Oliver Samwer, one of Europe’s leading technology investors, once told entrepreneurs to use “blitzkrieg” tactics to quickly gain market share: “I am the most aggressive man on the internet in the world,” he wrote in an email to colleagues over a decade ago. “I will die to win and I expect the same from you!”
His Berlin-based firm Rocket Internet subsequently backed groups such as meal kit manufacturer HelloFresh and online retailer Zalando, which later went on to conduct multi-billion-dollar IPOs.
In recent years, however, Samwer’s company has quietly abandoned its roots as an early investor in the continent’s hottest start-ups. Instead, Rocket has morphed into something more diverse but potentially more lucrative: a complex investment company that manages various types of capital, from debt to public equity.
This account of Rocket Internet’s finances and operations is based on company records, several people with knowledge of the company, and other investors and executives. Together, they provide a detailed picture of the company since it began a delisting process from the Frankfurt stock markets three years ago with a market capitalization of around €2.5 billion.
Rocket’s management did not respond to requests for comment.
In one deal, it provided more than £100 million in debt financing to financial technology company Revolut in 2019, according to documents and people familiar with the transaction. Rocket has also built significant stakes in public technology companies such as Amazon and Alibaba.
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Meanwhile, in recent years, Rocket has cut staff at its venture capital funds, closed one of its investment units, abandoned plans to create a new start-up fund, and urged certain emerging tech companies it has invested in to adopt more conservative spending plans.
According to people close to Samwer, these moves reflect a dramatic shift in response to a tech downturn that has hammered the valuation of startups around the world.
Florian Heinemann, one of the founders of Project A ventures and former director of Rocket Internet, praised Rocket for its smart investments and for nurturing the next generation of European tech founders and venture capitalists. But he added that while Samwer’s business was once considered “massive”, it has “certainly lost relevance in recent years”.
A personal transformation
Rocket was founded about 16 years ago by Samwer together with his two brothers Alexander and Marc. The company attracted attention – and fierce criticism – for its practice of taking successful Silicon Valley business models and then launching them in markets outside the US.
After its share price halved for six years as a publicly traded company, the company made plans to delist in 2020. The takeover process was contentious, after Rocket offered to buy shares below their trading price and activist investor Elliott Management amassed blocking interest. In the end, Rocket succeeded, but had to pay almost double his original offer and had a special deal for Elliott.
“The reputation has just been completely shattered,” says a Berlin-based technical director of the removal process. “They behaved very badly in the capital market.”
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In its latest annual filing for 2021, Rocket Internet revealed that it had turned from a loss to generate annual net income of €134 million, with a portfolio of approximately €2.1 billion in business investments. In total, it listed €4.4 billion in assets.
In the meantime, Samwer has further strengthened control by buying his brother Alexander out of the business, according to acquaintances of the business. With that control, he has pushed Rocket to develop strategies beyond what has made his name: incubating high-growth internet startups.
Rocket’s best-known division is Global Founders Capital, the venture capital investment team. The two $1 billion funds were backed by early bets on companies such as $12 billion outside hiring company Deel and $8.5 billion human resources start-up Personio.
A less prominent arm, however, is Global Growth Capital, which was launched in 2016 to provide debt financing. It has been a major profit generator with its two funds of €200 million and €300 million each, according to people familiar with the matter. The unit has landed big deals, such as lending more than £100 million each to financial technology companies Revolut and SumUp. It generated a gross internal rate of return in the low teens, people said.
Rocket has also built a sizable public equity portfolio. It had about €673 million in public shares in 2021. According to the most recent publicly available accounts, the company’s largest equity holdings were a $326 million stake in Amazon and a $107 million stake in Alibaba.
Don’t dare venture
It now seems to have largely abandoned new deals for start-ups.
In 2020, Rocket launched Flash Ventures, a start-up fund that ultimately invested around €30 million. It grew to about 40 people spread all over the world from Australia to Latin America, making dozens of investments together. Flash’s strategy was to take a stake of about 30 percent in companies in the earliest stages of development, including investments in e-commerce company Razor Group, which was last valued at more than $1 billion.
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Three years later, the entire Flash Ventures team has disbanded and stopped further investment, despite some promising deals, according to people familiar with the business.
This is a reversal of Rocket’s move to quickly hire and deploy venture capital aggressively during the pandemic tech boom. Since then, Samwer has been wary of a prolonged recession, according to those who know his mindset. He has urged portfolio companies to hold cash reserves for years to come – far beyond the two-year consensus among other VCs.
“Oli’s thinking is in line with the market. . . when he’s in a bad mood and the market goes really low, he forgets all the values he preached before,” said a person familiar with the company.
According to people in the know, Rocket has cut staff after the pandemic. They said it employed about 130 people in its units as of early 2022. That was reduced to 75 employees in November 2022. Today, only a few dozen employees serve the various investment functions.
The company has also faced other challenges. In late 2021, Global Founders Capital attempted to raise a third fund of similar size for $1 billion, but backed out due to a lack of interest, according to those with knowledge of the move.
And a decision to create a dedicated acquisition company — a blank check vehicle to merge with another company — ended without a deal earlier this year.
There was also significant turnover among Rocket’s top team, with the departures of investors such as Soheil Mirpour, Johann Nordhus Westarp and Hugues de Braucourt, a blow to the founders of start-ups who had built a close relationship with them. Mirpour and de Braucourt did not respond to a request for comment, while Westarp declined to comment.
Those close to Samwer said that Rocket’s pivot comes with personal changes, even as he keeps a close eye on the company.
“He just turned 50. He has a lot of money,” said a former director. “He wants to spend time with his family, skiing in Alaska and kitesurfing.”
