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Companies are Icebergs: Why Copycats Don't Equal Instant Success


My buddy just sent me this article from The Next Web about the potential costs to build some of today's big players in "startups" including Twitter, Instragram, Facebook, Uber, etc (see "How much does it cost to build the world's hottest startups?").  They're not really startups anymore, though, I'd argue.  But of course, they used to be.  Here are some of the highlights:

  • Twitter:  May not take long to build the core -- 10 hours and a good $160 Ruby on Rails course.  But to really get to a Minimum Viable Product (MVP) you have to pour in about $50K-$250K for processes, infrastructure, and the like.
  • Facebook: One expert quoted $500K (min) and 9 months of development and design team.  The real costs, however, is the support.  The expert estimates a monthly burn-rate of $30MM just for its infrastructure so we can Like, Share, and watch videos of kittens!
  • Uber: Uber "scrapped by" with $50MM to build what the service is now, and then Google and Benchmark rammed another $258MM since August.  Artem Fishman (VP of Huge) estimates an MVP would have cost about $1.0-1.5MM to develop.  However, beyond the app itself, there is lots of costs to navigate local legislations and permits to think about.
  • There are several other hot "startups" on the list including Pinterest, Tumblr, etc.  Check out the article to read more.  
What made this interesting for me also coincided with the notion of building a startup and a recent post on David Cumming's blog post "Can't the Software Just be Knocked Off".  It's also a notion people have asked me in regards to Body Boss.  The question makes many people think about keeping their ideas quiet, or even gives people a notion that they can just copy another program and have the same success or even better.  Some personal thoughts:
  • A company is an iceberg.  What you see in a front-end either in an app or even marketing material is just the tip of the iceberg.  Beneath the water is a whole lot of you-don't-know-what that really makes a business a business.  Costs to build an app is oftentimes (especially in the long-run) the tiniest line item compared to everything else it costs to maintain a successful app.
  • It's about the experience.  I'm not an Apple fan, but they have customer service down in ways Microsoft has really never been able to copy.  Just watch Microsoft Stores vs. an Apple store.  The culture ingrained in Apple just oozes a satisfying customer experience.  With apps, making a simple, easy-to-use experience is not simple.  It's also what makes things like Tinder blow up (with users).
  • You don't know what you don't know.  Companies and their products/ services get refined iteration after iteration.  Through customer usage, interviews, and just being in the space, they learn what makes products and customers tick and tock.  Similar to the iceberg analogy above, a startup who has learned and iterated knows things that knockoffs may struggle with because they haven't experienced it.
  • Value of an App?  $500K.  Value of Your Network?  Priceless. I'm trying to be clever here with a reference to Mastercard commercials (here's a good one), but the point is that many times, what can make or break a product/ service is the company's network (connections).  I know there's a suggestion somewhere about suggested network size for B2B startups, but I can't figure it out or find it.  If someone knows it, let me know.  Essentially, have a large, quality network in the market you're approaching.
  • Cost of Entry is Low.  With so many frameworks and Software Development Kits (SDK) available, it's pretty easy to have a copycat program ready to go and live in a short amount of time.  And because of that, almost anyone can do it.  (My friends and I's first foray into entrepreneurship, we used a framework based off of fmylife.com and created abigeffu.com where users could dish "A Big Eff U" to... anything or anyone.  It's since shutdown and is being squatted on.)  What's difficult is getting repeat users/ customers because they're being inundated with like-products.  Instead, standing out is the hardest part.  If you're going to build a similar product/ offering, you need to add elements that will "wow" users of existing products to woo them onto yours.
  • Don't be Shy to Share.  Lastly, the notion of someone copying your idea or product is valid, but not all that probable from the get-go.  Everyone is pretty busy as it stands.  I mean, when was the last time you heard a great idea like Uber or some social app, and you started building one?  Sharing your idea with others allows you to iterate and discover who your customers are and what they want before potentially ever writing a single line of code.  There is so much more to building a startup from an idea creating a big hurdle from just anyone copying you -- expertise, grit, and those things outlined above.
So what are your take-aways or thoughts about building copy cat products/ services?  How would you go about building a similar product, but tackling the market with a new twist?

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