One of Europe’s most aggressive venture capital businesses is subtly changed into a more cautious investing house by Oliver Samwer.
One of Europe’s top digital investors, Oliver Samwer, once advised business owners to use “blitzkrieg” strategies to gain market share quickly: “I am the most aggressive guy on the internet on the planet,” he said in an email to coworkers more than ten years ago. “I will sacrifice everything to win, and I demand the same of you!” His Berlin-based company Rocket Internet eventually supported companies like online retailer Zalando and creator of meal kits HelloFresh, which later staged initial public offerings valued at multiple billions. However, Samwer’s company has gradually departed from its past as an early investor in some of the continent’s most popular start-ups in recent years. Instead, Rocket has evolved into a complicated investment institution that manages a variety of funding sources, including debt and publicly traded stocks, which has the potential to be more lucrative and diverse.
This financial and operational analysis of Rocket Internet is based on business records, interviews with a number of insiders, and information from other investors and executives. Together, they offer a thorough examination of the business since it started the delisting process from Frankfurt’s stock exchange almost three years ago, when it had a market value of roughly €2.5 billion. Requests for comment from Rocket’s management went unanswered. According to papers and people familiar with the transaction, it gave financial technology business Revolut more than £100 million in debt financing in one deal in 2019. Additionally, Rocket has amassed large investments in publicly traded internet firms including Amazon and Alibaba.
Meanwhile, during the last few years, Rocket has reduced employees at its venture funds, shut down one of its investment divisions, given up plans to launch a new start-up fund, and advised some early-stage digital companies it has invested in to adopt more frugal spending plans. People close to Samwer claim that these actions reflect a drastic change in strategy in response to the global IT crisis, which has severely hurt start-up valuations.
Former Rocket Internet executive and Project A ventures founder Florian Heinemann lauded Rocket for its wide range of wise investments as well as for helping to launch the next generation of European tech founders and VCs. However, he continued, Samwer’s company had once been regarded as “huge,” but “over the last few years definitely lost relevance.” a change of one’s own Samwer and his two brothers, Alexander and Marc, created Rocket about 16 years ago. The business drew notice for its practice of adopting successful Silicon Valley business concepts and then entering other markets, as well as harsh criticism. The company declared plans to delist in 2020 after its share price fell by half during its six years as a publicly traded corporation. Rocket’s offer to purchase shares below their current market price and the activist investor Elliott Management’s acquisition of a blocking position made the take-private process controversial. Rocket eventually prevailed but was forced to pay almost twice as much as it had originally offered and included a special deal for Elliott. Regarding the delisting procedure, one tech executive in Berlin claims that “the reputation just completely got shattered.” They had extremely poor behavior in the stock market.
With a portfolio of around €2.1 billion in corporate assets, Rocket Internet reported in its most recent annual filing for 2021 that it had turned around from a loss to produce an annual net income of €134 million. It disclosed assets worth €4.4 billion in total. According to those with knowledge of the situation, Samwer has furthered his authority by acquiring his brother Alexander’s share of the company. With that power, he has forced Rocket to adopt techniques that are different from those that gave it its name—incubating rapidly expanding internet start-ups. Global Founders Capital, the venture capital investing team, is Rocket’s most well-known division. Its two €1 billion funds have been strengthened by early investments in businesses like the $12 billion remote recruiting company Deel and the $8.5 billion human resources start-up Personio. Global Growth Capital, which was established in 2016 to offer debt financing, is a less well-known division. According to those with knowledge of the situation, it has been a major source of profit for its two funds, each with a value of €200 million and €300 million.
The division has completed significant transactions, such as lending more than £100 million apiece to financial technology firms Revolut and SumUp. The individuals claimed that the gross internal rate of return was in the low teens. Rocket has also amassed a sizable portfolio of publicly traded stocks. In 2021, it held about €673 million in public equity. The company’s largest stock interests, according to the most current publicly available records, were a €326 million stake in Amazon and a €107 million holding in Alibaba. not being willing to risk It seems to have mostly given up on new arrangements for start-ups in the interim. Rocket introduced Flash Ventures in 2020, a seed fund that eventually contributed roughly €30 million. . It expanded to about 40 individuals who were dispersed all over the world, from Australia to Latin America, and who collectively made hundreds of investments. In line with this strategy, Razor Group, an e-commerce company that was most recently valued at over $1 billion, was one of the early-stage businesses in which Flash invested.
Despite having made some promising acquisitions, the whole Flash Ventures team has been disbanded and has stopped making investments three years later, according to persons familiar with its activities. This is a turnabout from Rocket’s decision to make quick hires and aggressive venture capital deployment during the epidemic tech boom. Those who know Samwer’s thinking say that he has since grown cautious of a protracted downturn.
He has advised his portfolio firms to keep much larger cash reserves than the two years that other VCs often recommend. According to a person familiar with the company, “Oli’s thinking correlates with the market. If he is in a bad mood and the market goes really low, he forgets all the values that he is been preaching before.” People with knowledge of the situation claim that Rocket drastically reduced its workforce after the epidemic. They said that it employed about 130 workers across all of its units at the beginning of 2022. 75 employees were left by November 2022. Only a few dozen people work on its different investing functions today. The business has also encountered additional difficulties. . Attempts by Global Founders Capital to create a third fund of a comparable magnitude at €1 billion in late 2021 were unsuccessful due to a lack of interest, according to those with knowledge of the action. Additionally, a plan to establish a special purpose acquisition business earlier this year that was intended to be a blank-cheque vehicle for a merger with another company failed to close. A blow to start-up founders who had developed close relationships with investors like Soheil Mirpour, Johann Nordhus Westarp, and Hugues de Braucourt is that the senior team at Rocket has undergone a substantial amount of turnover. Westarp declined to comment, while Mirpour and de Braucourt did not respond to a request for comment. . Samwer’s close friends claimed that although he keeps a tight eye on the company, Rocket’s shift has coincided with personal changes. He recently turned 50. He has a lot of money,” a former executive claimed. He desires to see his family, go skiing in Alaska, and kitesurf. The Financial Times Limited 2023. Copyright. Toutes droits réservés. Utilize this content again(opens in a new window)CommentsGo to the comments section now.