry
that will delay the entry of the original company to the market thus, improving the value
of the copycat. When Groupon acquired Clan Descuento to expand in Latin America they
had already solved important operational problems such as the delivery of goods, adapted
to local payments methods and to different tax systems. In Venezuela, EasyTaxi was able
to adapt the payment methods with the local culture of check payment which wasn't on
the scope of the original company. Linio, a copycat of Amazon with operations in Mexico,
Peru, Colombia and Venezuela allow cash on delivery: You only pay when the product
arrives to your home. This tropicalizes the Amazon concept by recognizing that credit and
debit cards are not common so far in these countries.
However, the challenge is not to over-tropicalize the original idea which could lower the
value of a potential acquisition. Thus, differentiation is a difficult equilibrium that can be
summarized as following:
Cr
0
40
-C
T*
Tropicalization
Figure 42: Value versus Tropicalization
Principle N*5: Choose carefully the target market
Most of the copycats studied can be described as having a "Business to Consumer" (B2C)
model or "Consumer to Consumer" (C2C) model. In fact as it can be seen in Figure 43
73
http://www.economist.com/node/21556269
73
more than three quarters of the copycat are in the B2C category.
Distribution of types of
business
B28
7%
Figure 43: Distribution of copycats by B2B and B2C
This observation is aligned with Riskin (2000) because B2C or C2C business models are
highly visible. Most of the copycat studied were started because the founder observed the
need and used the company's services in another country and then replicated the
business model. For example, Bebe2go in Mexico stated because both the need (the
cofounder was expecting their first son) and the original solution in the US (diapers.com)
were visible74 . Comparaonline (insurance comparison tool) started because the founder
had to buy insurance for his sister's car and was confused about the options. He then
found a solution abroad which would solve his problem and replicated it for the Chilean
market7 5 . However, due to its visibility these market opportunities will face higher
competitions when the opportunity is important. For example, MercadoLibre (eBay's
copy) had to compete against more than 50 different copies of eBay during their first year
of operation. In fact, in segments that represent a billion dollar opportunity it is expected
that competition will be stronger because of the entry of the major players in the industry
thus reducing the possibility to compete for smaller players. For example, Buscalibre.com
was founded in 2010 to become the Amazon of Latin America with an initial funding
below 4 million. In 2012, Rocket Internet launched Linio to become the Amazon of Latin
Interview with cofounder.
7s Techcrunch - http://techcrunch.com/2013/09/14/how-comparaonline-raised-16m-to-build-a-thrivinginsurance-comparison-service-in-latin-america/
74
74
below 4 million. In 2012, Rocket Internet launched Linio to become the Amazon of Latin
America and have invested more than 120 million over the last 2 years7 6 . Thus, smaller
startups have to choose carefully the markets in which compete and take into account the
possibilities that an important player can invade the market with more resources and
execution capabilities.
In contrast, B2B is generally more difficult to observe because it has no relationship with
customers as natural persons. This might explain why only 7% of the copycats studied are
oriented to business. However, these startups have been quite successful: Officenet was
acquired by Staples as its entry door to Latin America
, ContaAzul (copy of Intuit software
for small businesses) had gone through series A and B of financing and more than 200,000
companies are using their software in Brazi178. Trabajando.com (copy of Monster.com) has
become the leading platform for employment in Latin America.
In summary Principle N*9 can be illustrated with the following matrix:
Table 12: Advantages and disadvantages for B2C and B2B startups relative to the size of opportunity.
M
0.
Bigl (market ptervntoa Cpany
ides(11
nFE
have
aMEvbntg
M
+loop unders2rm
e
Example: Shotgun
cap under 25m) Might become SME but no IDE.
______
l_
Example: Shotgun
moverstment/g
itetioal plye
Igh beoeSEbuIoE
wwwdvatag:nimiedzaret/rowhm
Principle N06: Use the US as a reference market
7http://lavca.org/2013/1 1/06/rocket-intern ets-mexica n-ecom merce-site-li nio-receives-new-50m investment/
77 See SPIS 10-K filed Feb 28, 2006.
78 www.contaazul.com
75
If the final goal is to be acquired by the original company many investors79 agree that the
target is to look for companies whose market valuation is around 1 billion in the US. Their
logic is simple: as rule of thumb the Latin American market is a 10% of the US and thus a
100 million of market capitalization for the copycat is the number need to meet their
returns. As an example, the following table shows the market capitalization at the time of
creation of their copycat:
Table 13: Original company's market value
Original
Opentable
eBay
Groupon
Amazon
Copycat
Copycat
founded
Market
Cap
Resotrando
Mercado Libre
Clan Descuento
Submarino
2011
1999
2010
1999
1.5
12
1.35
23
bi
bi
bi
bi
Sources: techcrunch, Nasdaq, ycharts
However, as point out in principle N*9 the speed at which valuable ideas are copied is
faster and thus sometimes making it difficult to "wait-and-see" the market valuation. An
example is Eventioz, which is a copycat of EventBrite (founded 2006). By the time Eventioz
was founded in 2008, EventBrite had just recently raised its series A of 3 million and
achieved a market cap of 1 billion in 201380.
Principle N*7: Platforms with strong network effects have done better
Most of the most successful copycats in Latin America
have winner-takes-it-all
characteristics. These markets are characterized by having strong network effect (the size
of the network is reinforced by new entrants) and difficulty in changing platforms (there is
a cost of administer different platforms with similar content). For example, Mercado Libre
(eBay's copycat) has these characteristics: The more people publish goods to sell on the
platform the more attractive it is for other potential buyers and sellers producing a very
79
Interview with Quasar Ventures cofounder and Nazca Ventures.
Techcrunch and Crunchbase.
76
strong network effects. Moreover, for sellers it becomes expensive and difficult to track
different goods published in different sites generating an incentive to only choose one
thus generating higher barrier to switch platforms.
Principle N*8: Execution is more important than industry knowledge.
Juan Pablo Capello, one of the most respected entrepreneurs and VC in Latin America,
said: copycats need "bakers" more than an "artist" 81 . A baker follows a set of pre-defined
instruction whereas a chef is similar to an artist who explores the unknown. Thus,
copycats need "bakers" that will excel in execution. This is a key characteristic of the
copycat founder which is reinforced because of the high competition that copycats face.
As I have illustrated copycat are more popular where barriers of entry are low thus
emphasizing the importance of execution.
This empirical study has shown that execution capacity is more important that previous
industry knowledge in predicting the success of a copycat. To further illustrate the point I
present the differences of execution capabilities and industry experience for the top
success and bottom failures in our data:
Capabiitles for (Un)Successful copycats
40%
3M*
-
-
--
6Successful
opcats
0 Unsuccessful copycats
Ift
Execution Capacity
lnduw"y Eperinc
Figure 44: Comparison of capabilities for copycats
81 http://thenextweb.com/insider/2013/08/04/web-2-0-in-latin-america-why-we-blew-it-and-what-we-can-
do-to-fix-it/?fromcat=all#!AcveY
77
Using a 2 by 2 matrix I illustrate the probabilities of success for each scenario. When the
founder has no experience in the industry and no execution capacity the probability of
being successful is 50%. If the founder has experience in the industry the probability
increases to 66%. However, if the founding team has execution capacity its probability of
success increases to 89%.
Probability of success according to Execution canacitv and Exoerience
in the Industry
100%
89%
Z
CL
50%
NO
--
66%
YES
Experience In related industry
Smwm~gbaswdo..tcq/bvotm49stawt.
fmmo"ia1"atbm
Figure 45: Success of copycat according to Execution and Experience
These results are consistent with the previously described Rocket Internet philosophy that
target people who are highly focused on execution but may not have any experience in
the industry.
Principle N*9: Speed is key
As I illustrated previously, copycatting is occurring faster. In the 1990s, it took
approximately 10 years to replicate the company in Latin America. According to my
sample, in 2010 it took approximately 1 year to replicate the business in the region. The
availability of the information and the decreasing technical difficulties to replicate
business have accelerated the speed at which successful business are being copied. For
example, Groupon was founded in 2008 and by 2010 it had more than 500 clones
78
worldwide and more than 100 only in the United States8 2. In Colombia, after the launch of
Easytaxi two competitors were launched: Tappsi and Taxiya. Thus, in an environment of
high network effect the companies' timing and execution are key.
4.5 A simple framework for copycatting
Combining the principles and the data I developed a simple framework and set of
questions that should be considered before starting a copycat business and before doing a
more in-depth business plan. The illustration of the framework is as following:
* Identify a major trend
and dominant design
'Does the team have
execution capabilities?
'Do you have the unique
potential to foster the
experience curve?
How fast can you start?
Figure 46: Framework for copycatting
The framework's first step is to identify major trends in different industries. For example,
MercadoLibre identified that ecommerce was growing strongly in the US and the trend
82
http://blog.business-model-innovation.com/2011/04/can-you-copy-business-model-groupon-and-clone/
79
would follow in Latin America. Cumplo (a peer to peer platform) realized that money
lending was following a "social" process fostered by social networks. Once a trend has
been identified, the potential startup has to detect if the dominant design has emerged or
is about to emerge. The objective is to minimize the development of businesses which are
not consolidated and which increase the initial costs for the startup. When Groupon was
copied in Latin America, the model didn't change which allowed copycats to focus on the
execution rather than searching for the right model to develop.
The second step is to choose an idea to replicate. The most important question is to verify
that the need exist in the local markets. Many ideas developed abroad will not have an
immediate application in less developed markets and sometimes will not be a need due to
the market structure. For example, the "moving" business has seen many innovations in
the US which has not been replicated in countries of Latin America because people don't
move often due to highly concentrated business centers (more than 40% of the Chilean
population live in the capital).
The second most important question (for the second step) is to identify if the local startup
has any competitive advantage relative to the original company. According to my findings
a strong relationship with local suppliers is important. It increases the barriers of entry of
the original company and thus increases the value of the startup. Successful copycats such
as ClanDescuento (Groupon copycat) had a very strong link with local business because
they had to find local companies that would publish their promotions on their website.
Groupon most likely acquired ClanDescuento to get a faster access to these partners. A
second option to increase the competitive advantage is to find ideas that need a certain
adaptation to the local economy (i.e. tropicalization). The more adaptations a copycat has
to make, the higher the barriers of entry will be for the original company and thus
increasing the value of the copycat.
The fourth question in choosing the idea is related to the market segment where to
compete. Most of the copycats are either business-to-customer or customer-to-customer
because these business models as well as the need are highly visible. For example, it is
80
very easy to understand how Diapers.com works and deduce their business model; an
aspiring entrepreneur can easily test the solution. However, as explained in principle N*9
the main consequence is that in there opportunities there will be more competition thus
providing advantage for companies with more resources and execution capabilities.
In the process of choosing an idea copycats should also use the market capitalization in
the US to have a reference of potential size of the startup. As a reference, the objective
for VCs is to look for original companies that have a market capitalization of 1 billion with
the objective of creating a copycat that will have a market capitalization of 100 million (in
many business Latin America represents 10% of the US).
After having identified a relevant trend and selected an idea, the aspiring entrepreneur
should next focus on its execution. The first question is to ask if the founding team has
execution capabilities. I defined execution capabilities by having advanced degrees such
an MBA or having corporate experience (and in some cases previous startup experience).
As shown by the data these capabilities seem to be more important than experience in the
industry. MercadoLibre's and Deremate's success in a highly competitive industry was due
to their important execution capabilities (most of them had MBA or business degrees from
Stanford and Harvard and corporate experience).
Next, it is important for aspiring entrepreneurs to question if they have a unique potential
to learn the secrets of the original business model and fast forward the learning curve.
One of the most important advantages of copycatting is to be able to re-use the
knowledge developed and tested by others. If the aspiring entrepreneurs don't have
access to them the copycat model loses an important advantage. For example, Officenet
(copycat of Staples) was able to visit and understand most of Staples "best practice" from
the beginning of the company. Mercado Libre was able to fast forward its learning curve
when in 2001 eBay bought 19.5% of its shares. These are examples of companies that had
unique access to valuable knowledge providing them an important advantage over other
copycats and increasing their success probabilities.
81
The last question about execution is related to the speed of execution: How fast and
cheap can an aspiring entrepreneur have a minimum viable product on the market. As
Figure 31 showed, replicating business models is happening faster and as such speed of
execution will play an important role.
5 Conclusion and future research
The vibrant entrepreneurial ecosystem in the US is maintained by an important virtuous
circle that generates hundreds of startups and produces many exit opportunities. This
virtuous circle does not work in emerging countries, especially because the innovation
capacity is very low and there are no clear exit possibilities for successful startups.
In this thesis I explored how local startups can spark the virtuous circle by replicating
successful business models in developed countries. This strategy has the advantage of
lowering the risk for the VCs and provides a higher probability of exit and a faster path to
growth. In fact, the most successful startups in Latin America are copycats of US
businesses. Why not foster the replication strategy? As the Economist noted "For
business, being good at copying is at least as important as being innovative".
In order to understand these copycats more deeply, I studied 120 cases of replicas in Latin
America. Based on statistical analysis and interviews I generated 10 principles that should
improve the success of copycatting. These are: 1) Search and follow trends, 2) Check for
local needs, 3) Link with local businesses is the main competitive advantage, 4) Search
opportunities to tropicalize, 5) Choose carefully target markets, 6) Use the US as market
reference, 7) Platforms with strong network effects have done better, 8) Execution is more
important than industry knowledge and 9) Speed is key. Combining these principles I
created a simple framework to guide the creation of copycats in Latin America. The first
step is to identify trends and dominant designs. Then, choose an idea that solve a local
http://www.economist.com/riode/21554500
82
need, have a link with local businesses and can by slightly tropicalized. And finally, focus
on execution, fast-forward the learning curve and act fast.
These results could be improved in many directions. Here I present some ideas and
directions for potential future research on the subject. First, the analysis of the copycats
could be deepened by conducting interviews to the founder of every company. Most
probably this would provide important insights that were not captured in the thesis.
Second, the number of copycats studied was limited and can be expanded to check for
new results. Third, one of the most important variables in this study is related to the
"Success" variable which in some cases is subjective. The same study could be done in 2 or
3 years using the same startups when the "Success" codification will be more objective
(same point applies to Rocket Internet). Another interesting study would be to compare
the characteristics of the copycat founder with the characteristics of the founder of
innovative companies for the region. And lastly future studies could concentrate in the
replication dynamic in one vertical companies. For example, study the all the different
replicas of Groupon in Latin America and understand why some of them were successful
and other weren't.
All in all, copycats should be considered as a potential lever to foster the entrepreneurial
ecosystems of countries with low innovation capacity. This could increase the possibilities
of exits as well as building more entrepreneurial capacity in the country. However,
copycats are by no means simple. At a first glance the concept and the business model
could be the same but there are many complexities involved in the execution and in the
strategy.
83
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Organization
85
Appendix 1: M&A history in the US (Source: NVCA)
2004
100
2101
38
7,=7
161
4
283
36
0
34
37
4945.1
134
a
80
4,144;9
13A
11.0
19
1,48.
12338
7
12
20
3.2420
120
167.6
8
21
1619
131
2012-2
11o
201N"
208.
141
12,e
6139
95
51
4038
2011-2
37
281-3
142
43
63,4
6934.5
201-4
123
38
4,986
2-2
2M2-2
114
28
3,671.0
131.1
2012.3
2012-4
125
126
37
32
40D1
Z476
226.0
126.0
2N1
2013.2
20133
2t3-4
85
96
10
19
W4.3
A,4W.3
96A
a
716.9
1792
lie
61
30
31
4,A%.
-161.9
23
27
2.436.9
ZMA1
170.4
24
5,312.6
8
-m
= ---123
3
34
6,V4.4
5,04
191.0
2141
M2 A
88
061 5
1.5
1247
-
-
140284a
irei
202
2
5,883.
475.9
11
5,32
254.g
1,682.8
Is
12
17,2279
10
0
952
,1(7
886
1435.7
114A
Z4AWA
176.1
89-6
-106.0
1
103.0
221.4
Appendix 2: Interviews
The list of formal and informal interviews:
*
*
Andy Freir, cofounder Officenet and Quasar Ventures (Argentina)
Felipe Henriquez, cofounder Groupon and Nazca Ventures (Chile)
*
Alfredo Millan, former Rocket Internet employee (Venezuela)
*
Salvador Kalifa, founder of Bebe2go (Mexico)
*
Fernando Fishman, founder of Cristal Lagoon (Chile)
*
Alfredo Zolezzi, CEO of Advanced Innovation Center (Chile)
*
Matias de Tezanos, entrepreneur in Latin America
*
Susan Amat, Founder Venture Hive (US)
*
Patrick Summers, founder of Zurkbox (Latam)
*
Jose Antonio Carrasco, Dictuc (Chile)
*
Conversations with Sebastian Castro (cofounder of Leaf), Ari Liberman (Amazon),
Israel Valentin (former entrepreneur), Martin Migoya (CEO Globant).
86
Appendix 3: Descriptive statistics and correlation
matrix
Descriptive variables
Variable
Success
Yearfounded
Year-experience
Startupexp
Corpexp
MBA
ExecutionCapacity
Expindustry
Complexity
Linklocal business
Observability
Obs
Mean
103
103
102
103
103
103
103
103
103
103
103
0.670
2009.019
7.127
0.466
1.029
0.816
0.515
0.262
1.447
0.563
0.786
Std.
Dev.
0.473
3.586
4.894
0.711
0.880
0.872
0.502
0.442
0.668
0.498
0.412
Min
0
1997
0
0
0
0
0
0
0
0
0
Max
1
2013
25
2
2
2
1
1
2
1
1
87
Correlation Matrix
Yearfo
unded
Yearfound
ed
Year-exper
ience
Year-exp
erience
Startu
pexp
Execution_
Capacity
Exp.in
dustry
Compi
exity
LinkI
ocal
busin
ess
Observ
ability
1.00
0.21
1.00
0.14
0.29
1.00
-0.01
0.30
-0.19
1.00
0.01
-0.35
0.47
0.00
0.34
0.07
0.02
0.21
1.00
0.14
1.00
0.17
0.14
0.05
0.03
0.15
-0.09
1.00
0.00
-0.25
-0.06
-0.12
-0.08
-0.47
0.02
Startupex
p
Execution_
Capacity
Exp_indust
ry
Complexity
Linklocal
business
Observabili
ty
1.00
88
Appendix 4: Logit models results
Coefficients for Logit and oLogit models:
VARIABLES
Yearfounded
Year-experience
1.Startupexp
2.Startupexp
ExecutionCap
Expindustry
2.Complexity
3.Complexity
Link-local business
Observability
Constant
Cuti
-
Constant
Cut2
-
Constant
Observations
Logit Model oLogit Model
Success
Success
-0.412***
-0.355***
(0.155)
(0.0844)
0.004
-0.008
(0.091)
(0.054)
0.962
0.472
(0.746)
(0.530)
1.961
1.221*
(1.278)
(0.708)
1.879**
0.965**
(0.755)
(0.483)
1.668*
0.931
(0.990)
(0.588)
0.986
0.278
(0.813)
-0.608
(0.527)
(1.373)
1.196**
(0.579)
-0.670
(0.929)
827.6***
(312.2)
(0.856)
1.086**
(0.436)
102
Standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1
0.164
0.397
(0.570)
-712.6***
(169.6)
-710.5***
(169.5)
102
89
Coefficients for Logit model and robustness:
VARIABLES
ExecutionCap
Link-localbusiness
Yearfounded
Expindustry
Startupexp 1
Startupexp 2
Complexity 2
Complexity 3
Observability
Yearexperience
Constant
(0.579)
Model 2
1.978***
(0.635)
1.291**
(0.569)
-0.412***
-0.402***
(0.155)
1.668*
(0.990)
0.962
(0.746)
1.961
(0.150)
1.345*
(0.812)
(1.278)
(1.243)
0.986
1.039
(0.813)
(0.796)
-0.490
(1.360)
Model 1
1.879**
(0.755)
1.196**
-0.608
(1.373)
-0.670
(0.929)
0.004
(0.091)
827.612***
(312.156)
Observations
102
1.018
(0.714)
2.194*
Model 3
2.012***
(0.631)
1.298**
(0.568)
-0.401***
(0.151)
1.327*
(0.801)
0.989
(0.712)
2.296*
(1.246)
1.195
(0.779)
0.142
(1.071)
Model 4
2.150***
(0.613)
1.122**
(0.539)
-0.426***
(0.156)
1.247
(0.772)
Model 5
2.565***
(0.947)
1.207*
(0.722)
-0.405**
(0.173)
2.478*
(1.299)
1.017
1.553
(0.688)
2.605**
(1.256)
(0.957)
2.093
(1.389)
0.762
-0.695
(0.910)
804.610***
853.714***
(313.273)
(303.660)
103
103
103
Standard errors in parentheses
806.710***
(300.964)
Model 6
2.409***
(0.739)
1.266*
(0.664)
-0.411**
(0.162)
1.570*
(0.948)
1.292
(0.840)
2.508*
(1.382)
Model 7
1.977***
824.656**
(324.472)
77
793.767
(493.998)
85
(0.640)
1.225**
(0.564)
-0.396
(0.246)
1.663*
(0.895)
0.884
(0.707)
2.327*
(1.295)
(1.103)
-0.490
(1.517)
-0.228
(1.091)
-0.075
(0.117)
812.887**
(346.840)
76
*** p<0.01, ** p<0.05, * p<0.l
90
Appendix 5: Complete Database
Mercado Libre
ebayv
1995 IOnline auctions
eba
1995
Online auctions
DeRemate
Orbitz
2001
Internet-based travel website
Despegar.com
Groupon
2006
Daily deals
PeixeUrbano
eDreams.com
1999
Online travel agency
Viajanet.com.br
Staples
1986
Office supply delivery business
Officenet
Eastba .com
1999
Company that sells sporting goods through the Internet
Netshoes.com.br
PriceGrabber
1999
Price comparison
BuscaPe
Crai sList
1995
Online classified
Olx
Groupon
2008
Daily deals
ClanDescuento
EventBrite
Hotels.com/Bookin
g.com
2006
Platform to manage events
Eventioz
1999
Online travel agency
Hotel Urbano
Amazon
1994
Online retailer
Submarino
Birchbox
2010
Beauty product discovery service
NinaBox
Birchbox
2010
Beauty product discovery service
Vulev6
Birchbox
2010
Beauty product discovery service
GlimBox
Shopping.com
1998
Price comparison
Confronte.com
GrubHub
2004
Online food ordering platforms
GrubHub
2004
Online food ordering platforms
Miorden.com
BuenosairesDelive
ry
GrubHub
2004
Online food ordering platforms
0 entregador
GrubHub
2004
Online food ordering platforms
Jnamesa
GrubHub
2004
Online food ordering platforms
MegaMenu
GiltGroup
2007
Shopping club
Brandsclub
Z n a
2007
Social gaming company
Netflix
1997
Online movie rent
Vostu
NetMovies.com.b
r
Wag.com
1998
Online store for pets
PetLove
Etsy
2005
Online handicrafts site
Bixit
Kickstarter
2009
Crowdfunding
Movere.me
99Designs
2008
online graphic design marketplace
LogoChef
Hailo/Uber
2009
mobile Taxi apps
EasyTaxi
Grou on
2008
Daily deal
Cuponica.com
Groupon
2008
Daily deal
ClickOn
Grou on
2008
Daily deal
Grupon Brazil
Diapers.com
2005
Online retailer for babies
Baby.com.br
91
Diaper.com
2005 1 Online retailer for babies
Bebestore.com.br
O entable
1998
Reservation for restaurants
Restorando
1993
Online price comparison
Compara Online
1993
Online price comparison
Sossego
Kekanto
Moneysupermarke
t.com
Moneysupermarke
t.com
Yel
2004
City guide
Birchbox
2010
Beau product discovery service
QuickBooks
2002
ContaAzul is a web-based accounting SaaS platform
ContaAzul
Build.com
2000
Platform for building materials
MadeiraMadeira
Autoanything.com
1979
Acessories for cars
Connect Parts
Ets
2005
Online handicrafts site
Elo7
Kickstarter
2009
Crowdfunding
Idea.me
Lendin Club
2006
Peer-to-peer loans
Cumplo
Making smart design furniture
Oppa
Desi n Public
Beautystoponline
Online beauty retailer
Belezanaweb
Amazon
Moneysupermarke
t.com
Moneysupermarke
t.com
Moneysupermarke
t.com
1994
Online retailer
Linio
1993
Online price comparison
Bidu
1993
Online price comparison
Segurar.com
1993
Online price comparison
Minuto Seguros
Monster.com
1999
Job search
Trabajando.com
Zillow
2005
ViveReal
Buddy Media
2007
Real Estate information
55social is the leading provider of social media marketing solutions
in Brazil.
Stelladot.com
2004
Trunk jewelry-show seller
Sophie and Juliete
AVG
1991
Antivirus
Psafe
Coupons.com
Furniture.com &
wayfair.com
1998
Discount Coupon Website
CupoNation
2002
Home Furnishings
Mobly
GrubHub
2004
Online food ordering platforms
HelloFood
Seamless
2000
Online food ordering platforms
iFood (Disk Cook)
GiltGroup
2007
Luxury private sales club
Geelbe
GiltGroup
2007
Shopping club
Ventas Privadas
Square
2009
Card payment
Clip.mx
Etsy
2005
Online handicrafts site
Airu
Elance/oDesk
2005
Marketplace for freelance
Nubelo
Stubhub
2000
Marketplace to Buy and sell tickets
Ticketbis
Hailo/Uber
2009
mobile Taxi apps
SaferTaxi
Zappos
1999
Footwear and fashion eCommerce
Dafiti
5SSocial
One Kin Lane
2009
online shopping club for Home & Living
WestWing
JustFab
2010
Fast-fashion e-commerce brand
Olook
Fiverr (TaskRabbit)
2008
Marketplace for services
Getninja.com.br
EventBrite
2006
Platform to manage events
Boletia.com
92
Moneysupermarke
t.com
1993
Online prnce
Zillow
2005
Real Estate information
Lamudi
Amazon
1994
Online retailer
Avenida.com
Udem
2010
Online education
EduK.com.br
EventBrite
2006
Platform to manage events
S m
uShi
Fandango /
AlloCind
Khan Academy &
Coursera
2003
Transportation
TransportarOnline
2000
Movie information and ticket sale portal
Cinepapaya
2006
Online education platform for the Brazil market
Descomplica
GrubHub
2004
Online and mobile food-ordering company
PedidosYa
GrubHub
2004
Online food ordering platforms
Sinimanes
GrubHub
2004
Online food ordering platforms
ClickDelivery
Wa .com
1998
Online store for pets
Petzy.mx
Square
2009
Card payment
Pagpop
Elance/oDesk
2005
Marketplace for freelance
Woot
2004
One deal per day
Workana
Mequedouno.com
.mx
Kickstarter
2009
Crowdfunding
Broota
99Designs
2008
online graphic design marketplace
Torneo de Ideas
Hailo/Uber
2009
mobile Taxi apps
DineroTaxi
2005
Network of technology-oriented blogs
Startupi
Luxury women appareal ecommerce
OQVestir
Techcrunch
GuiltGrou
comoarisn
EscolherSeguros
la
EmotionBox
2009
Subscription marketing
Regalobox
VistaPrint
1995
Printing space
Printi
Groupon
2008
Daily deal
Notelapierdas
Groupon
2008
Daily deal
Cuponzote.com
Amazon
1994
Online retailer
Buscalibre
Dia er.com
2005
Online retailer for babies
Bebe2go.com
Dia er.com
2005
Online retailer for babies
Ebebe.mx
Dia er.com
2005
Online retailer for babies
Bebitos.mx
uShip
2003
Transportation
Orangutrans
GrubHub
2004
Online food ordering platforms
Pick-eat
Quora
2009
Crowdsourced intelligence
Ledface
Hailo/Uber
2009
mobile Taxi apps
Tappsi
Hailo/Uber
2009
mobile Taxi apps
Ubimovil
Zazzle
1999
Online creative platform
MangaCorta
Zazzle
1999
Online creative platform
Pegalo
Hoteltonight.com
2010
Last minute hotels
Fugate
Groupon
2008
Daily deal
BuzzUrbano
Groupon
2008
Daily deal
OferCity.com MX
Groupon
Fandango /
AlloCin6
2008
Daily deal
Cuponetika
2000
Movie information and ticket sale portal
Cinemaki
93
1
Facebook
Shtoerazzle
2004 1Social network
I
Mint.com
c2c
1999
2009
Online personalized styling and retail
2006
Online personal finance service
Sonico
IShoes4you
Buxu
Arg
IPO (1.6 bi)
2007
2008
c2c
1999
Arg
Acquired by Mercado Libre $40m
b2c
1999
Arg
+4,500 employees
b2c
2010
Br
+1,000 employees, serie C
b2c
2009
Br
b2b
1997
Arg
2012
Leader in Brazil, raised 19m
Acquired by Staples in 2004 for 23m
b2c
2000
Br
Revenues of 150m in 2011, raised 70m
b2c
1998
Br
Acquired by Napster for $374m
c2c
2006
Br
Raised 114m from Napster
Aquisition Groupon
2004
b2c
2010
Cl
b2c
2008
Arg
A uired b EventBrite
b2c
2011
Br
Raised over 40 m
b2c
1999
Arg
b2c
2010
Cl
Acquired by FancyBox
b2c
2010
Cl
Acquired by FancyBox
b2c
2011
Cl
Acquired by AlmaBox
b2c
2007
Arg
Acquired 2008 by Clarin
b2c
2010
Mx
Acquired by SinDelantal
b2c
2010
Arg
Acquired by ClickDelivery
b2c
2010
Br
Acquired by Peixe Urbano
b2c
2012
Br
Acquired by HelloFood
b2c
2011
Br
Acquired by HelloFood
2013
b2c
2009
Br
Raised 17m
2010
b2c
2007
Br
Raised 46m
b2c
2004
Br
Acquired for 7m (positive return)
2010
IPOed 2005
2005
2008
b2c
1999
Br
Raised B 10m
2013
b2c
2009
Arg
Acquired by Elo7
2012
c2c
2010
Mx
Acquired by Idea.me
c2c
2010
Br
Acquired by 99Designs
b2c
2011
Br
Raised 32m, 60 cities worlwide
b2c
2010
Arg
Acquired by Fnbox
2011
b2c
2010
Br
Acquried
2011
Rocket Internet post
launch
94
b2c
2010
Br
b2c
2010
Br
b2c
2009
b2c
2011
b2c
2009
CI
Raised 16m
b2c
2010
Br
Raised +25m
2013
c2c
2010
Br
Raised 11.1m
2013
b2c
2012
Arg
Acquired other comp
b2b
2011
Br
Seria A,B undisclosed
b2c
2009
Br
Backed by Build.com exec and others
b2c
2006
Br
Raised 7.5m in 2012
c2c
2008
Br
7.6 million visitors/month
c2c
2011
Raised 21.1m
2012
Br
Raised 17.8m in total
2013
Arg
Raised 16.5m
Kaszek ventures
Seed round
c2c
2012
Cl
Raised Seria A, undisclosed
b2c
2011
Br
Raised 14.5m
2013
b2c
2006
Br
Raised +15m
2012
b2c
2012
Mx
Raised 96.5m
2013
b2c
2012
Br
VC funding, undisclosed
b2c
2011
BR
Raised 10m
2011
b2c
2011
Br
Raised between 3-5m in 2012
2012
b2b
1999
Cl
Raised 15m
b2c
2009
Raised 15m
2012
2011
Br
Raised more than 10m
2012
2012
2012
Br
Undisclosed
b2b
2011
Br
Raised 30m, 25m users
b2c
2012
b2c
2010
b2c
2012
b2c
2008
Br
Raised 4.1m
b2c
Br
Raised 20m
Rocket internet
Rocket Internet
Raised 4.7m -Ar
Arg
Raised 0.6m merged with coquelux.com
2013
Mx
Raised 3.6m
2011
b2c
2009
b2c
Redpoint eVentures
Raised 28m, present in 21 countries
Arg
b2b
Kaszek and Monashees
Rocket internet
2008
2011
Roclet Internet
Raised 11m
2008
c2c
Kaszek
Raised 2.5m
2013 1
2013
Rocket internet
1.7m
Raised 5.6m
Cl
Raised
2009
Cl
Raised Sm
b2c
2010
Br
Raised 230m,
b2c
2011
b2c
2011
Br
Raised 4m
b2c
2011
Br
Raised 3m
b2c
2010
Mx
500 city accelerator
Rocket internet
Rocket Internet
Raised +50m
2013
2013
95
b2c
2009
b2c
2013
Br
Raised between 1-5m
2013
2013
2013
Ar
Back by Quasar
2013
Br
Raised Seria A, undisclosed
b2c
2011
Mx
Angel round
b2c
2012
Arg
Invest from ex DHL CEO
b2c
2011
Pr
2013
investment
2011
Br
b2c
2009
Uru
b2c
2011
Cl
Nxtp
b2c
2007
Co
Serie A undisclosed
2013
Mx
2006
Br
Raised 1m
Raised cap from Intel Capital, revenue 1.5m
2012
b2b
Raised 6m, Peter Thiel
RocketInternet
Present in 8 countries, 100 cities
labs, SUP Chile
2012
Arg
Seed round 500k
b2c
2009
Mx
Raised 4m
c2c
2012
Cl
Seed 230k
c2c
2011
Mx
Seed 150k
b2c
2012
Arg
c2c
2008
Br
Seed money
Raised 0.3m
b2c
2009
Br
Raised Seria A, undisclosed
b2c
2010
Cl
2012
Br
Raised 1.2m
b2c
2010
Uru
Undisclosed
b2c
2010
Mx
b2c
2010
Cl
2012
Br
2012
Mx
2012
Mx
Raised 1.3m
b2c
2013
Cl
Winner Green Startup 2013
b2c
2012
Ar
Seed money
c2c
2010
Br
b2c
2012
Co
Only in Colombia
Raised
2013
2012
3m
b2c
2011
Cl
Partner with cell operator
c2c
2011
Cl
Seed money
c2c
2011
Cl
Seed money
b2c
2012
Cl
Startup Chile
b2c
2010
Mx
b2c
2010
Mx
b2c
2011
Cl
StarupChile
b2c
2008
Arg
Closed 2013
c2c
2007
Arg
Raised 6m - Failed
96
5
1
IPO
5
1
Good ac
Alec
Oxenford
No
5
1
bi
Roberto Souviron
No
5
1
Big success BR
Julio Vasconcellos, Emerson Andrade
Yes
5
1
Leader in Br
Bob Rossato
Yes
5
1
Good exit
Santiago Bilinkis
No
5
1
Leader in Br
Yes
5
1
Marcio Kumruian
Romero Rodrigues, Rodrigo Borges, Ronaldo Morita and Mario
Letelier
5
1
Alec Oxenford, Fabrice Grinda
No
4
1
Good acq
Felipe Henriquez, Oskar 0., Daniel Undurraga
No
4
1
Good acq
Pablo Aquistapace, Emilio Tagua
No
4
1
Joao Ricardo Mendes
No
4
1
IPO
Marcelo Ballona, Antonio Bonchristiano
No
4
1
Small acq
Anne-Sophie Dutat
Yes
4
1
Small acq
Anne-Sophie Dutat
Yes
4
1
Small acq
Josefina Estivariz
Yes
4
1
Small acq
Matias Alejo Garcia, Lucas Lain
No
4
1
Eduardo Mussali
No
4
1
Javier Cohen Kichik
No
4
1
Small acq
Leandro Morais
No
4
1
Small acq
Bruno Mengatti
Yes
4
1
Small acq
Fernando Monteiro
No
4
1
Biggest shop club Br
Vasco Crivelli Visconti, Paulo Humberg
Yes
4
1
Daniel Kafie, Mario Schlosser and Josh Kushner
No
4
1
Daniel Topel
No
4
1
Been in busines long
Marcio Waldman
Yes
4
1
Small acq
Alexis Caporale
No
4
1
Small acq
Bruno Pereira
No
4
1
Dan Strougo
Yes
4
1
Tallis Gomes
No
4
1
Albert Aspani
Yes
4
1
Marcelo Macedo
No
Emilio Maciel, Florian Otto
Yes
Marcos Galperin &co
est in LA
No
No
4
1
3.5
1
Good growth
Kimball Thomas
Yes
3.5
1
Good growth
Juliana Della Nina e Leonardo Simlo
No
97
3.5
1
Good growth
Santiago Bilinkis
No
3.5
1
Good growth
Sebastian Valin
No
3.5
1
Alexandre Jesus
No
Fernando Okumura
No
3.5
1
lOm visits, 100%
growth
3.5
1
Acquired other sup
Ignacio Molins
No
3.5
1
Good growth
Vinicius Roveda Goncalves
Yes
3.5
1
Daniel Scandian
Yes
3.5
1
Good growth
In business for long
time
Paulo Biancalana
Yes
3.5
1
Good growth
Carlos Eduardo Curioni
Yes
3.5
1
Mariano Suarez Battan
Yes
3.5
1
Leader in LA
Leader in Chile,
expanding
Nicolas Shea
No
3.5
1
Rapid growth
Max Reichel
No
3.5
1
Rapid growth
Lucas Mendes, Felipe Ganem Mansano
No
3
1
Bernardo Cordero, Fernando D'Alessio
No
3
1
Eldes Mattiuzzo
Yes
3
1
Rodrigo Veloso, Jose Augusto Correa e Oswaldo Romano Ji1nior
Yes
3
1
3
1
Leader in LA
Marcelo Blay
Yes
Juan Pablo Swett, Felipe Hurtado
No
3
1
Brian Requarth, Diego Simon
Yes
3
1
Too soon to know
Emflio Maciel
Yes
3
1
Too soon to know
Ronald Beigi, Camila Mendes Vieira de Souza
No
3
1
No buisness model yet
Marco DeMello
Yes
3
Maria Fernanda de Azevedo Antunes Junqueira
No
Victor Noda
No
3
1
1
1
Emerson Calegaretti
Yes
3
1
Felipe Fioravante, Patrick Sigrist
No
3
1
Big in Arg
Agustin Pallotti
No
3
1
Too soon to know
Felipe Herrera Zoppi
3
1
Too soon to know
Adolfo Babatz, Vilash Poovala
Yes
3
1
Fabio Tran, Jaques Weltman
No
3
1
Leader in LA
Rodrigo Villatoro, Francesc Font
No
3
1
Quick growth
Jon Uriarte Uranga
No
3
1
Clemens Raemy, Jonathan Lo, Diego Massanti
No
Thibaud Lecuyer
No
Antony Martins
No
Andre Beisert
No
Eduardo LHotellier
No
Joshua Francia, Alfredo Canales
No
3
3
3
3
1
1
1
2
0
2
2
0
0
2
0
3
No tracking yet
Too soon to know
Marco Kemp e Pieter Lekkerkerk
No
Vera Makarov
No
Santiago Bilinkis
Yes
98
2
0
Too soon to know
2
0
No tracking yet
2
0
No tracking yet
2
0
2
0
2
0
2
0
3.5
1
2
0
2
0
2
0
2
2
0
0
2
2
2
IEduardo Souza Mendonca de Lima
Yes
Rodrigo Cartacho
No
Federico Vega
No
Gary Urteaga
No
Too soon to know
Marco Fisbhen
Yes
Not yet consolidated
Alvaro Garcia, Ariel Burschtin
No
Ignacio Guglielmetti
No
Acquired competition
Miguel Mc Allister
No
Too soon to know
Toby Clarence-Smith
No
Marcio Campos
No
Tomas O'Farrell, Guillermo Bracciaforte
No
Pablo Recolons Brugueras
No
.Jose Antonio Berrios Cruzat
No
0
Martin Iglesias
No
0
Carlos Matias Baglieri
No
0
Diego Remus
Yes
2
0
Mariana medeiros
No
2
0
Henri Bugnet
No
2
0
Mate Pencz, Florian Hagenbuch
No
2
0
Marcelo Ceruzzi
No
2
0
Gerardo Giacoman Colyer
No
1
0
Eduardo Stekel, Boris Kraizel
No
1
0
Too soon to know
Salvador Kalifa
No
1
0
Too soon to know
Gerardo Mendoza Llanes
No
1
0
Too soon to know
Enrique Zambrano
No
1
0
No tracking yet
Pablo Cappellini
No
1
0
Diego Gawenda
No
1
0
Horacio Poblete
No
1
0
Andres Gutierrez, Juan Salcedo
No
1
0
Juan Carlos Solari
No
1
0
Alan Earle
No
1
0
Miguel Correa
No
1
0
Andres Garnham
No
1
0
Arturo Nanes
No
1
0
Angela Cois
No
1
0
Patricio Bravo Celis
No
o
0
Lucas Lain
0
0
0
0
Rodrigo Teijeiro
Yes
0
Olivier Grinda, Fabrice Grinda
No
0
Andres Arellano
No
Too soon to know
Too soon to know
99
4
JP Morgan,
6
MBA Stanford
Linkedin
BCG
MBA HBS
4
PWC, France Telecom
MBA Duke
Linkedin
Linkedin (R. S o u vi r
o n)
6
Facebook, the experience project, Microsoft
MBA Stanford
Linkedin
15
Preivous Decolar.com, CarlsonWagonlit
MBA Brasil FGV
Linkedin
2
Procter&Gamble
Linkedin
3
Short experience in shoe seeling before
NO linkedin
Linkedin
YPF
0
No relevant experience
12
BCG
MBA HBS
Linkedin
5
Startups
NO
Linkedin
9
CEO
ITC Solutions (health care)
Linkedin
0
Linkedin
3
Yahoo Brazil, experience in startup and VC
Oxford
10
Cartier and other luxury band, exports
MBA Luxu
Brand Marketing
Linkedin
10
Cartier and other luxury band, exports
MBA Luxury Brand Marketing
Linkedin
11
Marketing & Communication Unilever
MBA Mannheim SB
Linkedin
4
HP, Telmex, developes exp
MBA EDDE (not known)
Linkedin
4
No relevant experience
Linkedin
3
Experience in media (not food neither startup)
Linkedin
7
Developer, experience on cofounding startup
Linkedin
5
Linkedin
7
Workd as COO Glossybox, Rocket Internet
Experience on startups, consutlant
management
MBA Coppead
20
Experience on startups and ecommerce
PhD Physics
Linkedin
3
McKsinsey, no exp in startups
MBA HBS
Linkedin
6
Experience in software USA, PWC USA
MS Stanford
4
Veterinarian
Linkedin
Linkedin
Linkedin
1
Preivous stratup (not successful)
10
HR background
8
Experience in design & arquitect
Linkedin
3
Exp in startups, entrepreneur
Linkedin
15
Exp in startups, and discounts
13
Banking/investment
MBA exec Ibmec
Linkedin
6
MBE Brasil FGV
Linkedin
MBA Harvard
Linkedin
7
Groupon China, McKinsey
Successfull entrepreneur, pooltable.com
(ecommerce)
Some experience in ecommerce, product
management
NO
Linkedin
15
Officenet, P&G
Singularity University
Linkedin
6
Linkedin
MBA FGV Br
Linkedin
Linkedin
100
0
No previous ex eri
10
Director LG
5
10
Consultant McK and BCG
Lot of experience Nestle, Glossybox Rocket for
1 year
Software Dev (small comp), founder of
rpevious startup
7
Worked at com an that used wood
18
CEO Dakota Parts
No info
Linkedin
15
Meli, Accenture
MBA Wharton
Linkedin
10
Successfull entrepreneur exit (Disney)
7
Entrepeneur, government
MBA Stanford
Linkedin
5
McKsinsey
MBA HBS
Linkedin
4
Investment banking, BCG
MBA NYU
Linkedin
14
Consultant in tech/stratups
MBA NYU
Linkedin
14
Superintendente Itau, MBS Seguros
MA Stanford
25
Experienced entrepreneur
20
VP Itau seguros
9
Linkedin
e
Linkedin
Stanford MBA, Wharton
Linkedin
ESADE
Linkedin
MBA FGV Br
Linkedin
Linkedin
Linkedin
Linkedin
Linkedin
Linkedin
MBA Columbia
Linkedin
7
No relevant experience
Previous startup in same field, excecution
experience
Bachelor San Diego U., Business Adm
Brasil FGV
Linkedin
6
Groupon China, McKinsey
MBE Brasil FGV
Linkedin
8
Bain Consultant
MBA IESE Esp, MBA Harvard
Linkedin
14
Security at Microsoft
MBA Wharton
Linkedin
3
Goldman Sachs Debts
MBA FGV Br
Linkedin
7
Booz Allen
Kellogg MBA
Linkedin
18
Exp in internet, big companies
MBA at ESPM
Linkedin
7
Consultant background
8
Oracle, some experience in startup
BA USAL
6
Experience in software
Msc Marketing Paris Dauphine
Linkedin
4
_Linkedin
Linkedin
14
PayPal, Visa, management, no startup exp
MBA MIT
Linkedin
7
AT Kerney McKinsey
MBA Kellogg
Linkedin
6
P&G, Pmang
MBA Shangai
Linkedin
7
Morgan Stanley, Banking
MBA U de Deusto
Linkedin
6
Exp investment banking
MBA HBS
Linkedin
6
Investment banking
MBA Insead
Linkedin
12
Exp in marketing & communcations
MBA ESPM
Linkedin
8
Ambev, Mckinsey
MBA HBS
Linkedin
4
Accenture, Bain, McKinsey
6
Developpers, startups
MS Tech Mont
Linkedin
15
VP Banking ABN Ambro, McKinsey
MBA Erasmus U., MBA Insead
Linkedin
Linkedin
8
Experience in consulting and investment
HBS Bachelor and MBA
Linkedin
15
Officenet, P&G
Singularity University
Unkedin
14
Background eng. - founded educational
Linkedin
101
startup
10
Various startup projects (no very successful)
MBA Universidad de Girona
Linkedin
6
M Fin England
Linkedin
Various studies, not clear
Linkedin
10
JP Morgan finance
Consutitant United Nations, not success expt
in startups
Teacher, experience in education and
entrepreneur
Grd Business Uni Feder Rio de Janeiro
Linkedin
4
Software exp, some startup experience
7
7 years in teleco industry
Ms Erasmus University
Linkedin
3
Some experience in startup
4
Barclays, some Linio and VC Bridge
6
Harvard MS, experience in startups, VCs
10
Expeience in FnBox, Google
BA U San Andres
Linkedin
15
Exp in technology
Business IESE
Linkedin
8
Linkedin
Linkedin
MBA Wharton
Linkedin
Linkedin
0
Linkedin
4
Deloitte, Pepsico
7
Software exp, some startup experience
Linkedin
6
Newpapers, editor
Linkedin
8
Lawyer
4
No startup exp
4
Harvard Bachelor, MBA Wharton
8
Investment banking
Founded previous companies in
marketing/com
6
Bain, BCG
Bach Yale
Linkedin
0
No previous experience
NO
Linkedin
4
Logistics, CEO advisor
MBA HBS
Linkedin
5
MBA Stanford
Linkedin
5
Banking and ventures
Logistics and marketing big company, founder
startup
MBA Stanford
Linkedin
7
Patent Office
Linkedin
BA Tech Monterrey
MBA FGV Br
Linkedin
Linkedin
Linkedin
Linkedin
Linkedin
3
No relevant experience
Linkedin
3
Startup experience
Linkedin
6
Some exp in startup and corporate
Linkedin
9
Exp in retail and consulting
0
No previous experience
Linkedin
0
No previous experience
Linkedin
5
Lan airlines
5
McKinsey, corporate
4
Government
Linkedin
0
No relevant experience
Linkedin
MBA Adolfo lbahiez
Linkedin
Linkedin
MBA Stanford
Linkedin
No previous experience
4
Compan builder
BA U south calif
6
Cofounder of brandsclub
BA U Miami
0
No previous exp
Linkedin
Linkedin
Linkedin
102
0
2
2
1
0
2
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2
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1
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1
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1
1
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0
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1
0
0
1
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0
0
1
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103
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0
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0
2
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0
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1
1
1
1
1
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1
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1
0
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0
1
0
1
1
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1
1
1
1
0
0
1
3
1
0
0
1
1
2
1
0
2
2
1
1
2
1
1
2
0
0
0
1
1
1
2
1
0
1
0
0
1
1
0
0
2
2
1
0
2
1
1
2
2
1
0
1
0
1
1
1
2
0
3
1
0
2
2
1
1
1
1
1
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0
0
0
1
1
1
0
2
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1
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0
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1
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1
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1
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0
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1
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0
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0
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0
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0
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_
0
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0
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1
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104
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105
Source
Received investment from eBay
http://www.igexpansion.com/files/caital%20riesgo.pdf
http://www.wikinvest.com/stock/Staples_(SPLS)/Acquisitions
http://ucbweb2.castelobranco.br/webcaf/arquivos/29423/11427/Netshoes-r.pdf
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a4sbmh9NTISg
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http://techcrunch.com/2013/08/07/brazilian-vacation-bookings-goliath-hotelurbano-gets-20m-third-round-led-by-ivp/
http://www.boltventures.com.br/press/2013/8/28/rocket-internet-takes-over-rival-food-delivery-startup-in-brazil
http://www.crunchbase.com/company/vostu
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tml
http://thenextweb.com/la/2012/07/30/brazilian-etsy-elo7-buys-argentine-competitor-bixti-to-expand-across-latinamerica/#!szGH
http://www.businesswire.com/news/home/20130827005441/en/99designs-Completes-Acquisition-Purchase-Leading-BrazilianDesign?utmsource=dlvr.it&utmmedium=twitter#.UtFQRAo4I
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http://www.crunchbase.com/company/baby-com-br
http://techcrunch.com/2Ol3/03/l4/bebestore-lands-10-2m-from-w7-atomico-in-the-race-for-brazils-kid-focused-ecommercemarket/
106
Crunchbase
http://techcrunch.com/2013/09/14/how-comparaonline-raised-16m-to-build-a-thriving-insurance-comparison-service-in-latinamerica/
httP://economia.ig.com.br/empresas/2013-01-2l/site-que-tenta-ser-decolarcom-dos-seguros-fecha-l-ano-com-4-milclientes.html
http://thenextweb.com/la/2013/01/07/brazilian-social-city-guide-kekanto-raises-5-5m-becomes-w7-brazil-capitals-first-
investment/#!pqZwk
http://thenextweb.com/la/2013/02/05/almabox-acqui-hires-ploombox-to-expand-in-mexico-eyes-other-latin-americanmarkets/?fromcat=all#!sbqF
http://thenextweb.com/la/2013/01/07/brazils-contaazul-raises-series-a-from-monashees-ribbit-capital-500startups-and-napkn-
ventures/#!sbx8w
http://pulsosocial.com/2012/07/16/construction-building-platform-madeiramadeira-closes-first-investment-round/
http://pulsosocial.com/2012/06/22/Who-are-the-2012s-movers-and-shakers-in-brazil/
http://exame.abril.com.br/pme/startups/noticias/elo7-recebe-aporte-da-insight-partners
http://venturebeat.com/2012/08/31/copycat-startups-in-latin-america-are-killing-it/
http://startups.ig.com.br/2013/bidu-de-cotacao-de-seguros-faz-um-ano-ceo-compartilha-aprendizados/
http://webprendedor.com/2012/09/20/primera-inversion-del-fondo-redpoint-e-ventures-es-en-minuto-seguros-de-brasil/
h-ttp://thenextweb.com/la/2012/12/19/real-estate-marketplace-vivareal-raises-series-b-to-keep-on-growing-in-latinamerica/?fromcat--all#lsbFqA
http://www.igexpansion.com/files/capita1%20riesigo.p~df
http://www.reuters.com/article/2012/07/23/Venture-redpoint-brazil-idUSL2E81KD5P20120723
Rocket Internet
Rocket
Internet
Backed by Rocket
Internet
http://pulsosocial.com/en/2013/08/19/hellofood-makes-another-acquisition-in-brazil-if-you-cant-beat-em-buy-em/
http://thenextweb.com/insider/2013/05/28/mobile-payments-startup-clip-raises-1-5m-aims-to-be-the-square-of-the-spanishspeaking-world/#Itov89
[ttp://startups.ig.com.br/2013/airu-mantem-crescimento-mensal-de-30-foca-moda-e-decoracao-rocket-reinveste/
h'ttp://pulsosocial.com/2013/02/18/safertaxi-alcanza-mayor-inversion-de-start-up-chile-completando-ronda-por-us42m/
Rocket
Internet
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http://thenextweb.com/la/20l3/O2/l9/sympla-raises-angel-round-hopes-to-become-brazils-eventbrite/?fromcat--all
http://thenextweb.com/la/2al3/I2/07/transportaronline-raises-angel-investment-from-former-dhi-executive-to-grow-inbrazil/?fromcat--all#lsbpXh
http://thenextweb.com/la/2l2/l2/l4/peruvian-movie-portal-cinepapaya-announces-funding-from-500-startups-eyes-latin-
america/#IsbAGn
http://porvir.org/porcriar/descomplica-leva-cursinho-para-dentro-de-casa/2O12O7o3
http://pulsosocial.com/en/2013/12/12/whos-who-in-online-food-delivery-in-latin-america/
http://techcrunch.com/2013/12/11/petsy-mx/
http://thenextweb.com/la/2012/11/07/latin-american-freelance-marketplace-workana-bags-500k-in-round-led-by-evenbase/
http://venturebeat.com/2012/08/3/copycat-startups-in-latin-america-are-killing-it/
http://thenextweb.com/la/2012/10/29/brazilian-online-printing-startup-printi-gets-offline-presence-with-newpartnership/#!sOWGi
Diverse sources:
108
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http://thenextweb.com/la/2013/05/05/why-brazils-shoedazzle-clone-shoes4you-decided-to-close-shop/#!sHZQ9
109