What is Brief History of Rocket Internet Company?

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What is Rocket Internet's Business Model?

Rocket Internet, a German internet company, was founded in 2007 with a distinct strategy of replicating successful online business models, primarily in emerging markets. The company's approach involved identifying proven concepts, often from the US, and rapidly launching them in new territories.

This 'startup factory' model aimed to accelerate growth and capture market share by leveraging existing, validated ideas. A key aspect of their strategy involved swift execution and adaptation to local conditions, as detailed in a Rocket Internet PESTEL Analysis.

Founded by the Samwer brothers, the company became known for its rapid expansion and venture-building capabilities. Although it delisted from the Frankfurt Stock Exchange in 2020, it continues to operate as a private investment entity.

The genesis of the Rocket Internet company can be traced back to 2007 in Berlin, Germany, when it was established by the entrepreneurial Samwer brothers: Marc, Oliver, and Alexander. These founders brought a significant track record of prior entrepreneurial successes, having previously co-founded and successfully exited two notable ventures.

The Founding Story of Rocket Internet

Rocket Internet was founded in 2007 by the Samwer brothers, leveraging their previous successes in the online sector. Their initial strategy focused on identifying and replicating proven internet business models in underserved markets.

• Founders: Marc, Oliver, and Alexander Samwer
• Founding Year: 2007
• Location: Berlin, Germany
• Previous Ventures: Alando.de AG (sold to eBay for $43 million in 1999) and Jamba AG (sold to VeriSign for $273 million in 2004)

The Samwer brothers' prior experience included co-founding Alando.de AG, a German online marketplace that was acquired by eBay for $43 million in 1999, and Jamba AG, a mobile content provider sold to VeriSign for $273 million in 2004. This history provided them with both capital and invaluable insights into building and scaling internet businesses. The core problem Rocket Internet aimed to solve was the significant untapped potential of e-commerce and online services in emerging markets, where successful business models from developed countries had not yet gained a strong foothold. This led to their distinctive business model, often referred to as the 'clone strategy,' which involved identifying successful internet concepts and launching similar ventures with a focus on rapid execution. This approach is detailed further in the Brief History of Rocket Internet.

Rocket Internet operated as a 'startup studio' or 'venture builder,' providing its newly formed companies with essential resources such as seed capital, office space, operational support, and strategic guidance. The initial funding for Rocket Internet itself was primarily derived from the Samwer brothers' personal capital and the proceeds from their previous ventures, with their holding company, Global Founders (formerly European Founders Fund), maintaining a substantial ownership stake. Oliver Samwer, one of the co-founders, famously emphasized the critical importance of execution, often stating that it accounts for 90% of a company's success. This philosophy heavily influenced their aggressive market entry and scaling tactics across their diverse portfolio of Rocket Internet ventures.

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Rocket Internet's early years were defined by a strategy of rapid replication and aggressive global expansion. The company quickly established itself by identifying successful online business models and launching similar ventures in new markets.

Rapid Replication and Early Successes

Founded in 2007, Rocket Internet's initial growth was fueled by launching ventures that mirrored existing successful online platforms. A prime example is Zalando, launched in 2008, which quickly became Europe's largest online fashion retailer by adapting the model of Zappos.com. Another significant early venture was City Deal, a daily deals site that was acquired by Groupon for $100 million, demonstrating the viability of Rocket Internet's approach.

Operational Support and Global Network

Rocket Internet provided substantial operational support to its portfolio companies, offering shared resources, scaling expertise, and strategic direction. This comprehensive backing enabled rapid market penetration and accelerated international expansion, leveraging a global network for cross-market collaboration.

Expansion into Emerging Markets

By 2012, the company had expanded its reach into emerging markets, launching major ventures like Lazada and Zalora in Southeast Asia, and Jumia in Africa. This strategy aimed to establish a first-mover advantage in regions with developing digital infrastructures, targeting a broad Target Market of Rocket Internet.

Capitalization and Market Reception

The company's aggressive growth was supported by significant capital raises, including a $1 billion tech fund in January 2017. This strong market reception allowed for rapid scaling of its ventures, contributing to a market capitalization of €3.49 billion by November 2017. Early investments often ran into the millions of euros, reflecting the speed and efficiency of its launch strategy.

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Rocket Internet's history is marked by significant achievements and considerable challenges. A pivotal moment was its IPO on October 2, 2014, with shares priced at €42.50, leading to a peak valuation exceeding €6.7 billion. This event underscored its ambition to become a leading global internet platform. The company's core innovation was its 'venture builder' model, offering centralized support for product development, marketing, and IT, facilitating rapid business scaling. Successful ventures like Jumia and HelloFresh exemplify this model's potential for market penetration and job creation.

Rocket Internet's primary innovation was its 'venture builder' model, which provided centralized operational support to rapidly scale new internet businesses. This approach allowed for efficient execution and market entry across diverse geographies.

Venture Builder Model

This model focused on replicating successful business concepts, providing robust operational support to accelerate growth.

Centralized Operations

Centralizing functions like IT, marketing, and product development allowed for economies of scale and faster deployment of new ventures.

Global Scalability

The model was designed for rapid international expansion, enabling the company to launch and grow businesses in multiple markets simultaneously.

Jumia's Growth

The development of Jumia, often referred to as the 'Amazon of Africa,' showcased the potential of the venture builder model in emerging markets.

HelloFresh Expansion

Facilitating the global expansion of HelloFresh, a prominent meal kit delivery service, demonstrated the model's adaptability to different consumer sectors.

Data-Driven Optimization

Leveraging data analytics to refine business operations and marketing strategies was integral to the company's scaling efforts.

Significant challenges faced by the company included criticism of its 'clone strategy' for perceived lack of originality and aggressive market tactics. Reputational issues also arose from reports of a difficult internal culture, impacting talent acquisition.

Criticism of 'Clone Strategy'

The business model of replicating existing successful internet companies faced criticism for lacking genuine innovation and potentially stifling original ideas.

Intense Competition

As the startup ecosystem matured, founders gained more funding options, making them less amenable to the equity stakes offered by the company.

Profitability Struggles

Many of the company's ventures encountered difficulties in achieving sustained profitability, leading to a decline in overall valuation from its peak.

Reputational Concerns

Allegations of a 'toxic culture' and aggressive business practices created reputational challenges, affecting its ability to attract and retain top talent.

Market Landscape Evolution

By 2019, the evolving startup landscape and increased competition began to challenge the effectiveness of the company's established strategies.

Strategic Pivot

The delisting in 2020 signaled a strategic shift from an active company builder to a more focused investment vehicle, aiming to maximize value from its existing portfolio.

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The Rocket Internet company's journey began in 2007, founded by the Samwer brothers. It quickly established a reputation for replicating successful online business models, notably launching Zalando in 2008. The company's expansion into emerging markets was aggressive, with launches like Lazada and Jumia in 2012. A significant milestone was its IPO in 2014, which valued the company at over €6.7 billion. The Rocket Internet timeline shows a strategic shift towards becoming a private investment vehicle after its delisting in 2020.

Evolving Investment Strategy

Rocket Internet's approach has moved from direct replication to a more focused investment strategy. It now emphasizes leveraging AI and machine learning within its portfolio companies.

Focus on Existing Holdings

The company is concentrating on its role as an investment vehicle. The aim is to maximize value from its current investments and identify new market opportunities.

Leadership and Control

Oliver Samwer continues to be a central figure in guiding the company's strategy. Consolidated control among major shareholders is a key aspect post-delisting.

Future Growth Areas

The future trajectory involves strategic investments in global internet and technology firms. Providing operational support to scale these businesses remains a core objective, reflecting its founding vision.

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