Thursday, March 01, 2012

The Samwer Brothers

Having grown up in Germany, this piece in BusinessWeek about the Samwer brothers sparked some thoughts. For those of you who haven't heard, the Samwers are three brothers started a string of successful web businesses in Germany by copying one successful US web startup after another. I can remember buying something off their first website - Alando.de, an eBay clone - back when I was in high school in 1999. It was their first exit and was acquired by eBay for a $43 million. They have since made billions.

To someone like myself in the US startup community, the idea of the Samwer brothers sounds terrifying. Imagine you're a startup founder and your new company is just taking off. Suddenly, a Samwer clone comes along and gobbles up your European market way before you can get there - you'll end up having to buy it later for a lot of money. This has happened to Groupon with CityDeal, and it looks like it's happening to Airbnb and Zappos.

Why does their approach work?

Let's say your Silicon Valley based startup just became successful and proved out their business model. Now you has to deal with fundraising, hiring, and scaling to new users. International expansion gets put off until you have more time to breathe. Meanwhile, the Samwer brothers activate the clone machine. While you're struggling to recruit engineers in the talent jungle of Silicon Valley, the Samwer brothers redeploy existing resources and follow the models they've learned from other startups.

Another key factor is that it's easy for US founders to overlook opportunities in other developed countries. I'm not sure if this is because of the psychological draw of American exceptionalism or a genuine lack of awareness of the Internet landscape in other countries, but it's a clear blind spot. Germany, the Samwer brothers' home base, is a great country to target: High purchasing power, high-speed Internet widely available[*], and a large target market of people who all speak the same language and are technophile.

Finally, Germany has a great talent pool of technical people and a comparative dearth of interesting tech companies to work for: If you're a talented engineer, you can't go work for Airbnb or Zappos, so why not go work for the respective Samwer clone?

I've always believed that great entrepreneurs find and exploit the shortcuts to success in a system. It turns out that taking established business ideas from the US to Germany is one of these shortcuts, and you have to respect the Samwers for finding it.

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[*] To illustrate, my brother lives in a small town in Germany and his Internet connection is substantially faster than what I can get from Comcast near downtown San Francisco.

8 comments:

Anonymous said...

"...so why not go work for the respective Samwer clone?"

Because they offer you the worst (working) atmosphere you can imagine and build the companies only in order to exit them, no matter what happens to it or the employees afterwards.

Activate your german and read the comments below the article: http://www.gruenderszene.de/news/groupon-gomorrha-leak

Gabor said...

Thanks anonymous!

My understanding is that Citydeal is now owned by Groupon, so the actions of the manager in the case you quote are due to the immense pressures on employees at Groupon, which is a public company in the US - the Samwers have no control over this at this point.

There are plenty of examples of US startups where there is immense pressure on employees to perform - Zynga comes to mind.

Are there other Samwer business where employees are being badly treated?

Holger Haslbeck said...

… talent in Germany: Well things are getting tough here in Germany regarding recruiting/talent acquisition. The talent pool exists but it is extremely tough to get people for your venture. There's much more need for people then there are available. Maybe a great chance for the Silicon Valley folks to come cross the pond?

Anonymous said...

I have to correct that. The Samwers own about 10% of Groupon and have to work at least 50% for Groupon right now. (See the prospectus for Groupons IPO to proof that). Right now 1 of them works 100% another 50% so they are the ones really in charge of what is going on in Groupons offices in Berlin (Which is responsible for nearly every country besides the US). The "CEO" of Groupon in Berlin is a complete marionette or PR CEO (as some people say).

The same working conditions can be found at wimdu, their clone of airbnb.

Anonymous said...

Good Article,

however I think it has become clear in german webscene that wimdu and zalando will probably not exit to their respective templates airbnb and zappos. This is mainly because they have grown too big by now. Besides, Wimdu and Airbnb have a very difficult relationship and Airbnb Operations outside the US are also run by German Incubator Springstar, which is a direct competitor of Rocket Internet, which makes it unlikely that these two could merge one day.
Zalando on the other hand is still not profitable but growing really big right now all over Europe and it seems it might be too big to be aquired. However there are rumors Zalando might file for an IPO later this year.

Keep up your good work.

Anonymous said...

I am working at Rocket and I absolutly having fun, at least in my department. And at least what I know, there is no galley work at Rocket.
I also have insight to some other Rocket ventures and there it is also not so bad. But Groupon and Wimdu are special, indeed. But it should be mentioned, that the Groupon office Berlin is producing the money, not the American one.

Entropy said...

When there is so a shortage of qualified web engineers in germany then i don't understand why most of the established web companies here pay minimum wage and burn through their talents.
It also bothers me that most companies i worked for use rather questionable practises like massive spam, well hidden hooks in contracts or - well - copying ideas from overseas.

Scholar said...

From the BusinessWeek article, I read "they went US and worked there for some time and they learnt, how do they develop ideas, raise money and scale". If I want to know how do Silicon Valley folks develop ideas, raise money and scale, what is my best bet?