How three ruthless brothers make millions by cloning American Internet businesses. By Caroline Winter

How three ruthless brothers make millions by cloning American Internet businesses. By Caroline Winter

purple rooster sculpture made from re-cycled grape Fanta bottle labels . Clocks designed to hang in corners. Bauhaus posters from the 1920s. Hand-painted vintage type writers. These are some of the carefully curated objects for sale on Fab.com, the fast-growing � ash-deal site for designer goods. Launched out of a loft in New York City’s Garment District last June, Fab had sales of $20 million in its � rst six months and is on track to earn $100 million in 2012. “We owe our success to keeping it real, authentici-ty, being close to designers,” says Jason Goldberg, Fab’s chief executive o� cer. That, and “o� ering people objects and design products they wouldn’t � nd else-where. No knocko� s.”

Six months after Fab launched, it was knocked o� . An e-commerce design site called Bamarang opened for business in Germany, the U.K., France, Australia, and Brazil. Bamarang sells cake stands made from vinyl records, miniature speakers handcrafted out of apricot wood, and plates painted to look cracked. Like Fab, it o� ers discounts of up to 70 percent on designer goods. The layout, color scheme, and typefaces are also suspiciously Fab-like. Bamarang even has a beautiful shot of an Eames chair as the background photo for its sign-in page, just as Fab does.

Bamarang is the creation of Oliver, Marc, and Alexander Samwer, a trio of German brothers who have a wildly suc-cessful business model: Find a promising Internet business, in the U.S., and clone it internationally. Since starting their � rst dot-clone in 1999, a German version of EBay , they’ve duplicated Airbnb, eHar-mony, Pinterest, and other high-pro� le businesses. In total, they’ve launched more than 100 companies. Their Zappos clone, Zalando, now dominates six Euro-pean markets and is estimated to be worth $1 billion by Financial Times Deutschland. Through their venture capital � rm, the

European Founders Fund, they also in-vested in Euro pean knocko� s of Facebook and YouTube , which sold for $112 million and $36 million, respectively .

The Samwers’ base of operations is a startup accelerator in Berlin called Rocket Internet. Rocket launches compa-nies, hires sta� , and provides marketing, design, search engine optimization, and day-to-day management until the start-up can fend for itself. Rocket’s executives won’t disclose revenue, but a former high-level employee estimates the company is worth at least $1 billion . Oliver Samwer, the middle brother and de facto head of the operation, says the firm has offices in at least 20 countries and has created 20,000 jobs over the years . “I’m in love with startups, ” says Oliver, who, like his siblings, rarely talks to the press. He elab-orated in an e-mail: “The power of Rocket is really this huge galaxy of stars.”

Groupon got cloned by the Samwers two years ago, and the results were expen-sive for the daily-deal site. In November 2008 Groupon went live in Chicago and soon became one of the fastest- growing Internet businesses ever. In January 2010 the Samwers launched a knocko� called City deal. Within � ve months it was the top deal-of-the-day site in the U.K., France, Spain, Italy, Ireland, the Nether lands, Switzerland, Austria, Poland, Finland, Denmark, Sweden, and Turkey. Groupon could have fought Citydeal in the market-place. It also could have � led an intellec-tual property lawsuit, though the chanc-

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es of winning would have been slim . Companies can’t be patented, and trade-marks apply only within the countries where they’re registered. Perhaps taking the path of least resistance, Groupon in May 2010 bought its German clone for 14 percent of Groupon’s shares. (Rocket now owns 6 percent of Groupon, a stake worth about $1 billion.)

The Samwers are revered for putting Berlin’s startup scene on the map and de-spised for sticking Germany with a reputa-tion as the copycat capital of Europe. Not that the brothers take o� ense at the label. “There are pioneering entrepreneurs and execution entrepreneurs, and maybe we belong more to the execution entrepre-neurs,” says Oliver , who speaks at a rapid clip, frequently punctuating thoughts with a rhetorical “ja?”

“I think the most admirable entrepre-neurs are those with original ideas, ja? It’s a unique gift that you either have or you don’t. Just as we might have a very good gift of execution, others have a unique gift for the purest form of innova-tion.” As for the similarity between, for example, Bamarang and Fab, he says, “There’s a certain humbleness. First you need to learn from people who are more experienced. … From there, you can start innovating yourself.”

Marc, Oliver, and Alexander—ages 41, 39, and 36, respectively—grew up in Co-logne, the sons of two corporate law-yers. Their parents often brought cli-

Marc, Oliver, and Alexander Samwer (left

to right) in 2006

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purple rooster sculpture made from re-cycled grape Fanta bottle labels . Clocks designed to hang in corners. Bauhaus posters from the 1920s. Hand-painted vintage type writers. These are some of the carefully curated objects for sale on Fab.com, the fast-growing � ash-deal site for designer goods. Launched out of a

European Founders Fund, they also in-vested in Euro pean knocko� s of Facebook and YouTube , which sold for $112 million and $36 million, respectively .

The Samwers’ base of operations is a startup accelerator in Berlin called Rocket Internet. Rocket launches compa-nies, hires sta� , and provides marketing, design, search engine optimization, and day-to-day management until the start-up can fend for itself. Rocket’s executives

cessful business model: Find a promising Internet business, in the U.S., and clone it internationally. Since starting their � rst dot-clone in 1999, a German version of EBay , they’ve duplicated Airbnb, eHar-mony, Pinterest, and other high-pro� le businesses. In total, they’ve launched more than 100 companies. Their Zappos clone, Zalando, now dominates six Euro-pean markets and is estimated to be worth

Financial Times Deutschland. Through their venture capital � rm, the

Marc, Oliver, and Alexander Samwer (left

to right) in 2006to right) in 2006

Prenz lauer Berg district. A concrete stairwell connects three floors of un-decorated conference rooms and open o� ce space. Each � oor is eerily silent despite the dozens of casually dressed employees, packed around Ikea tables, working on � at-screen monitors. Space is tight. Workers say the company is hiring so fast that newcomers sometimes have to sit on the � oor.

The CEOs of Samwer companies gen-erally reap only 5 percent to 10 percent equity. They also get a lot of phone calls from the Samwers. “It’s probably not common with other investors to call you multiple times per day and at night, or set up early- morning calls to walk through things,” says Johannes Kreibohm, CEO at the Rocket startup Plinga.

ents home, and the brothers developed a love of entrepreneurial ventures. Much of their time was spent dreaming up com-panies . “Before we started university, we were thinking of starting an airline or a shipping company,” says Oliver. Marc studied law at the University of Cologne; Oliver attended Germany’s elite Otto Beisheim School of Management (known as the WHU); and Alexander majored in politics and philosophy at Oxford before getting an MBA at Harvard. In early 1998, Oliver persuaded a professor at the WHU to sponsor his dissertation on U.S. start-ups and spent three months doing � ve or six interviews a day with businessmen in Silicon Valley and Boston. He later pub-lished his observations under the title America’s Most Successful Start-ups: An Entre preneur’s Handbook.

Later that year the Samwers de-clined job o� ers in Germany and moved to Mountain View, Calif., where they shared a one-bedroom apartment and interned at various tech companies. “In ’98 it was just amazing,” says Oliver. “Ev-erything was popular, and everything was possible. America at its best, ja?” The brothers studied how people � nd ideas, raise money, start businesses, and scale up . After a few months they recog-nized a huge market opportunity: Start an e- commerce company, but in Germa-ny. Their home country had few Inter-net companies and little venture capital, but it had a lot of budding Internet users with disposable income.

EBay’s business model appealed to them from the start. “It’s a market-place, you earn a commission, and it’s something we thought maybe German hobby ists would also like,” says Oliver. The brothers moved back to Germany and launched their clone, Alando, in early 1999. They worried right up until the last minute whether they shouldn’t be copying Priceline instead. “Even on the day of our launch we were asking ourselves, ‘Is Priceline maybe bigger?’” says Oliver. “Everything is easy now in hindsight, but at that point we won-dered who sends something to some-one they’ve never met, ja? ”

Among the first items for sale on Alando were the brothers’ childhood toys, including a model train and some roller skates. “My mother, who wanted to save the toys for her grandchildren, wasn’t so happy, but of course we needed everything,” says Oliver, remem-bering the scramble to stock the site .Oliver was in charge of signing up stamp and coin collectors, among others. He

called the sellers one by one, persuad-ing them to put their wares on Alando, often scanning their photos and putting them online himself.

Four months after launch, EBay bought Alando for $53 million—and the Samwers became Germany’s � rst Internet millionaires. “That had a major impact on the entrepreneurial scene in Germany,” says Holger Ernst, a professor of technol-ogy and innovation management at the WHU. In the old days, he says, his students mostly went into investment banking, consulting, or corporate careers. Now, “they all want to be like the Samwers.”

Rocket Internet’s headquarters are in a drafty brick factory building set back from a gra� ti-sprayed street in Berlin’s

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In February, Fab expanded

to Europe, where it will

compete directly with

Bamarang

Bamarang began

operations in January

2012

There are at least six Fab

knocko� s in Germany, but

Bamarang bears the greatest

likeness to Fab

Fab.com launched

in June 2011

Fab

Bamarang

Both sites feature Eames

chairs on their log-in

pages

→

and launched their clone, Alando, in early 1999. They worried right up until the last minute whether they shouldn’t be copying Priceline instead. “Even on the day of our launch we were asking ourselves, ‘Is Priceline maybe bigger?’” says Oliver. “Everything is easy now in hindsight, but at that point we won-dered who sends something to some-one they’ve never met,

Among the first items for sale on Alando were the brothers’ childhood toys, including a model train and some roller skates. “My mother, who wanted to save the toys for her grandchildren, wasn’t so happy, but of course we needed everything,” says Oliver, remem-bering the scramble to stock the site .Oliver was in charge of signing up stamp and coin collectors, among others. He

Although Oliver is the front man, the brothers are equal partners. Alexander focuses largely on Zalando and other Rocket portfolio companies. Oliver man-ages Rocket companies but spends about half his time working for Groupon. Marc, for the moment, has stepped back from Rocket to concentrate on Groupon full-time. The American daily-deal compa-ny hired the two older brothers as con-sultants in 2010 to guide its international operations in 46 countries and help over-see 7,000 of its 10,000 employees . At this year’s DLD conference in Munich, Grou-pon CEO Andrew Mason praised the Sam-wers: “What people have to realize is the idea is the easy part, and that execution is the hard part, and Marc and Oli are the best operators I’ve ever seen in my life—they’re just inhuman,” he said. Says Oliver: “Groupon taught us about the business, and we taught them about international-ization.” He stresses that company- clone relationships often become symbiotic. “It’s not necessarily in the blood of every American to go abroad, but it’s in the blood of every Euro pean to go abroad.”

Oliver, who sets the pace and tone of the Samwer empire, once described Rocket Internet as “McKinsey on ster-oids.” He was referring to his company’s international network, but he could just as well have been talking about its cor-porate culture. Rocket’s employees work long hours—often from 9 a.m. to 11 p.m. One former high-ranking employee, who says he left the company in part because of a climate of aggression , recalls seeing a list of international managing directors accompanied by a note that read, “Keep this list updated and check it regularly

because fluctuation should be around 5 percent every month.”

In December the blog TechCrunch published an internal e-mail from Oliver Samwer to his employees . In it, Oliver exhorts his team to do business like “a blitz-krieg invasion.” The e-mail contin-ues (punctuation Samwer’s) : “i do not accept surprises. i want this planned con� rmed by all three of you: you must sign it with your blood … I am the most aggressive guy on internet on the planet. I will die to win and i expect the same from you!” The e-mail went viral in Ger-many, even inspiring a song called Blitz-krieg, the New Single By Oliver Samba , in which Sam wer’s manic commands are set to a throbbing techno beat. He apol-ogized for his word choice but said, “I write 4,000 e-mails a day or something, lots of e-mails; I often write them after midnight, whatever midnight means in whatever country I’m in … and I think that, just like a lot of people we build companies with, I’m very passionate.”

The Samwer style may have spread to Groupon. On Feb. 17 the respected German magazine Gründerszene pub-lished internal Groupon e-mails and let-ters from employees that paint “a shock-ing picture of personal attacks, massive psychological pressure, problems making deals, and crammed work quar-ters.” One of the leaked e-mails, reprint-ed by Gründers zene’s sister site, Venture Village, is from Daniel Glasner, a former managing director at Citydeal who’s now Groupon’s Central European CEO. In it, he threatens managers with demotion if they fail to achieve a certain number of deal targets and customer acquisitions .

“Any one of you who does not achieve the following two goals in the next week will lose his ‘Director’ title,” he writes. An unknown sender of another leaked e-mail complained to Venture Village in September that “ team meetings are full of insults, non-performers openly bashed in meetings as well as via e-mail. ” Groupon declined to comment to Bloom-berg Businessweek, but in a statement to Venture Village it said the complaints “in no manner mirror the daily working rou-tine at Groupon.”

The Samwers’ reputation for ruth-lessness extends well beyond their of-fices. In 2007 another set of German brothers, the billionaires Andreas and Thomas Strüngmann , who founded the generic drug company Hexal, agreed to collaborate with the Samwers in joint investments. The plan, according to a 2011 article in Manager Magazin, was for the Strüngmanns to provide 80 percent of the cash, with the rest coming from the Samwers. To get things going while a contract was being legally vetted, the Strüngmann twins handed over €10 mil-lion ($13 million) to invest in several com-panies. That included the German Face-book clone StudiVZ (from the German for “student directory”) founded by Ehssan Dariani. The Samwers then took a 13 per-cent stake in StudiVZ and helped stage a bidding war for StudiVZ, � nally selling the company to Holtzbrinck Ventures, one of Germany’s biggest publishing houses, for €85 million ($112 million) . Shortly before the sale, they returned the Strüngmanns’ €10 million , saying they hadn’t needed the money and e� ectively cutting the Strüng-mann twins out of several million dollars. Insiders con� rmed the details for Bloom-berg Businessweek but refused to speak on the record for fear of reprisal. Oliver Samwer says joint investments with the Strüngmanns had been planned, though a � nal agreement was never reached.

Even the Samwers’ longtime business partner, Holtzbrinck Group , hasn’t gone unscathed . Just months after o� oading the German social network, the Sam wers invested in Facebook (a stake they’ve since sold), and Alexander went on record with Germany’s Der Spiegel magazine, saying Facebook was “light-years ahead” of StudiVZ. Asked whether siding with Face-book would seem like “competing with your own child,” Alexander answered, “StudiVZ is now owned by the Holtzbrinck Group and not by us. It’s open competi-tion between the best ideas, and the best company will be the winner.”

“I am the most aggressive guy on the internet on the planet.

I will die to win and I expect the same from you!” Oliver wrote in a leaked internal e-mail

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March 5 — March 11, 2012Bloomberg Businessweek

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international network, but he could just as well have been talking about its cor-porate culture. Rocket’s employees work long hours—often from 9 a.m. to 11 p.m. One former high-ranking employee, who says he left the company in part because of a climate of aggression , recalls seeing a list of international managing directors accompanied by a note that read, “Keep this list updated and check it regularly

he threatens managers with demotion if they fail to achieve a certain number of deal targets and customer acquisitions .

Strüngmanns had been planned, though a � nal agreement was never reached.

Even the Samwers’ longtime business partner, Holtzbrinck Group , hasn’t gone unscathed . Just months after o� oading the German social network, the Sam wers invested in Facebook (a stake they’ve since sold), and Alexander went on record with Germany’s Der SpiegelFacebook was “light-years ahead” of StudiVZ. Asked whether siding with Face-book would seem like “competing with your own child,” Alexander answered, “StudiVZ is now owned by the Holtzbrinck Group and not by us. It’s open competi-tion between the best ideas, and the best company will be the winner.”

“I am the most aggressive guy on the internet on the planet.

I will die to win and I expect the same from you!” Oliver wrote in a leaked internal e-mail

The German site has since tanked. For the past two years the Samwers

have been at war with yet another set of German brothers—Fabian and Ferry Heilemann, founders of a rival Groupon clone called DailyDeal. In early 2010 they sent job o� ers to nearly all of DailyDeal’s employees, luring them with promotions and raises, according to a person close to the Heile manns. Of the handful of Daily-Deal employees who defected to Citydeal, most lost their jobs in a mass � ring a few months later.

Next, the Samwer company began spreading rumors that the Heilemann company was close to bankruptcy and that it was instituting a punitive arrange-ment with vendors, whose money would be held in special escrow accounts for

three years —all untrue statements, ac-cording to the acquaintance of the Heile-manns. Asked about these tactics, Oliver Samwer was not apologetic. “I cannot speak for every single sales person, but it de� nitely didn’t happen systematically,” he said. “I think it’s all within the normal laws of competition.”

Normal or not, StudiVZ’s Dariani told Manager Magazin in February 2011: “To put it nicely: I wouldn’t recommend that anyone do business with the Samwers.”

Rocket is in the process of relocating its headquarters to a beautifully renovat-ed building in Berlin’s chic Mitte district. “We’re moving into a building that is � ve times the size of the old Rocket building, ja?” says Oliver. The new digs will give

Rocket some much needed space and, perhaps, an image upgrade. “I think they’re trying to look a bit like Google , be this Web company, kind of friendly, with these amazing o� ces, ” says Ciáran O’Leary, a partner at the German ven-ture capital � rm Earlybird. “But there’s the saying, ‘If you hire sharks, you can’t expect them to act like dolphins.’ ”

An image boost couldn’t hurt. Last summer a local startup called 6Wunder-kinder called for an anti-copycat revo-lution. And Berlin has begun to attract non-clone entrepreneurial ventures. Some say the Samwers have provided a bridge from the old risk-averse Germa-ny to a more fertile startup climate. “OK, we respect the fact that you’re really good at execution and copying business models,” says Jessica Erickson, 6Wun-derkinder’s communications director. “But we can do better than this.”

In January about 20 Rocket employ-ees, some the Samwers’ closest allies, an-nounced they were leaving to launch a rival startup factory, called Project A Ventures, that will focus on backing original ideas. “Things have changed, gotten speedier in terms of rollout, more aggressive, and done more in a copying way,” says Uwe Horstmann, who worked as a managing director at Rocket and is a founding part-ner at Project A Ventures. “The shift was maybe from quality to quantity. Not every-body was fully on board with that.” In Feb-ruary, Russian entrepreneur Yuri Milner, an investor in Facebook, Zynga, and Twit-ter, pulled out of a plan to invest in Rocket. The German media speculated it was be-cause of Oliver’s bad reputation. Respond-ing to this claim, Oliver says, “None of this is a problem. Over the years probably 20 VC firms have invested with us, private equity � rms have invested with us, media companies have invested with us.”

As for Fab.com, the design site on Feb. 21 announced its acquisition of a German non-Samwer facsimile, Casacan-da. “They’re less of a copycat and more a group of people who came up with a similar idea,” says Goldberg . “There are other clones that copy Fab very closely out there, but at least they use di� erent colors,” says Goldberg, who’s sitting at his desk � ipping back and forth between Fab and the Samwers’ Bamarang site. He points out the similar font and word choices on the “About” pages. “We even saw a job posting they had that was ba-sically copied and pasted from Fab. It’s kind of � attering, but come on: If you’re going to do something about design, at least design your own website.” �

“Zalando” is a fusion of

“Zappos” and “Alando,”

the Rocket EBay clone

Zalando generated

net sales of $267 million

in the fi rst half of 2011

The Samwers replicate fonts,

colors, and design of sites

These screen grabs, taken

on Feb. 7, both feature boots

In a confi dential

e-mail leaked to TechCrunch,

Oliver wrote: “There are

only 3 areas in ecommerce

to build billion dollar

business: amazon,

zappos, and furniture”

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Zappos

Zalando