Why fast-follow is fast-fail …

I used to love magic, but America’s Got (No) Talent ruined that for me *

[* too many magicians, too little time]

But, as a kid, I always loved those tricks where the magician brings some n00b up on stage and says “do everything I do” …

… and, proceeds to make the hapless ‘volunteer’ look the fool.

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There’s a trend in Australia for aspiring founders to find an idea that works in the US and attempt to replicate it here.

It rarely works out.

Two reasons:

  1. If an amazing idea is worth $20, its perfect execution is worth $10,000,000 (multiply the two for a $200m valuation).
  2. Australia’s population is the size of Texas … and, you haven’t heard of any successful startups wholly-formed-and-operated in Texas, have you?

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So, by ‘fast-following’ somebody else’s idea, from another market, you are ‘borrowing’ $20 … you still have to build $10 million of execution value **

[** OK, $1m of execution because you want a no-liquidity ASX-size exit]

By copying somebody else’s idea, you are the volunteer, the aspiring founder, copying the magician, the successful US startup.

Just remember that you probably only learned about the US startup after they became successful: after their 1,000 customer interviews and 15 pivots.

In other words: you haven’t learned anything, yet. Which is why I probably won’t invest in you.

[If you still do want to copy the US startup, follow the money: check out crunchbase.com & see how much money they’ve recently raised … if not a lot — say <$20m — and not recently, the chances are they are not as successful as you think they are]

Another reason, the main reason, why I won’t invest in you is because Australia is simply too small … this is true for all home-grown startups, not just rip-off-somebody-else’s-idea startups.

By all means, try your idea out here; Melbourne and Sydney are pretty decent size test-markets, but that’s all they usually are. My advice? As soon as possible, hop on a plane and relocate to a larger market and set up shop there.

Does that mean that you can’t succeed only in Aus? TBH, probably, but certain startups (eg SEEK, REA, Carsales) all managed to succeed by dominating Australia before being forced to seek overseas markets in order to sustain growth.

The types of startups that MAY be able to succeed in Aus generally have larger transactions &/or with high gross-margins ($ and %).

The key is the ‘and’: where there is a high-dollar gross margin figure attached to the transaction.

For example, you don’t need very many transactions (which suits a small market) when your commission on selling a car online is $1k.

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The counter-argument is always that the founders aren’t looking for the Unicorn exit.

Unfortunately, the investors they’re chasing usually are.

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Startups are hard. Why put all that work into something that has its potential capped from the very beginning?

Travis Kalkanik from Uber started off as a realist who was smart enough to make sure there was no artificial roof over his head:

We (founders and investors alike) would all be ecstatic with $20–30m+ per year profit, but it won’t happen in Aus with 5% (Australia’s relative-to-the-US market size) of Travis’ ‘realistic’ 5% US market-share target.

Here, in Aus, Uber’s ‘best case’ is the ‘only case’ for investor-backed startups: market dominance in a high-value market.

Aim global from Day # 1 🚀

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