Wed · Jun 1

What to Do When Someone Copies Your Startup

Andrew Mason, founder of Groupon and co-founder of Detour, on how he dealt with Groupon clones.

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In this episode of Startup School Radio Aaron Harris talks with Andrew Mason. Andrew shares how Groupon began as The Point, which initially gained traction when fans of the Insane Clown Posse used it to campaign for the legalization of marijuana. Eventually they spilled over to other parts of the site and began trolling the rest of the community so Andrew pushed in a new direction.

Groupon launched with two deals: sports themed garter belts and two for one pizza. Unsurprisingly, the pizza deal performed much better and the company started to gain traction. Andrew intentionally avoided major tech press because he recognized that Groupon's model was replicable and though they had a head start in Chicago, other cities were up for grabs.

Andrew Mason : We launched Groupon in, I think, October of 2008. And we were only in Chicago for the first six months before we started getting ready to go to Boston. And I'm going to mess this story up a little bit, but it's spiritually correct. We went to register, I think, Groupon Boston or something like that. And it was already taken. This was maybe four months in. [...]

And then we raised a round from Accel [...] And sure enough, as soon as we did that round and we got in TechCrunch, it was off to the races, and there were just new clones launching every day at that point.

Aaron Harris : How do you deal with that? There's one thing for a competitor to be out there, either started at the same time or started a little later that's similar to you. When someone is just lifting your copy and everything about what you do, how do you fight that, both from a tactical perspective, but also internally as you think about the company you're building and what makes it special? How do you keep that differentiation and keep that sense of purpose?

Andrew Mason : Well, internally, I don't think it was difficult at least for the people at the company to understand how we were different. Just...if you think about the founding action of our company versus all these other companies, they were just trying to draft what they saw as an opportunity to make money quickly. And it was as simple as that. And everybody at Groupon felt like we had, I guess, a greater purpose. [...]

But here's the weird thing about Groupon. A big part about what made Groupon so wonderful in the early days, was that we would do one deal a day. [...] Groupon had a nine-month waiting list of amazing businesses that wanted to be featured. And so, effectively, what happened was all these competitors came in and soaked up that waiting list. They soaked up the demand from businesses to reach customers. [...]

The constraint we were trying to put on our model was lifted by these competitors. Where all of a sudden, on any given day, I could get a teeth whitening deal. [...]

But it was very difficult to differentiate. Most consumers...our largest competitor ended up being Living Social, and most competitors, despite our best attempts and their best attempts to say this gobbledygook about how we're different, most competitors looked at them as interchangeable. If there's a deal that they see on one site versus another site, they don't care. [...]

But the fact of the matter is, Groupon did maintain market dominance, and we did it a lot by just moving extremely fast. And everybody was moving fast, and we just did a land grab so that we could get first-mover advantage, which ended up being a big deal.

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