Rocket Internet Appears to be Slowing Down

Rocket Internet

Bloomberg on Rocket’s numbers and capital market reports:

The company will show “significant improvements in profitability” at its startups this year and next, Chief Executive Oliver Samwer said on a call with reporters. Rocket still seeks to bring companies public but will do so only if markets are positive, he said.

Reuters:

Revenue from its top companies, which range from online fashion to food delivery, rose 69 percent in 2015 to 2.4 billion euros. Their aggregate adjusted loss before interest, tax, depreciation and amortisation (EBITDA) was 1 billion euros, up from 600 million in 2014.

However, Rocket said the average adjusted EBITDA margin improved 6 percentage points to a negative 29.7 percent.

It reiterated that 2015 should represent the peak of the losses for its major start-ups and repeated a target that three of those firms should be profitable by the end of 2017. (..)

Rocket noted strong revenue growth at “ready to cook” meal delivery firm HelloFresh, seen as a likely candidate for a stock market listing, as well as at African online retailer Jumia, up 338 percent and 118 percent respectively.

However, Samwer said that a target set last September to list one of its start ups by early 2017 might have to be pushed back due to volatile markets.

Is Rocket Internet still a rocket? This seems like things are slowing down at the company builder.

With missing success and subsequent (investor demanded?) focus on cost structure and revenue at existing startups it seems likely that Rocket Internet’s times of company building with breakneck speed seem to be over. (for now)

I still think that Rocket’s model is fundamentally flawed. Back in December I wrote about Rocket’s ‘Network Effects Within a Country’ strategy:

I don’t believe this will work well in direct competition with bigger companies like Amazon, Zalando, Alibaba or Uber. Because here’s the thing: A global online retailer can exert network effects in more dimensions than locally confined companies can. (besides plain scale effects which also come to fruition here) (..)

The amount of market influence [global online retailers] will exert a few years down the road can hardly be overstated. This is understandably inconceivable to a lot of people because businesses at the scale we are going to see were impossible pre Internet.

It might be doable in single cases, but I doubt this can be recreated locally confined in most categories at the scale Rocket Internet needs to be successful.

Rocket Internet has an international, not a global strategy.

And therein lie the problems.

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2 comments

  1. […] Rocket Internet Appears to be Slowing Down […]

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  2. […] access to capital. This may have looked all good and fine on paper but it doesn’t seem to be working too […]

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