Rocket Internet Preparing to Go Public | Hacker News Reader

Rocket Internet Preparing to Go Public

tropicalconsiderations.com

45 pointshofimax29 comments

So its a rumor of a rumor. Interesting. Personally I don't think its a credible rumor but lets set that aside for a moment.

These guys are a derivative business, generally picking up the value between an idea growing in one market and its arrival in another. Its not a bad place to be but to the extent that it is successful it indicates that the capital system isn't enabling rapid enough expansion of successful businesses, this isn't a steady state.

Think of it this way, company A starts in market X and demonstrates traction, then r-i starts up company B in market Y with the same value proposition and gets traction there. The investors in A don't see this as "validation of our idea in market B" they see it as "we didn't move into B quickly enough". So instead of accruing that value to company A its been diluted into company B. This situation happens when capital markets become so risk averse they start crimping their own ability to capture value. Its an imbalance and lately it was I think enhanced by the questions about how the IMF monetary system is going to resolve out its current tension.

The situation is temporary as once the other factors of fiscal instability are removed, the investors in these companies will be push them to expand into those other markets and take that risk on. That will then make it very hard for R-I to continue operating the way it does today (well it will greatly reduce their success rate) and so they won't be a good candidate for outside investment.

I got to meet a guy [1] who took advantage of scared investors for a living, he bought (and sold) 37 single family homes out of foreclosure in the Bay Area, pretty much from almost every county but more on the peninsula/southern side than the east bay. He said he's on track to quintuple his investment in just under 3 years. He attributes his success not to some special gift of insight, just that he didn't believe that the Bay Area housing market was 'never' going to be the same, and where other investors were too timid to invest he stepped in.

[1] Like many neighbors I tour houses nearby when they are on the market, I met this guy when he was talking with the Realtor showing the house. The broker had been getting questions they couldn't answer about the solar power system on the roof.

This sounds like great news for Rocket Internet, but having read the article I don't even have a cursory understanding of what they do. I think it would have been beneficial to include a sentence or two about what they do beyond "clone factory".

EDIT: This seems to be them: http://www.rocket-internet.de/

They're a global company that creates e-commerce startups in emerging economies. Not sure if 'startup' is really the right term here, but it's what they use. While they bill themselves as an accelerator, it's more that they ship in talent to emerging economies and try to become a big name in the e-commerce sector in those economies.

Seems to be working out for them, but I'm guessing the 'going public' is a way for the founders to cash out as quickly as possible in case it goes belly-up?

Thomas already wrote down a quick analysis of the potential IPO: http://tropicalconsiderations.com/2013/01/05/rocket-unleashe...

Pretty good analysis. I disagree about the last validation point though - no matter how much money they raise, they are still non-profitable. I think the only way they're going to get real validation is when they're well out of the red. Applies to any business...

I guess there will be 'validation' in lots of interesting in the company from random people looking to get some of that extra free flowing cash for themselves?

In a nutshell: take successful US start-up ideas and create a European version of the exact same thing.

you forget the part were US startups won't go abroad, ignoring non-US users. Who is to blame?

It's everyone's fault and no-one's fault.

I'm not trying to cast aspersions... just to state facts.

I understand, but US startups have a wrong sense of entitlement. They might come up with the idea, but if their execution falls short why should others be stopped?

I'm not just talking about European startups, but this also happens within the US ecosystem. Take the latest and greatest: SnapChat vs Poke.

Additionally, if a US startup does not service the rest of the world (specially in e-commerce, which is what Rocket Internet focuses on) they are giving others an opportunity; and others have the right to execute this. Take Gilt copying Vente Privee; VP is not calling Gilt a copy cat.

Your "facts" are unfortunately wrong. Most of their ventures are e-commerce sites i.e. not exactly unique ideas, and doesn't even target the European market.

Not just europe - they're in brazil and a couple of asian countries too.

Among the "gems" in Brazil, they have a zappos clone (with an awful customer service), a ZocDoc and a Square clone.

As HN places significant value on innovation and entrepreneurship, I suspect that there will be a number of comments on this post calling out Rocket as a parasitic clone machine who steal good ideas from hard working startups and throw massive capital at these clone businesses in developing markets.

While this is definitely a valid criticism, I'd urge you to read this post: http://posts.richoakley.com/post/rocket-internet-respect which argues that we, as entrepreneurs, have a lot to learn from the way Rocket has managed to execute so phenomenally well in each of the developing markets it has targeted.

Especially given a few recent posts on HN detailing failed attempts at startups, I think the above post highlights the importance of being able to consistently execute in a business.

I am not criticising them for being a clone company. Especially not when they are cloning companies that are not interested to come to europe.

I think they treat their employees bad.

I have worked for one of their companies as a freelancer and I would never want be an employee there. It was an eye opening experience though.

I would recommend not working for them without researching their modus operandi first. If you like to be yelled at in meetings and told a three year old would do better work than you, maybe this is the right place to work - for you.

I regard the Samwer brothers as kings of execution. They have even come into Nigeria. Within 5 months, they have set up 3 companies. See (http://www.innovation-village.com/2012/12/rocket-internet-la...). They also go where traditional companies are not confident to go to. I respect them. J P Morgan even just gave them funds for their ventures in Africa. See (http://www.innovation-village.com/2012/10/j-p-morgan-invest-...). I wish them the best.

This is a significant move for several reasons: 1) Samwers have made the majority of their money from selling their clones to the original companies. I think they can continue doing this with much success. So I don't see why they need to go public.

2) Cloning to sell doesn't seem like a viable business model as a public company, what metrics would they be judged by? So that means they are seriously building companies now for cashflow and long term potential.

3) From what I know about Rocket Internet many of their management level employees are transient. As someone else stated, they hire a lot of interns and young employees looking to gain a little experience before moving on to something else. Can they continue doing this as a public company?

4) They are extremely aggressive, and focus a lot of growth by any means. I don't think anything they do is illegal, but such focus on rapid growth always leads to problems (think real estate loan bubble). They will dramatically increase their liabilities as a public company.

5) Is this the first technology incubator to go public? Public companies are similar to them?

Wanting and planning to go public is one thing. Having the management team, financials and story to convince people to actually buy your shares is another. I'm looking forward to reading their prospectus.

This is big. Rocket Internet is a perfect example of what's wrong with the European startup ecosystem. I don't doubt they'll have a successful IPO, but it will leave a foul taste in the mouth of Europeans, especially Germans and Swedes.

Why? I'm European and I don't really have any strong feelings about it. Isn't this capitalism at work? I'm really having trouble seeing the issue. If laws have been broken that's one thing but fair competition is another entirely.

You know, I see your point. Our mantra is "ideas are worthless, execution is everything". Rocket is an execution machine, and they deserve recognition for that. The problem is that because they are so successful at copying ideas and executing them in other markets, it reinforces the stereotype that this is what all European startups do. Maybe it's simply a matter of lack of confidence on the part of us Europeans, but I think a lot of people agree with me on this.

From the article they have expanded to doing this in Brazil and SE Asia now too which makes it a more interesting business.

I don't think this is true. I follow tech trends fairly closely, but I use very few of the consumer tech startups, with the exception of Spotify, which was created in Sweden. Those on HN may have this perception of the Europe startup scene, but most consumers only care about whether the product is valuable to them, not whether it is original.

Rocket Internet identified a market in the fact that American companies often ignore the European market for years.

Because of their large home market, American web startups can grow to considerable sizes before having to worry about multiple languages, multiple export rules, multiple tax systems, multiple consumer protection regimes, multiple payment systems etc. That is a huge advantage that American companies have over European startups. Rocket Internet and their like are levelling the playing field a bit.

All business ideas are to large extend inspired by others. Maybe some of the companies the Samwer brothers "cloned" were truly first in their field, but if they had taken the German market serious the Samwer brothers wouldn't have had a chance. It's their bad.

In some recent posts, the founder of the german studivz (facebook copy cat) accused the Samwer brothers and other german copy cat incubator leaders of tax fraud and very bad behaviour against their employees e.g. using ~90% interns, make them work 12-14 hrs for near-no-pay, headhunt people from concurrent companies just to fire them 2 weeks later to "burn" them for "both" companies.

In the so called "management" level some people should got fired just right upfront a deal or deadline to rip their bonuses.

While I was not involved personally, I often hear and read about this and it looks to me that competing companies did/do it the exactly same way, not only the Samwers/Rocket.

That's why the "German startup industry" is broken. If you can only clone ideas, twit employees and (as someone claims) rip off dumb billionaires, this should not be a role model of entrepreneurship on HN.

Sorry that I can't read between the lines, but "what's wrong with the European startup ecosystem"?

Politicians focusing on social benefits instead of new sources of growing revenue, like startups. In my opinion EU politians do too much when we the people know better what we need. I don't mind paying taxes as long as they don't keep me from growing my business. And guess what? That's exactly what EU needs. More people who know how to do business, raise money, and give back to the people, all in one sweep.

Although I agree on the lack of focus by politicians on startups and entrepreneurship; this is not a political problem. If not, how did politicians help Facebook, Google, Microsoft et al. get started?

That was too easy. Money!

Politicians don't care about small to medium businesses, only big. I guess you know where I'm heading... They only care about big businesses not for the jobs, but for the under the table revenue they provide. They like to talk about jobs in the evening news on tv to make people happily vote for them. Meanwhile, we have to deal with that crook employee on medical leave for six months enjoying his life on Rio de Janeiro beaches while we struggle to pay his salary instead of paying someone who delivers. All that because the law allows him to do it.

Mmh, I don't know but there's no foul taste to me. I regard them as kings of execution. Yes, they don't "invent" business models but they take what works and execute on it. Nothing wrong with that - it's how most business made money for many many years.

They don't just copy business models - in most cases, they straight-out clone entire sites/products and resort to poaching to force the "competitor" (original product) out of market.

I, an American, have a friend in Germany that worked for Rocket Internet to get into the startup industry after coming from a strong business consulting background. Even they saw it as doing something a little unethical in order to get experience and move on. They have since left and are now running the supply chain for an independent startup based in Berlin. This Independent startup is an e-commerce site, much like a Gilt/Tchibo mashup. While it is not terribly innovative, it has taken an Idea from the US and merged it with the culture of Germany. I don't think Gilt would be able to move into the market so easily, just as Walmart trying to go to Germany was a failure. We may see this as not very exciting, but the idea of any startup in Germany is counter current business culture and Rocket Internet is responsible for helping change the culture, albeit slowly.

EDIT: Tchibo is a chain of small stores that typically contain a a coffee shop and has goods that change regularly, usually as needed for the season. They appeal to the Germans consumers sense of best value for the money. They in a sense are the working persons Gilt in brick and mortar stores.

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