The Groupon acquisition of CityDeal is being hailed by many across Europe as a good exit for the German-based clone (yes, there is no point in saying it is anything else but a Groupon clone). But luckily there are more than just clones in Germany. The burgeoning cluster in Mitte, central Berlin, is producing startups such as Soundcloud, hiogi, Babbel, Twinity, SongBeat and aka-aki. Nokia bought Dopplr and with it set up an innovation lab amongst the beating heart of Berlin’s startups. Hamburg has spawned many others include Qype, Europe’s Yelp, and more recently the interesting Apprupt. VCs in Hamburg and Munich vie over raw engineering talent out of German universities, and our TechCrunch Europe Munich and Berlin events last year were buzzing. As US-born Germany-based VC Paul Josefak recently guest posted for us, he’s coming across “multiple companies who recently closed either initial or follow-on rounds.”
Berlin is now vying with London as the second tier cluster in Europe with a decent critical mass.
But there are clouds on the horizon, and they come in the shape of an attack of the clones, if you will, or more accurately, Pollution of the Clones.
While the market for copycat businesses aping the latest startups form the Valley is well known, it’s been a component, but never the only aspect, of the German scene. With Groupon’s acquisition of CityDeal the Clone Scene could now threaten to overtake it’s younger brother, the Innovation Scene. Here’s why.
1. Engineering and operations are German strengths and they will naturally play to those over entrereneurship. That means going after proven business models rather than innovating.
2. Entrepreneurship remains a problem in Germany where the overriding business culture is about safety. Hence young graduates flock to try and get the jobs in BMW, Volkswagen and other corporate giants, but avoid risky startups. However, to be fair that’s a charge that could be levelled at almost any European country, not just Germany.
3. The Samwer brothers, famous for their European Founders Fund now have a totally proven model. They sold alando to eBay, StudiVz (Facebook clone) to Holtzbrinck and now CityDeal to Groupon. They are almost unstoppable. They are pumping millions from their clone factory, sorry, incubator, Rocket Internet, into clones like Plinga, the Zynga clone. Just look at them go.
4. And as Germany based entrepreneur Stefan Wolpers blogs today all this clone success will just increase the level of risk aversion in Germany, and draw funds aware from early stage innovation:
“Problem is, that a lot of German investors in the start-up industry may not realize the proficiency level of the Samwer operations in comparison to their own ambitions. At the height of the German Groupon clone frenzy there were eight or so clones, four to five of which are already out of business or doomed to date. From now on, an even larger share of the scarce early-stage funding will be allocated to cloning US business models: they’re less risky and provide a good exit opportunity if executed in the right way. Looks [like] we might become the high-end in the clone business. And that’s a tiny niche we should not excel in.”
The light on the horizon is Berlin, where cheap office space and plenty of young talent attracted to the freewheeling atmosphere of the city are creating the priomordial soup of a startup cluster based around innovation. The question is, will that talent fall into the Rocket Internet factory or not?
It’s to be hoped that the Kane and Abel like struggle between Clone and Innovation ends in victory for the more daring of the two.
Update: I contacted Oliver Samwer for this article but so far have had no response.