Blind Leading the Blind: Copycatting in Emerging Markets

I spend a lot of time traveling through emerging startup ecosystems across Asia, Latam, Europe and one of the most common things I see are copycats of business models that started in America. Things like marketplaces, food delivery, ride sharing and even micro mobility Ie. Stupid scooters like Lime or Bird. 

And it makes sense, in their eyes, if  it seems to work in the USA so it must work in their country or city. As a founder you copy the business model and remove business model risk. All you have to do is figure out the specific market and cultural issues and solve for it. You become the regional giant and then sell out to the big US players who come to your country later. Or become a big awesomely profitable & independent regional player. Great success!! (As per Borat :)

But there is a small wrinkle here. What if that business model doesn’t actually work in the original USA. And its issues and things like negative unit economics were papered over by massive amounts of VC money. 

Obviously there are exceptions to the rule like Getir in Turkey or Glovo in Spain & parts of the emerging Europe for food and grocery delivery. Or Allegro group which is exceptionally good in marketplaces across CEE region. Or Bolt in ride sharing that is doing very well across most of Europe. Or Grab in Southeast Asia for ridesharing and payments. Digital decolonization is a real thing. 

But like I said before these tend to be exceptions. So the point for founders (and Local VCs), do your homework and don’t blindly copycat. 

It goes without saying: don’t equate big VC funding rounds with working business models. Especially from 2018 to 2021. Perfect example being Bird scooters. What a disaster zone,  having raised at least $600M usd and now worth much less publicly than the total amount of VC $$ raised. Which goes to show you how far hype can take you. (Or how deluded venture capitalists can get, saying this as a VC myself). 

You can absolutely learn from these American startups but also must understand the X-factor. Ie. What is the local situation, infrastructure and customer readiness that underlies and drives them. And does this business model even make sense locally. 

You need to really dig into all the idiosyncrasies of the business model you are copying and seeing how they fit locally. Reach out and talk to VCs or even the founders or C-levels of these American companies. You’d be surprised about how open most founders will be to another founder, especially one in a completely different region. 

I’d also recommend following the lean startup methodology and do lots of customer validation tests on the customer segments & testing receptiveness of your region. Don’t go into full on build mode without doing this first. 

Assuming you start getting some traction here, really focus on understanding your go to market and unit economics and whether they can work as you grow. In other words, following the title of one of the most underrated startup books around “Nail it and Scale it.” (by Furr and Ahlstrom)

It’s a good practice in general for most startups whether copycatting or not.