Rocket Internet

The Rocky Road of Startups

Oliver Samwer (r), Vorstandsvorsitzender und Gründer des Berliner Internet-Beteiligungsunternehmens, hält am 02.10.2014 auf dem Parkett der Wertpapierbörse in Frankfurt am Main (Hessen) beim Börsengang der Berliner Startup-Schmiede neben Vorstandsmitglied Alexander Kudlich die Börsenglocke. Die Aktie ist mit einem Kurs von 42,50 Euro gestartet. Der Börsengang bringt dem Unternehmen gut 1,6 Milliarden Euro ein. Foto: Arne Dedert/dpa +++(c) dpa - Bildfunk+++
Oliver Samwer, the chief executive of Rocket Internet, at his company's public listing in October 2014.
  • Why it matters

    Why it matters

    Rocket Internet is seen as a promising investment platform for Internet startups, but it has yet to prove its holdings can become profitable.

  • Facts


    • Loss-making Rocket Internet holds investments in hundreds of online startups and is most famously known for helping to grow German online fashion retailer Zalando.
    • Berlin-based Rocket Internet has replaced its supervisory board chairman, Lorenzo Grabau, who heads major shareholder Kinnevik, with the board’s deputy chairman, Marcus Englert.
    • Nine-month revenue at Rocket’s biggest online retailers jumped 120 percent to €2.17 billion, but operating losses amounted to €629 million.
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There’s irony in the name Rocket Internet. It conveys much about how German investors bypass their startups and how startups bypass their investors.

Ultimately, this is a story about misunderstandings and how Germans should recognize they lost the competition of how to use the Internet in the most clever manner.

There are large and successful companies such as SAP, which sells digital products successfully worldwide. But the essence of digitalization, which exists to build platforms open to all, remains unaccomplished. Amazon, Apple, Facebook, Google are companies that have mastered that function in a way Rocket has not.

It seemed like a blessing last year when Rocket Internet was listed on the stock market, a Berlin firm promising a real digital platform including one for startups. It sounded like an audacious German answer to Silicon Valley.

Our Mark Zuckerberg was Oliver Samwer, another smart entrepreneur who defied conventions. These days he talks only when he wants and invokes silence when others direct urgent questions at him. He wants Germans to believe he understands communications strategies very well. It is if he had said: ‘I live in my world and am thoroughly convinced it will change the world, if not actually replace it.’

So far, Mr. Samwer has not demonstrated he is the right person for the next phase.

Even those who never heard of Rocket Internet until its initial public offering were, at least, aware of Zalando, the online clothing mail-order company famous for its “scream for joy” advertisements.

The public often believe visibility means success. Zalando was certainly visible. When we learned the Zalando founders also had a seat at Rocket Internet, we offered high praise to the company.

The formula seemed a good one. A modern company plus a smart chief executive on a mission plus initial visible success, equald a rocket on the stock market and a harbinger of hope for the German Internet scene.

Instead, the opposite occurred.

After a brief period of euphoria, the shares fell. Quarterly figures released Wednesday created more disappointment. There was an abrupt change at the top of the supervisory board. Rocket disappoints us and we observers, investors and commentators disappoint Rocket. It is time to address the misunderstandings.

First, Rocket itself is not innovative, but rather, seeks innovative, digital business ideas and promotes them. Mr. Samwer and his troops prefer proven ideas that already have been proven elsewhere. Anyone comparing Rocket with Amazon is comparing apples to oranges, which is good because it recognizes the considerable differences.

Second, while Mr. Samwer is one of the founders, he is not responsible for the companies, which find themselves in a big pot with Rocket Internet on top. Those who know Mr. Samwer find him sometimes dramatic, sometimes introverted, but always ambitious. Growth is in the genes of founders and Rocket has to consolidate at some point. So far, Mr. Samwer has not demonstrated he is the right person for the next phase.

Third, anyone who wants to make money with startups needs patience. The key lies in quality and mass of the gathered businesses because success is the exception not the rule among young companies. In fact, 90 percent will disappear without leaving a trace except, perhaps, the furrows on the foreheads of its employees.

Zalando needed seven years to earn its first euro. If they had not had practiced patience, they would succumbed to misery long ago.

Anyone with Rocket shares in a securities account must accept that the pearls among the company’s investments have not yet been found. Patience must accompany the unpleasant feeling of betting on a company, which deals only with expectations and may implode at some point, just like many dotcom businesses did in 2000.

The feeling is called risk. Investors should be prepared for it if Rocket and its offspring are to have a chance to succeed.


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