Does Europe need tech entrepreneurship?

Nicolas Colin is singing the praises of Rocket Internet, the German investor which is known as the cloner from Europe. If you didn’t read it yet, go ahead and do it now, it is a well-argumented piece, as all the writing Nicolas is doing.

He does have a point, as Rocket Internet filled a big void in Europe at that time, which, Colin argues, makes secondary the fact that they merely imitated what American successful companies were building, since at the end of the day they managed to develop quite a few valuable assets too in spite of their rep.

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If you don’t know what Rocket Internet is, it’s worth reading their wikipedia page and the Controversy section. You may also be aware that history is not what actually what you think happened, but what remains written in the history books.

To make a quick parallel, in the 90s in Romania after communism fell and Ceausescu was executed, entrepreneurship meant racing to bring in American fast food franchises - McDonalds, Burger King etc. Specifically you would pay for operating a brand and its playbook and it was up to you and your skills to adapt those to the local market.

This is exactly what Rocket Internet did with tech businesses, except that they didn’t pay anything. They just copied mot-a-mot US companies which seemed promising because they raised money and added their own logo on top it, and created their own playbook in a market which was empty, like Romania was in the 90s.

And not only that, but also, upon building them, they tried to sell them to the guys they cloned from as “their European operation”. Boy, did that piss off some American dudes back then!

Some of the startups worked, most didn’t. Rocket Internet certainly built assets that returned money to the investors and others which now are solid European businesses.

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A topic that is less talked about is that by doing this the Germans had a bigger role in creating a new nomenclator of jobs, the startup jobs. They made startups cool in Germany and provided an educational structure and infrastructure, even though they were clueless about tech startups to begin with.

School doesn’t teach you the combination between tech and building business out of it. Back then and even today, school meant a lot theory crunching, as good as storytelling over a cup of coffee and most of the times senseless without practical support. You either got the concepts or not, and, in some cases, you got theory combined with mistakes made by corporates decades prior wrapped in business cases. Why corporates? There were not startups to learn from at that time.

The rest, which was actually everything, you learn it on the job. Back in the 2000s, your career path as a graduate was to work for a corporation, become a management consultant or an investment banker.

There were not too many startups, especially tech. Sure, there was an emulation because Google was cool and not evil at that time, but, just like now, it was just a small bubble. Especially in Europe.

And so, when Rocket Internet started, their startups clone incubator became an alternative, fast-paced, high-learning curve to a straightforward and rather boring career. And which today has led to a good range of qualified people who are skilled at working for tech business.

Rocket Internet was a huge school for kids eager to learn tech and business at that time, even better than an MBA in some cases - some of those guys are actually Euro VCs or successful entrepreneurs these days.

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But. Other than all those conjunctural spillover effects, the question remains: 

Is it better to steal people’s ideas rather than create something from your own head?

Good artists borrow, great artists steal, they say, but Rocket Internet ain’t an artist, it was a bunch of rich kids willing to make a quick buck. We’re talking business here, and in US what they did can be treated as intellectual theft and you can lose your shirt if you’re found guilty.

And, beyond morality, in secondary markets such as Europe, it didn’t really matter for the consumers. It doesn’t matter anywhere actually - as always, the market will dictate what works or not, regardless of you being an innovator or just a mere follower.

And on to morality I don’t think there’s a clear answer to that, it’s up to one’s values and intellectual abilities, and, at the end of the day, that’s rather philosopical and personal choice.

And that is why the opinions about Rocket Internet are polarised:

- Some people see the idea stealing. The lack of originality and of creativity. All those are associated with personal values and organisational DNA.
- Others see happy customers benefiting from value created by those successful companies.
- And others see some good assets that made some investors rich.
- And yet another see the related jobs and an educational ramp that created a bunch of successful middle class, savvy these days in building startups.

But, overall, all those opinions are among a very small segment, a closed circle of people building stuff out of Europe. At the end of the day, as I said, the market is the only one validating your business, and that is customers giving you money.

It is certain though that there’s a good part of Europe following Rocket Internet’s blueprint, i.e. copy ideas and adapt to the local market. The continent is full - in Germany, France, Spain there’s plenty of startup clone factories today, they’re building their fame out of that. And there’s plenty of investors backing them up.

Problem is that this is just small thinking, with lower returns on investment as the risk is lower too. It’s not Champions League, it’s a secondary league for teams dreaming with eyes wide open to get drafted to CL teams some day.

And, on top of that, it’s other variables like path to liquidity, lack of fast deal turnaround and lower M&A levels that are part of Europe’s entrepreneurship problem and have been since the beginning.

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And so, are those guys part of the problem or part of the solution today?

Is Rocket Internet representative of the European DNA of doing entrepreneurship and innovation, by, as Nicolas puts it, “merely replicating models and strategies that have already been proven on more mature markets”?

Is this the European way of being a startup founder?

If this is it, it’s fine, but let’s call a spade a spade. We just need not be too hard on ourselves when asking why kids cross the ocean in droves when they want to create top products and businesses. In spite of US being a shitshow these days.

And us, outliers, we’ll always have the French/Germans/Spanish etc to make fun of when they will unsuccessfully try to clone Google, Amazon or whatever shiny new things Americans and Europeans living in America may invent.

Which begs another question, a bit meta - does Europe really need tech entrepreneurship? Why or why not - just because today there’s more money than projects, with a bunch of VCs sitting on funds and looking to justify their jobs? :-)

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