‘Clone factory’ Rocket Internet by German Samwer brothers fires into the big time after securing $400m investment

Last updated: July 16, 2013 7:51 pm

‘Clone factory’ Rocket Internet fires into the big time after $400m investment

By Henry Mance and Tim Bradshaw

Three German brothers seeking to rivalAmazon and Alibaba for dominance of global e-commerce have secured an investment of $400m from backers including Russian-born billionaire Len Blavatnik, bringing their fundraising total for the past eighteen months to almost $2bn.

Rocket Internet, founded by Alexander, Marc and Oliver Samwer, has financed and built one of Latin America’s largest online fashion retailers, as well as dozens of businesses in Russia, Asia and the Middle East, since emerging in 2007.On Tuesday the company announced a further $400m in funding, meaning it has now raised $1.8bn since the start of last year. Much of the new capital has come from Mr Blavatnik who sold his $7bn stake in BP’s Russian venture, TNK-BP, in March.

“There are three e-commerce companies in the world – Amazon, [China’s] Alibaba, and us,” Oliver Samwer told the Financial Times on Tuesday.

“We go where we believe in the next five years the growth will be greatest. People have built bigger companies than us, but I’m not aware that they have built as many in as many countries,” added Mr Samwer, who described himself as the “most aggressive guy on [the] internet” in a memo to staff two years ago.

A hybrid between an early-stage investor and an online retailer, Rocket has been derided as a copycat for taking ideas that have worked in the US and implementing them elsewhere.

“Generally the view by [venture capitalists] in Silicon Valley of the Samwers is of loathsome hatred, at about the same level as patent trolls,” said one US investor, who asked to remain anonymous.

However, the company has also won admiration for its grasp of logistics in markets such as Colombia and Nigeria, where it owns its own a fleet of trucks for deliveries.

“There is no better executional and operational machine in Europe or the United States,” said Eileen Burbidge, a partner at venture capital firm Passion Capital, which is not invested in Rocket Internat.

“They recruit and hire the best graduate talent on the continent and give those individuals experience that outrivals any MBA.”

Swedish investment company Kinnevik contributed €67m in the latest fundraising, retaining its position as Rocket’s largest outsider shareholder with a 24.2 per cent stake. Rocket’s other major investors include JPMorgan, who Mr Blavatnik recently sued over losses on mortgage securities.

The Samwer brothers made their fortunes selling internet businesses to eBay andGroupon, an approach that they have replicated at Rocket.

However, Mr Samwer indicated that investors were now prepared to look at other ways of realising the value of its portfolio companies, including IPOs and dividends.

“If you look at the size of our companies, none of them has to exit through M&A,” he said.

Rocket does not publish operating numbers, but Mr Samwer said that its companies had “several billion dollars” in revenue.

The company is renowned for its intense operating style. In his 2011 memo, Mr Samwer, now aged 40, said, “I will die to win and I expect the same from you!”

He said he stood by those comments. “We belong to the one that doesn’t take no for an answer,” he said.

Malte Huffmann, co-founder of Latin American fashion retailer Dafiti, which received investment from Rocket, said the brothers offered two main pieces of advice.

“Be aggressive and be bold. And test things with numbers – rather test something that’s not 100%, than work on a prototype for two years.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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