How to build companies from a kit

Building companies: Rocket machine; How to build companies from a kit

Jan 18th 2014 | From the print edition

WHY BOTHER WITH accelerators? Why not just hire a bunch of clever youngsters, provide them with the necessary cash, support and technology, and tell them to pursue a business idea with a proven success record? That should make it possible to start a new company in weeks, not months or years.In a nutshell, that is the idea behind Rocket Internet, an e-commerce conglomerate based in Berlin. It controls 75 firms in 50 countries with a total of more than 25,000 employees and a combined annual revenue of more than €3 billion ($4 billion). Together with two similar outfits, Project A and Team Europe, also based in Berlin, it has pioneered a category called “company builders”.

Critics call Rocket a “clone factory”, with some justification. The headquarters near the Brandenburg Gate does not feel like a creative co-working space, more of a boiler room, as call-centres for salespeople peddling penny stocks are known. In 2009 the firm launched CityDeal, a European online-coupon site. Six months later it sold the business to Groupon, the American original, for Groupon shares then worth nearly $126m.

Being branded a plagiarist clearly irks Oliver Samwer, the most active of the three sons of a Cologne lawyer who run Rocket. He explains that consumers are similar everywhere, so the same e-commerce ideas will work the world over. What counts is not so much coming up with ideas but implementing them well. “A bridge is a bridge wherever you are. We are a construction company.”

Rocket prides itself on being ruthless about execution: it has “key performance indicators” for everything. If the firm’s executives miss their sometimes insanely ambitious targets, they quickly incur Mr Samwer’s wrath. But Rocket’s efficiency also owes something to its culture of sharing. Its firms learn from each other, often across countries, and they benefit from common services such as marketing and IT. “Our goal is to build a global galaxy of firms with Rocket at the centre,” says Mr Samwer.

To expand its universe, Rocket lures consultants from firms such as McKinsey and Boston Consulting Group, offers them a reasonably attractive salary and a slice of the equity in its ventures and provides them with the skills they will need to strike out on their own. E-commerce ventures also require tons of cash to build warehouses and buy inventory. In 2012 Rocket raised more than $1 billion from investors such as Kinnevik, a Swedish investment firm, DST Global, a Russian fund, and JPMorgan.

Some of Rocket’s firms look like winners, such as Zalando, a European chain of footwear and clothing sites, and Drafiti, which dominates online fashion in South America. But others shine less, including Home24, which sells furniture on the internet, and Wimdu, an Airbnb clone. Being a privately held firm, Rocket does not have to tell the world whether it is making a profit.

Some see it as the corporate model of the future, others think it may not last. The air is certainly getting thinner for the Samwer brothers. In the past their ventures grew quickly in developing countries and in Europe because American start-ups were slow to expand abroad, but in recent years the Americans have become more globally minded, leaving less scope for Rocket.

Some analysts also question whether in the longer term the firm’s relatively low-risk e-commerce ventures can make decent profits and attract talent. The founders of Project A left in 2011 because they wanted to try riskier ideas. Last March the Samwer brothers set up a separate venture fund to invest in promising new businesses.

Ultimately, Rocket’s fate will depend on Oliver Samwer. A former colleague describes him as “eine absolute Maschine”. He jets tirelessly around the world and calls his colleagues at any time of day or night. “I can sleep anywhere,” he once told a reporter. But if this engine were to stop, the internet’s rocket might come down to Earth.