Introduction

Rocket Internet is a very successful Berlin-based start-up incubator and venture capital firm. It starts, develops and funds e-commerce and other online consumer businesses.

With over 700 employees and an additional 30,000 across its network of portfolio companies, the firm has helped create and launch over 100 start-ups and is currently active in more than 70 companies across more than 100 countries.

The company was founded by the Samwer brothers, Alexander, Oliver and Marc. After going to Silicon Valley in the late 1990s they became inspired by the Californian entrepreneurial culture and especially eBay. The brothers contacted eBay offerring to create a German version of the online auction house, but they received no reply from eBay. Instead they launched their own eBay clone, Alando. A month later they were acquired by eBay for $50m (30m, 37.5m). This was to be their first great online success, but far from the last.

Next the brothers created Jamba, a mobile phone content platform. It was sold to VeriSign, a network infrastructure directly in the start-ups and in the later growth stages, among them the American investment bank J.P. Morgan.

To work with the investors and structure the financial solutions, Rocket Internet has a large team of finance experts at the Berlin headquarters.

Besides financial skills Rocket Internet also develops the concepts of new ventures, provides the technology platforms and combines various skills necessary for setting up new ventures. It has about 250 specialists working at the Berlin head office. These specialists are part of diverse expert teams. Engineering, including IT software, programming and web design skills, is essential for product development and there are around 200 engineers with access to state-of-the-art technologies.

The expert team in marketing includes experts in customer management, customer relationship marketing and online marketing. Other teams include Operations, Business Intelligence and HR. Apart from this, there is a Global Venture Development programme including a global mobile task force of entrepreneurial talents that can bring further know-how to all international markets.

This task force includes venture developers with functional skills in product development, supply management, operations and online marketing. They rotate every 46 months to a new venture in another part of the world.

Human resource management and culture

The HR team recruit regular staff support for Rocket Internet and specialists for the expert teams and Global Venture Development programme and, not least, the founders of the ventures. Based on their entrepreneurial spirit they emphasise personal drive rather than good school grades. Head of HR, Vera Termuhlen, explains to VentureVillage.com:2

All in all, it doesnt matter if an applicant is from an elite university. For the area of global venture development, we look for applicants that are hands-on, first-class, have analytical skills, describe themselves as entrepreneurs, have a passion for the online start-up scene along and a willingness to work internationally, often in exotic locations like the Philippines or Nigeria.

The co-founders and managing directors of the individual ventures establish all operations, build the team around a venture, and develop the business; acting as entrepreneurs and holding personal stakes in the ventures equity. Recruiting them is central and Rocket Internet normally recruits extraordinary, ambitious MBA-level graduates with high analytic skills from within the local regions where the venture is set up. As Alexander Kudlich, Managing Director of Rocket Internet, says:

When we identify a business model we can, within a few weeks, build a platform out of our central teams. In the meantime the local Rocket offices will have hired or allocated the people who will execute on the ground . . . That gives us the speed. The combination of access to the best talent in each country combined with highly standardised or modular approach in terms of platform and systems which are rolled out by our headquarters.

In brief, Rocket Internet specialises in execution rather than innovation. This is also how the management defends their model when they are blamed for simply being a clone machine. Oliver Samwer says that they are execution entrepreneurs rather than pioneering entrepreneurs. 4 Managing Director Kudlich explains to Inc. Magazine: Which is harder: to have the idea of selling shoes online or to build a supply chain and warehouse in Indonesia? Ideas are important. But other things are more important.

5 Paradoxically, even though Rocket Internet often builds on others ideas, it prefers to keep its own ideas for itself as explained by Marc Samwer in the International Herald Tribune : We really dont like to speak about our investments since our track record encourages people to set up competing sites . . . Ideas travel much faster these days.6

Future

The future Rocket Internets success has continued. Zalando, which initially mimicked the online shoe retailing business in the USA by Zappos, now part of Amazon, has expanded into clothing and jewellery. Sales are rising rapidly: annual revenues for 2014 were $2.5bn and $94m in profit; and at its German stock listing the same year it was valued at 5.3bn. Other fashion brands have also been launched under the umbrella Global Fashion Group: Dafiti (Latin America), Jabong (India), Lamoda (Russia), Namshi (Middle East) and Zalora (South East Asia and Australia). After the IPO some investors complained that the company had become too complex to analyse and understand. In the Financial Times, Oliver Samwer describes it as a killer cocktail including proprietary software, its training programmes and its matter-of-fact and objective culture and claims: I dont think we have to change our successful model because of public investors.7 Rocket Internet has, however, started to attract imitators of its own. One of the operations is Wimdu, a copy of the American Airbnb, which allows individual home and apartment owners to list their properties as holiday accommodation. However, Airbnb quickly formed a partnership with another Berlin incubator, spring star, and they have since been rolling out Airbnb globally. Similarly, the original company responded swiftly when Rocket Internet company, for $273m in 2004. Since then they have become experts in spotting promising business models, especially in the USA, and imitating and scaling them internationally quicker than the originals. This model is the basis of Rocket Internet, which was founded in 2007 and stock listed in Germany in 2014 valued at $8.2bn. Several of their ventures have been acquired by the company with the original idea (see Table 1 ). Two of their most high-profile ventures after Alando were CityDeal, which was sold off to American Groupon, and eDarling sold to American eHarmony. The company has frequently been criticised for simply being a copycat machine without any original ideas, and some have even claimed it is a scam that rips off the originals. However, the question remains: if Rocket Internet has been so incredibly successful and what it does is simply copying, why has no one successfully imitated Rocket Internet yet? The brothers, through Oliver Samwer, defend their model in Wired: 1 But look at the reality. How many car manufacturers are out there? How many washing-machine manufacturers are there? how many Best Buys? Did someone write that Dixons copied Best Buy, or did anyone ever write that Best Buy copied Dixons, or that [German electronics retailer] Media Markt copied Dixons? No, they talk about Media Markt. They talk about Dixons. They talk about Best Buy. What is the difference? Isnt it all the same thing?

Finance and expert teams

Rocket Internet has strong financial backup from its main investor globally, Kinnevik, a Swedish investment company with a 14 per cent stake. Other investors invest

Company	Founded	Business	Buyer	Founded	Price, $m	Transaction date
Alando	1999	Online marketplace	eBay	1995	50	1999
cember.net	2005	Online business	Xing	2003	6.4	2008
		network
eDarling	2009	Online dating	eHarmony	1998	30% stake*	2010
GratisPay	2009	Virtual currency for	SponsorPay	2009	na	2010
		online games
CityDeal	2009	Discount deals for	Groupon	2008	126	2010
		consumers
viversum	2003	Online astrology	Questico	2000	na	2010

ROCKET INTERNET WILL THE COPYCAT BE IMITATED?

We are looking for those who from an analytical point of view understand the beauty of the business model, understand the rationale and understand what a huge opportunity is. Sometimes we say we are looking for analytical entrepreneurs rather than accidental billionaires.

The company emphasises not only strong expertise, but a close cultural connection to Rocket Internet. Rocket Internet has an intense entrepreneurial working culture that is highly performance driven including high pressure, long working hours, often from 09.00 to 23.00, and little job security. While this is attractive to some, the culture has also been criticised for being too tough and aggressive. Rocket Internets Managing Director Alexander Kudlich comments on the culture:3

I would describe our culture as very focused, we have young teams the average age is below 30. There is no place where you get more freedom and where you can take as much responsibility as you want. The only thing we want back is accountability. Identification of business models and execution

Identification of business models and execution

While some of Rocket Internets skills are common among other European incubators, the company is more of an international venture builder compared to most. Expertise is shared throughout the portfolio of ventures globally and its best practice can be applied across diverse business models (ranging from online fashion to payments to deals to social networking). Compared to many other incubators, the function of the headquarters is central. While entrepreneurs are hired to oversee individual ventures, overall strategy for Rocket Internet is largely shaped at the head office. The managing directors at head office lead the scanning for and identification of novel and proven online and mobile transaction-based business models that are internationally scalable. Former Managing Director Florian Heinemann explains in Wired: we take a pretty systematic look at business models that are already out there and we basically try to define whether a model suits our competence and is large enough that its worth it for us to go in there. Another significant aspect of Rocket Internets centralised model is the speed at which it can launch novel business models internationally. This is different compared to many US and European counterparts. Rocket Internet has an international infrastructure and distribution network with the capacity to build ventures on an international scale in just a few months. As Managing Director Kudlich explains in Wall Street Journal:3imitated Fab.com, a designer deal site, with its Bamarang. Fab acquired Casacanda, a parallel European site, and quickly re-launched it as Fab internationally and Rocket

Internet had to close down Bamarang. Rocket Internet is even facing imitators from within. Two of its managing directors have, together with other former employees, left to set up the Berlin incubator Project A Ventures. Internationally there is also increasing competition including The Hut Group in the UK. There are thus signs that Rocket Internet may eventually be imitated itself.

Questions

1. Based on the data from the case (and any other sources available), use the frameworks from

the chapter and analyse the resources and capabilities of Rocket Internet: