Imitation simply wasn’t enough: A Wimdu post-mortem

Wimdu-vs-Airbnb

Clones, copycats, and lookalikes – the startup world is littered with them. The usual storyline goes like this: an entrepreneur spots a popular web-based platform, looks for another market or location ready for a similar service, and launches a copycat company. The oft-cited goals are to scale fast, then co-exist in competition with the company they are copying, or sell the company for a profit. In some cases, the copycat succeeds in competing or gets bought, even by the company it’s copying.

This was the not case for Wimdu, an Airbnb clone founded in Berlin in 2011. From its launch and in its early days, Wimdu had all the hallmarks of a successful “clone”. Armed with a massive $90 million in funding from Rocket Internet and Kinnevik, Wimdu was on track to conquer Europe in the vacation rentals space. But late last year, after over seven years of operation, Wimdu had to shut down its doors.

What led to Wimdu’s demise? Here’s a look at what went wrong, and what can be gleaned from Wimdu’s story.

wimdu-timeline

Wimdu in its early years – rapid growth, too soon

Conceived out of the internet startup factory of Rocket Internet, Wimdu registered as a limited liability company in Germany in March 2011. Wimdu’s founders, Arne Bleckwenn and Hinrich Dreiling, were considered seasoned entrepreneurs, having founded and managed several startups before Wimdu. Barely a month after it launched, it received what tech insiders said was the largest investment in a European startup ever. Wimdu was on the path to fast growth — online for less than 100 days, it already had 10,000 properties worldwide and was available in 15 languages, including English, German, French, Spanish, Italian and Dutch. Recognizing the vast potential of the Chinese market, Wimdu launched a spin-off business there called Airizu in May 2011. Well worth noting is that within two months of its launch, Wimdu was already employing 400 people and had opened 15 offices worldwide.

By June of 2011, Airbnb felt Wimdu’s presence and fought back by exposing Wimdu’s growth-hacking techniques (some of which bordered on unethical), bringing together Airbnb’s community of more than 100k hosts to report Wimdu’s “practice” of copying Airbnb’s listings, soliciting their hosts, and listing homes on Wimdu’s website without the hosts’ knowledge. Airbnb went so far as to seriously consider acquiring Wimdu, meeting them in Berlin that same year but eventually decided against it. Cracks started appearing in Wimdu’s massive growth hacking when by August 2011, it had to let go almost 50 employees due to rapid growth and unexpected business developments.

By 2012, Wimdu claimed to be the largest social accommodation search site, boasting a record 50,000 listings in over 100 countries in its first year, with $6 million in monthly booking revenues and over $100 million in expected revenues by the year end of 2012. Later that same year, Wimdu backtracked from its aggressive growth strategy, closing activities in its offices overseas and moving some of its employees back to Berlin headquarters. The restructuring was again attributed to rising costs due to rapid growth. 2013 saw the closure of its Chinese subsidiary Airizu, which faced fierce competition from local competitors Xiaozhu, Mayi, and Tujia.

By 2013, regulatory bodies started scrutinizing peer-to-peer rental platforms operating in Europe and in Germany in particular, and Wimdu and its competitors faced new regulatory requirements; a contributing factor to 9flats, Wimdu’s competitor, leaving Berlin. Wimdu however, continued operating in Berlin and even pushed to expand its activities there in 2014.

Distress signals: founders leaving, dismal numbers

It’s no secret that the skills required to start a company are not the same as those needed to effectively manage its growth. Some startups have founders with both skill sets, and are able to adapt or adjust to navigate from the start through the growth phase. This may not have been the case for Wimdu. As in a lot of similar cases, leaving is construed as a crisis in leadership. In October 2014, at their request, Wimdu’s founders left and handed the reins to Arne Kahlke und Sören Kress, the former founders of the dating agency ElitePartners.

By the time the new executives took over Wimdu had over 100,000 listings in more than 150 countries. From 2013 to 2014, Wimdu increased its bookings by only 31% and did not reach Rocket Internet’s classification of a ‘Proven Winner’ and was instead classified as an ‘Emerging Star’, in its 2014 annual report. Along with talks of Rocket Internet selling Wimdu and finding no takers, Wimdu’s reputation began to suffer.

Final nail in the coffin: regulatory restrictions, merger

Wimdu saw some positive developments in 2015 when it inked a media for equity deal with Mediaset, getting millions of investment in terms of advertising in the Italian conglomerate’s TV channels and leading to expansion in Italy, Spain and other Southern European countries.

Another huge hurdle Wimdu experienced was a new law restricting private apartment rentals that came into effect in Berlin and prompted Wimdu to file a lawsuit against in April 2016, using up funds and receiving a lot of public attention in the process.

In October 2016, Wimdu merged with its rival 9flats, in a move that was set to combine Wimdu’s 300,000 or so listings with 9flats’ over 250,000 listings, and compete better with rival Airbnb which had over two million listings worldwide at that time. The merger came with speculation that it was in fact a “fire sale”, after Wimdu burned through its $90 million in funding and failed to secure more.

Later, in December 2016, Wimdu was acquired by Novasol, a Danish holiday apartment broker owned by Wyndham Worldwide. And in a further stroke of changing ownership for Wimdu, in February 2018, Wyndham Worldwide sold Novasol to PE firm Platinum Equity for a reported $1.3 billion.

September 2018 brought Wimdu’s saga to its fateful end. Platinum Equity was reported to have pulled the plug on scale-ups, and Novasol announced a new CEO and shortly after announced Wimdu’s closure as part of cleaning house and cutting off unprofitable operations.

Wimdu’s official statement said it was closing due to “significant financial and business challenges”. The closure affected 100 employees in Berlin and Lisbon. The platform honoured bookings made until the end of 2018 and is still accessible to this day but redirects to a different provider.

Lessons learned

If you search for the top three reasons why startups fail, you will often get lack of market need, a lack of cash, or a wrong team. Arguably, these reasons are not applicable to Wimdu. When it launched in Germany in 2011, Airbnb and other similar platforms did not yet have a strong foothold across Europe and there was room for another player. Clearly it did not lack cash, with the huge investment it received right after it launched. There were no indications that it suffered from lack of cohesion in its team. Wimdu was a “victim of its own success” – suffering from crazy expectations of growth and eventual acquisition resulting from its hefty initial capital. It played copycat to Airbnb for far too long, forgetting to develop a company and service that distinguished itself. In the end, Wimdu was not driven to provide authentic, sustainable, experience-driven accommodation for travellers – it just wanted to copy Airbnb and grow for the sake of growth.

In the end, imitation was simply not enough.

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