Who’s Eating Your Dessert: When Should our Company Expand Internationally?

In the U.S. we all lived through the “Daily Deals” bonanza when it seemed like every web or media property decided to offer a daily deal. So we’re quite familiar with the idea of successful concepts being copied and implemented by other firms.

But what about a whole business built on repeat copycatting? Or what about the case of a country with virtually a whole web ecosystem of “copycat” websites based on what’s successful in the United States?

We all know that Google, Facebook and Twitter are global phenomena. I suppose I assumed (without ever carefully considering the matter) that other websites grew slowly by adding markets and languages.

But founders beware, that’s not the case.

Last spring I attended the kick-off event of the German Silicon Valley Accelerator program in Berlin. The speakers of the evening emphasized innovation and the excitement about new Berlin companies, but in my conversations around the room later I was introduced to a concept I had not considered much before: the professional copycat. Although I had not heard of them, much has been written about the Samwer brothers in Berlin who simply find a promising internet business in the U.S. and clone it internationally. For a good example of their blatant theft copycat work, check out Pinspire.

And they’re not alone.

Two weeks ago I attended a lecture on the Digital Startup Ecosystem in Brazil at the Brazilian Consulate in Los Angeles. Alex Nascimento gave a great talk about the exploding digital ecosystem in Brazil and dazzled all of us with stat after stat abut the country’s growth. E-commerce there is growing at 30% a year aided by a young and emerging middle class. Digital ad spending is growing by 40% a year, 71% of travel purchases in Brazil are now made online, and so on.

Indeed, I attended the event with the intention that this blog article might be about the growth of the digital ecosystem in Brazil. However, as I listened it became apparent that although the digital ecosystem was growing there, it was growing without U.S. companies.

Nascimento, for example, showed a slide of the 10 largest companies in e-commerce. The only U.S. brand in the top 10 (coming in at number 8) was Groupon. The list, naturally, included some names which had been successful brick and mortar stores in Brazil prior to the web but Nascimento said several of the “pure players” (i.e. online only)were simply copycats of Zappos, Ebay, Amazon and others.

In the Q&A portion I asked him whether he could name on Brazilian company that was innovating (rather than copying). He cited Embraer, I suppose because he wanted to name a Brazilian company that was innovating, but he was at a loss to name one in the digital space.

Now I’ve personally met some very innovative entrepreneurs in Berlin and I am sure there are digital companies innovating in Brazil. But for the entrepreneurs and founding teams out there let me add a worry to your list: if, after years of struggle you finally find yourself at the center of success in the U.S., somewhere out there, someone is taking notice and your ideas, your concept and your vision will be cloned.

While attending events at Silicon Beach here in Los Angeles, from time to time I have asked entrepreneurs if they had a strategy for international growth. In fairness, depending on the stage of their company, my question can be a little like asking a third grader if they’ve considered which calculus course they plan to take in high school. The reaction I have received to the question is usually a cross of bewilderment with perhaps a tinge of exasperation. As in, three hours before this mixer I was concerned about making payroll and now I’ve got some smarty pants lawyer asking me about my international strategy.

Fair enough. But don’t say I didn’t warn you.

And I admit, tying this article up with some practical advice is tough. First, because the range of businesses for whom this applies is so wide. While most web businesses are more scalable than brick and mortar, some definitely scale easier than others. (For a great article on the many challenges for the “Amazon” of Russia see here.) Second, because I know time, energy and capital for theoretical challenges are in short supply for companies facing more immediate problems related to their domestic operations.

Nevertheless I will try a few suggestions and I’d love to hear your input:

1. Increase your International Fluency. If your last international experience was running with the bulls in Pamplona during college or hitting on the Russian/Swedish/Brazilian tourist at the Viceroy, then regardless of the stage of your company you should begin broadening your fluency in this area. Fortunately in Los Angeles we’re lucky to have 98 consulates and many of the larger ones sponsor events where you can begin broadening your network. Consider also attending at least one international conference or forum every year.

2. Consider International Options. Continuing with my example from above, we don’t expect a first grader to seriously consider their college options but I remember my 7th grade teacher urged me into a program where I could take the SAT. Perhaps it’s still too early for you company to draft a fully researched plan but you have begun to assume your company takes off in the U.S., where do think you would naturally expand? Who do you need to meet in order to make that happen? Even a rough idea will help you begin to connect the dots when you have chance meetings or while reading news.

3. Plan, Invest and Execute. These are things you do well, so I don’t need to help you here except to include this piece of advice to help you with your Board or investors who tend to be older and possibly operating under different assumptions: although international planning may at times seem premature, a mere 13 months after Groupon launched in the United States its clone launched in Germany. With the speed of news, there won’t be much time for the company to pivot to new markets after it finds traction. If you don’t have serious IP protection, you need to move very quickly.