[HN Gopher] Why Rocket Internet has come down to earth
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Why Rocket Internet has come down to earth
Author : edward
Score : 61 points
Date : 2020-09-24 18:40 UTC (4 hours ago)
(HTM) web link (www.economist.com)
(TXT) w3m dump (www.economist.com)
| juliansimioni wrote:
| I moved to Berlin for a while in 2014, and so I ended up
| interviewing at a couple Rocket Internet companies.
|
| I'm by no means an expert in any of this but the impression I
| took away was that while they did some really impressive things,
| all their companies had a fatal flaw.
|
| The impressive things were:
|
| - They had a common tech stack that while no means elegant was at
| least effective at getting to decent scale quickly
|
| - They clearly had marketing and growth talent to also scale up
| businesses quickly
|
| - They had expertise in specific geographies that are often
| difficult like South America, Europe, and China (these are
| difficult at least from the perspective of an American :) )
|
| But the fatal flaw all their companies have, by design, is that
| they are really good at cloning a product and not good at
| actually creating one. Every company was clearly designed to be
| acquired before that problem became insurmountable.
|
| If the acquisition didn't happen, turning a several hundred
| person organization into one good at figuring out what changes to
| make to a product to make it successful is...messy.
| danjac wrote:
| Out of interest, what was their tech stack based on?
| johnnyfaehell wrote:
| I worked at Foodpanda, which was one of the Rocket Internet
| flagship companies for a time. Foodpanda was a mess, and the
| people from Rocket Internet were saying it was 10x better than
| Rocket Internet. Which I can believe since Foodpanda outsourced
| work to Rocket Internet because Rocket Internet said so. They
| literally assigned me to make sure they didn't screw the
| project up, they wouldn't take any feedback really. I ended up
| not caring about the project because it wasn't actually within
| my offical responsibilites. At the end of the project I was
| included in the email threads between the two CTOs where the
| Foodpanda CTO repeatedly pointed out that they were warned
| about all the shortcoming in the project way before the end and
| that they needed fixed. Rocket Internet responded saying that
| was a lot of work and they would need developer resources from
| Foodpanda. Me and one of the guys I worked with at Foodpanda
| decided a way to tell if a developer was worthwhile in Berlin
| was how long they stayed at rocket. Majority in Berlin would
| have worked for them at some point, so working there wasn't a
| sign they were bad. But if they stayed there for more than a
| year, that was.
|
| From my experience Foodpanda's biggest problem was tech. They
| literally had hundreds of servers be knocked off line because
| one redis server with session data went down. This was
| considered acceptable within the company. There was a culture
| of failure. And the business side had these issues too. There
| was a write up in an Indian newspaper where they basically got
| tore to shreads for all their failures publically. Turned out
| half of the company didn't realise how bad things were.
|
| Foodpanda was Rocket's attempt at buying up competitors and
| dominating India. They literally bought everyone and still lost
| the war to dominate food ordering in India.
| juliansimioni wrote:
| First of all I'll admit I was trying to err on the side of
| generosity when describing Rocket. Maybe that's a mistake.
|
| They definitely seemed to have a culture of well...internal
| chaos. But that jives with their "copy fast" mentality. It's
| worked at least a couple times, right?
| johnnyfaehell wrote:
| > It's worked at least a couple times, right?
|
| Yea, HelloFresh seems to be doing well and Zalando
| dominates in fashion. There are probably a few others doing
| well too.
| fs111 wrote:
| Delivery Hero too, they just entered the DAX
| johnnyfaehell wrote:
| I am not too sure about them. They sold the German
| companies and pulled Foodora out of a few countries.
| deusex_ wrote:
| Look at their global results, Europe is largely
| irrelevant compared to APAC and MENA. Germany exit was
| loss of prestige losing home market but also not a major
| loss of revenue compared to gains elsewhere in the world.
| johnnyfaehell wrote:
| The only time I would advise people to deal with rocket internet
| is if they're a developer who is just moving to Berlin. Lots of
| fun to be had, everyone else has just moved so there are tons of
| people who hangout. After a while get to know the city and find a
| different company to work for.
|
| Rocket Internet is known for doing pretty much what the quote in
| the article has "What they're doing is totally legal and totally
| immoral." How they operate is rather well known.
| bogomipz wrote:
| Out of curiosity are you still in Berlin? What happens when a
| company like Rocket hires you and you leave? Do you need to
| have something lined up immediately for visa reason or is there
| a grace period where you have a bit of time to find something
| new?
| nicbou wrote:
| If you're not a EU citizen, you have 3 months after losing
| your job to find another visa sponsor, if I'm not mistaken.
| atlasunshrugged wrote:
| No longer in Berlin, I ended up moving to Estonia to work
| for their government and then just bounced around Eastern
| Europe until Covid happened. If your work was sponsoring
| your visa you have to leave after a set amount of time
| unless you get another one (assuming non EU citizen). That
| said, if you're an engineer or have access to capital it's
| not that tough to get a visa somewhere in Europe. I'm
| personally considering doing the Dutch American Friendship
| Treaty path once Covid is over but haven't decided yet.
| dolel22 wrote:
| Generally yes, there was strong demand for software engineers
| in Berlin pre-covid. It's still there albeit weaker, so you
| might not find something you want immediately. As for the
| visa, there's generally a 3 - 6 month grace period to find a
| new job that's granted by the immigration office before you
| lose your status.
| atlasunshrugged wrote:
| As a nontechnical person who moved to Berlin and whose first
| job was at Rocket, I echo this even for non-technical people.
| Stuff was a mess, turnover was absurd (I lasted about 8
| months), but you have a great little network from Rocket people
| who leave and go to other companies in the city
| rbrtdrmpc- wrote:
| Rocket Internet has the amazing skill of buying healthy
| companies, assure founders they are not going to shut them down
| on third party interests and shutting them down on third party
| money settlement. They are plain old assholes.
| FlorianRappl wrote:
| Much of the money of rocket internet is coming from other sectors
| these days. A major sector here is real estate, where they
| founders have created a massive network of companies / holdings.
|
| I still don't quite understand how they could be that
| "successful". But maybe its just a reflection of society...
| gabaix wrote:
| One of my friends worked directly under one of the brothers. He
| had to double any of his objectives: his revenue goals, his
| hiring goals, his layoff goals. Whatever it was, he had to
| double it. It was to the point of absurdity. He would be
| berated for any missed goal.
|
| Samwer brothers never cared for innovation. They picked
| whatever worked in the US and made a copy. They could either
| sell to the the US market leader, as they did with their first
| company when they sold to eBay, or IPO. All that mattered was
| to grab the market and get investors to value on the growth.
|
| And to be first, they hired new grads or junior McKinseys they
| could impress with high pay while giving monkey equity, while
| pressuring at will.
| k__ wrote:
| Guess, in times of globalization "copying US companies" doesn't
| cut it anymore, hu?
| whoisjuan wrote:
| You can copy business models but you can't copy trajectories.
| Their failure is not selling businesses fast enough. Perhaps they
| drank their own Koo-Aid and thought they could build an actual
| tech behemoth out of copying ideas but clearly all the things
| they copy have the same uncertainty that the original ideas they
| copy have.
|
| Maybe they thought that they could pass that upper limit of
| uncertainty with capital and operational speed but that doesn't
| work for unproven ideas. It's not like a private equity buying a
| crackers company. Startups in general have very undefined
| horizons with no operational references or data to build on. How
| could something like FoodPanda be successful when all the other
| players in this space struggle and just a few are barely
| successful?
| fxtentacle wrote:
| That's a very investor-friendly title. Effectively, they are
| taking the company private again using a legal method where
| investors lose the difference in stock value. It's not nice, but
| also not illegal. And these people were never known for their
| friendliness, so no investor should be surprised that they're
| taking the unfriendly route now.
| jansan wrote:
| _> And these people were never known for their friendliness_
|
| They were the founders of Jamba, a notorious company
| specialized in selling ringtone subscriptions for 3 to 5 Euro
| per month (called "Jamba Sparabo"). This may have well been the
| most hated company in Germany in the early 2000s.
| rbrtdrmpc- wrote:
| They were hated everywhere, In Italy the damn frog ringtone
| became associated with shitty annoying people
| shoo wrote:
| > Rather than using external capital to buy investors out at a
| premium, the usual way to take a firm private, Mr Samwer has
| used company cash to buy back EUR223m ($260m) of its own
| shares. This pushed his clan's stake to over 50%. He plans to
| use another EUR1bn of Rocket's cash to buy out minority
| shareholders at EUR18.57 a share, the volume-weighted average
| price in the past six months but down from the ipo price of
| EUR42.50.
|
| > Investors are under no obligation to sell their shares, of
| course. But those who stay put will have little power to affect
| the course of the firm now that the Samwer brothers control the
| board with their majority stake. Rocket has stated it will be
| "better positioned" for long-term development if not listed on
| a stock exchange.
|
| It seems like the main tipping point is one group (the Sameer
| "clan") getting into a control position. Presumably enough
| other investors agreed to the earlier buybacks that allowed
| that to happen.
| rahimnathwani wrote:
| "where investors lose the difference in stock value"
|
| According to the article, the investors have the right but NOT
| the obligation to sell their shares at the tender price. They
| might trust the company's governance less after de-listing, but
| it doesn't appear they're being forced to sell.
| gundmc wrote:
| What are the implications of owning shares in a company that
| is no longer publicly traded?
|
| Apologies if this is discussed in the article, it's partially
| behind a paywall.
| shoo wrote:
| > partially behind a paywall.
|
| if you search for the title from the desktop version of
| Google it's possible to read the cached version
| boogies wrote:
| Or just stop allowing JavaScript.
| pas wrote:
| The same as with any other (private) company. You have to
| deal with the majority shareholders and the
| board/management.
|
| It's not like you have any more control if the company
| happens to be public anyway.
|
| Also, big companies, private or not, in most countries have
| to retain an accounting auditor.
|
| Also, if you are a member of the company (as in you have
| equity) the management has a fiduciary duty toward you.
| (yes, yes, sure, in practice that means very little, they
| can siphon off the money in many creative ways), but
| usually people who are already minority owners have some
| trust in the majority owners.
|
| In some jurisdictions there are rules about what kind of
| mechanisms are available for the minority shareholders, and
| usually the get a board seat, and so they can kind of try
| to audit the majority.
|
| And in the end they can still sue, or threaten to sue, or
| whatever. That usually doesn't help with the valuation, and
| since the majority has more to lose, they can usually work
| out some minimally satisfactory deal between themselves.
|
| Aaaaand if not, we can finally get the popcorn, because
| then usually it gets dirty and juicy.
| paxys wrote:
| Practically speaking the biggest difference is that it is
| a lot harder to sell the shares to someone else.
| gumby wrote:
| You'll have no control, will probably find it difficult to
| sell your shares at _any_ price, and while you're entitled
| to any dividends, the controlling entities (Sam wer
| brothers) can take cash out in different ways and never
| declare a dividend.
| elcomet wrote:
| Maybe dividends?
| tus88 wrote:
| Just because something is private does not mean it cannot
| be owned, in whole or in part.
| function_seven wrote:
| Ok, but what are the implications of that? If I own
| 0.001% of a private company--having decided to opt out
| during this process--am I at the mercy of that company in
| the future to determine how much they're willing to buy
| me out for?
|
| How hard would it be to locate another 3rd party to buy
| my share? There's no longer an exchange to trade it on,
| and there might be all sorts of additional rules about
| how and who I can sell to.
|
| Those are the questions each investor is asking
| themselves, and I assume that even with the large
| discount they're being offered, it's probably the better
| choice unless you hold a significant minority stake.
| rbrtdrmpc- wrote:
| I'm pretty sure you can't do much with those if you are
| not a major shareholder or you gather under a third
| company that acts on behalf of you and your (enough)
| peers
| newdude116 wrote:
| Rocket Internet may be a dubious company.
|
| But as a rule of thumb: A public listed VC does rarely well.
| [deleted]
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