Oliver Samwer

Rocket Internet claims its success is misunderstood

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So tell me - how am I doing? Source: Marko Priske for Handelsblatt

The founder of Rocket Internet, Oliver Samwer, shrugged off recent criticism of the German online conglomerate, saying its share price volatility was unwarranted and insisting 2017 had been a “super year.” In an interview with Handelsblatt, Mr. Samwer, 45, said Rocket’s flagship projects HelloFresh and Delivery Hero had successful IPOs this year and that he was unperturbed by his failure to reach his target of having three profitable investments by the end of 2017.

Germany’s largest startup incubator, sometimes called a “venture builder,” has suffered a string of setbacks since it went public three years ago. Some of Rocket’s senior managers quit, IPOs were postponed, the share price slumped and Swedish investment firm Kinnevik pulled out. But Mr. Samwer feels misunderstood. “Rocket happens to be a bit different from online firms with a single business model like Delivery Hero, for example,” he said. “Rocket combines several business models and that makes it more complex.” The group, he added, will keep on focusing on increasing the long-term value of its companies and “at some point, the stock market will reward that.”

HelloFresh and Delivery Hero, according to the Mr. Samwer, were among the most successful IPOs launched anywhere in Europe in recent years, worth a combined $8 billion. “HelloFresh is launching a strong attack in the US,” he said. “In addition, we sold Asian e-commerce platform Lazada to Alibaba in April and it’s now valued at €3 billion ($3.56 billion). All that is a big success.” Asked why Rocket’s share price hasn’t responded to all the good news, he said: “Since our stock market launch, our share price has risen and fallen by 50 percent. A company doesn’t change fast enough to justify such share price swings. That’s why I’m pretty relaxed now.”

We think long term and know when we have to hurry up.

Mr. Samwer also had an explanation for missing his target of having three profitable investments this year. “We would have reached this goal but we’re convinced that our companies must above all deliver rapid growth at the outset,” the CEO said. “You could always save on marketing to get into profit quickly but then you would generate less growth. We think long term and know when we have to hurry up. In the end it doesn’t matter if the share price goes up or down 4 percent, what matters is the long-term development.”

Rocket was doing better than ever, Mr. Samwer insisted. It accounts for 85 percent of the market capitalization of all German IPOs since 2014, has offices around the world and is Europe’s biggest tech investor with liquid funds of around €3.8 billion. Going forward, Rocket plans to expand its global fashion unit and its home and living division with companies such as Home24 and Westwing. It also wants to grow in Africa and look at possible projects in southeast Asia.

The company is already investing in fintechs such as UK-based firms Funding Circle and Global Growth Capital. “And maybe we’ll go into real estate, e-mobility or cryptocurrencies at some point. Why not? But we’re not going to go running after trends if we’re not 100 percent convinced that we’ll be able to shape the future sustainably,” he said.

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Looks organic but you wonder how big the delivery carbon footprint is. Source: Picture Alliance/DPA

That caution may stem from a lack of expertise in many areas. But knowhow isn’t everything, according to Mr. Samwer. He pointed out that when he and his two brothers launched the auction website Alando in the 1990s, they didn’t know much about online market places, programming or payment models. “It’s been like that with us over and over,” he explained. “The core of our talent is to assess opportunities. The market forces me to keep on learning new things – that makes it exciting.”

So far, though, Rocket has stayed out of some of the biggest future technologies such as artificial intelligence, robotics, autonomous driving and virtual reality. Its horizons remain limited to what can be achieved in the near to medium-term. Put bluntly, its focus remains on furniture and pizza. “Oh, there are many trends that you don’t all have to run after,” he said. “We have a very clear focus on projects that can be realized in the coming two to five years at most. We’re not going to spend money on flying taxis today. The success must be foreseeable.”

Rocket Internet, as Mr. Samwer sees it, is a mix of incubator and investor with 200 specialists capable of deciding very quickly whether the company should pursue an interesting business model itself or whether to stand back and take a stake in it. “There are companies that Rocket colleagues have put more than 70,000 hours of work into,” he said. “We’re like a shipyard: Sometimes we build something all by ourselves, sometimes we just help in the construction.” He warned that Europe’s tech startup sector remains dwarfed by the US or Asia and that more government support was needed to boost the market.

We’re like a shipyard: Sometimes we build something all by ourselves, sometimes we just help in the construction.

Mr. Samwer argues that Rocket has made huge progress but agrees that the company is still small potatoes in Germany and Europe. “Across Europe, there are maybe 10 financing rounds a year with a volume of €100 million or more. In the US or China, we’re now seeing that happening on an almost daily basis,” he said. “It won’t work without more government support. We must turn more people into founders and turn more pension funds into investors. Founders, capital and ideas must find each other.”

That said, Rocket Internet is increasingly being appreciated for the role it’s played in boosting a startup culture in Berlin, Germany and the rest of the world, he maintained. “I’ve met people in the Philippines whom I don’t know but who learned their trade at Rocket. And they’re not just Germans. An incredible number of new companies have been created that we weren’t always directly involved with. I think that’s great. At the end of the day we don’t invest, we plant.”

Miriam Schröder covers the German startup scene from Berlin. Thomas Tuma is deputy editor in chief of Handelsblatt. David Crossland adapted this story into English for Handelsblatt Global. To contact the authors: schroeder@handelsblatt.com and tuma@handelsblatt.com

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