Rocket Internet faces new setback with loss of senior managers

I think a lot of the recent events around Rocket Internet need to consider the very unique position of the company: they are both a Venture fund, and a very closely involved corporate holding. They provide technical support (including development, hosting and dev ops) and marketing assistance to their subsidiaries/investees. The CEO of their companie” have a relation to the head-office similar to what local GMs have with the Uber HQ. This means that financially-motivated decision can be confused with doubts over the management direction.

There are two questions:

Will the current portfolio become profitable over time?

Are they able to continuously start successful companies?

At least for the 2nd they need excellent people in the headquarters. For the first one churn can also be an issue. If turnover is high one explanation could be that local management doesn't have enough long term incentives to build sustainable companies. As a consequence they optimize short term output to please the Samwers and jump ship to the next best offer.

I would caution against reading too much in departures of Rocket managers.

First, Rocket managers come and go all the time. In my first two years at one of the Asian Rocket companies (I own no Rocket stock today and am not affiliated with anything Rocket anymore), I think I counted 4-5 CEOs. Since I left, it's been the same CEO, though. The key thing is that the Samwer brothers have designed their companies to be resilient to any departures; "people should be replaceable" which sucks a bit when you are "people" but is good corporate governance when you are a publicly traded company trusted with billions of dollars. I'm pretty sure from what I saw that this also applied to Berlin; and since we're shortly after the IPO (and maybe the start of the period where executives are allowed to liquidate their equity?) it might be that those who culturally were more comfortable in a privately owned conglomerate are not enjoying the public version. It's also common for senior executives to be poached for more money by smaller Rockets, CMOs are in particularly high demand and managing directors find it relatively easier to raise funding and start their own thing (e.g. Shopback in Singapore).

Second, there are a LOT of Rocket companies. Some are very successful, others are case studies in problems. Just look at the map: https://www.rocket-internet.com/companies and imagine that each of these countries will have at least three companies (one fashion retailer, one Amazon clone, and one of several of the smaller concepts like Birchbox or FoodPanda). There are hundreds of companies operating in vastly different countries, legal systems, business models. I'd be wary of extrapolating too much from one or two examples - it's like picking a few YC failures (and I am sure there are spectacular ones, just from the sheer number of companies funded - HomeJoy is the most prominent in my head right now) and saying YC as a whole has failed as an incubator.

Third, Rocket is relatively operationally decentralised. Yes, the Samwers visit often, but companies are ultimately left alone to figure things out, even if insights are occasionally emailed around, and even if Berlin has some R&D and obviously runs the financial and legal aspect. I would doubt that Berlin departures would significantly impact the operations of non-Berlin-based companies (which is to say most of them).

> The stock was down another 0.2 percent on Tuesday, to 23.33 euros at 1330 GMT, valuing the company at about 3.9 billion euros ($4.2 billion).

I've always found these short term stock price tidbits fairly useless. What is more interesting is the long term trend (from a peak of 57 EUR down to 19 EUR) [1] which is strangely not mentioned in the article. Nevertheless, I used to be fairly critical of how the Samwers were running their conglomerate, but thinking back about it, I'm not sure I would do much better. How would you go about starting 200 companies in parallel in 40 countries? I do not know any other examples of even remotely successful attempts...

[1] http://finance.yahoo.com/echarts?s=RKET.F+Interactive#{"rang...

Rocket Internet is the prime example of the pump and dumping scheme. The pumping is over, now comes the dumping.