It isn't hard to feel negative about Rocket Internet; the infamous worldwide startup operation that has managed to make a business of taking emerging markets by surprise. Based primarily in Berlin, the operation is largely a 'cloning' one, centered around the identification of potentially-lucrative and somewhat-proven tech-based products in established markets such as the US and UK, copying them, and rolling them out into emerging markets such as Eastern Europe and Latin America, at a massive scale. Recent targets have included Groupon (Rocket's Citydeal was later acquired by Groupon for $169m), Airbnb, Pinterest, Stripe and, most recently, Jack Dorsey's Square. The company recently published a new website which reveals that over 100 companies have been produced by the self-proclaimer "incubator", stretching over in excess of 40 countries. Approximately half of these are currently in operation, while a large number of them have been acquired by the original company who have little choice otherwise. The company, founded and operated by Marc, Alexander and Oliver Samwer - the Samwer brothers to most - have attracted legal attention, media criticism, and mockery from the tech community at large for their methods. And understandibly so. Far from being noble, the practise of blantantly replicating others' hard work strikes as downright immoral. Is there anything more to it than that?
The Samwers had their first run as startup founders long before the days of Rocket Internet. Having completed their time studying - Marc, the youngest, got his MA from Oxford and MBA from Harvard - they approached eBay to start a German version and, after receiving no response, they did it themselves. 100 days later had sold their online auction platform, Alando, to eBay for $50m. They weren't first to market, either - what they had managed to do, instead, was execute well and, in doing so, proved to eBay that there was a market that couldn't be ignored. It took just 5 years for the brothers to have their next successful exit, selling their mobile SMS content company Jamba! to VeriSign for $270m. Remember that annoying Crazy Frog? That's them. Rocket Internet itself was founded in 2007 by the brothers, and serves as an incubator and accelerator. Four years later, their portfolio consists largely of established eCommerce companies. A portion of these are near-identical clones of existing startups, with little variation even in design - Wimdu (Airbnb), Paymill (Stripe), Payleven (Square) will all look familiar. But there are an equal number which bare no markings of the Rocket Internet operation that power them - Zalando, The Iconic, Lamoda, and over 20 other eCommerce operations. None of them are new ideas - online clothing stores are far from revolutionary - but they are self-sustaining businesses with buying, warehousing, ordering, delivery and customer support operations powering them.
At the center of the Rocket Internet's success is the execution, not the idea.
Rocket Internet's success lies in the fact that, armed with a proven idea and an experienced exeuctive team, they enter a local market, hire top young MBA-level graduates from within the region, and give them the responsibility of building a product into a sustainable business. With no shortage of funds, the operation then leverages a simply massive-scale traditional marketing operation that ensures that the brand rapidly achieves position in the marketplace. With a network like Rocket's behind the business it is far from a lowly startup, though - underlying the new business is a network like no other; of successful businesses that have overcome the same challenges in similar markets, marketing experts, and an executive team that is among some of the most accomplished in the world. The formula works; between 70 and 80% of Rocket Internet startups are successful - they either successfully exit, or continue to run with an operational profit. Numbers like that put the infamous Samwer brothers among some of the most successful serial entrepreneurs in the world.
When Rocket Internet recently entered the South African market with Zando - an online fashion retailer - they applied the same, familiar Samwer formula, and caught an entire market napping. The incumbant eCommerce players - such as the Naspers-operated Kalahari and 36Boutiques - had failed to capture the online fashion market, and were caught off guard when, just weeks after rumours of a Rocket Internet play started surfacing, the brand was already in top-line media and taking orders. Doubling down on marketing efforts since the launch, they have continued to scale to the demand that has, unsurprisingly, presented itself in a growing eCommerce market. In every way, Zando is identical to other Rocket Internet fashion eCommerce businesses - even the website is almost identical to Australia's The Iconic - but what has driven the growth is how well their existing business template has been executed on. The net result is a benefit for the local market - competition will continue to drive prices down, and Zando's above-the-line advertising continues to educate consumers who are new to the idea of online shopping.
Ultimately, there is a lot more to any startup than its website. Regardless of how similar Paymill looks to Stripe, it is the backend business operation that make it a competitor to the original. So much so that you have to question what value Rocket Internet derives from so closely mimicking the web prezence of the original business - its as if they want to make it known that they are unashamadly, and without apology, cloning to the pixel, rather than taking the same idea and taking it into a new market. There is an element of cheek and disrespect that detracts from their credibility as entrepreneurs. Put that aside and its hard not to admire the global operation that is Rocket Internet; a business with a scale and diversity of businesses that is difficult to comprehend - ranging from deals, to payments, to online fashion and social networking - and an infrastructure that can build these businesses out in mere months and then challenge a market that they are entirely new to. Like it or not, it's certainly hard not to respect that.