Berlin start-up pioneer Rocket Internet reporting more losses

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The German giant Rocket Internet has just released some bad news: it’s not doing too well.

In a recent statement from the company, they announced loses of 617 million euros between January 2016 and June 2016. More than half coming from the latest funding round of their fashion business, Global Fashion Group.

Photo by Benjamin Child.
Photo by Benjamin Child.

Rocket Internet put Berlin on the tech scene map… 

Founded by three German brothers—Oliver, Marc and Alexander Samwer—in 2007, Rocket Internet now operates 100 Internet companies in 110 different countries with more than 36,000 employees. Their business model is based on firstly identifying successful start-ups around the globe. Then launching copycat versions in other countries they deem has the potential to expand. Their portfolio expands across many markets including fashion, furniture, food and cars.

In a recent study by the IFSE, Hergen Woebken, founder of the Berlin-based Institute of Strategic Development wrote “Without the Samwer brother and their business models, Berlin today would be insignificant regarding startups.”

Alexey Kolupaev, who has worked as the chief technology officer for a number of Berlin’s start-ups confirms this high praise. “Lot of developers from all over the world have come to Berlin through Rocket. They do, like, 10 start-ups a year, and each of these needs a team.”

In addition, many employees and managers have left Rocket. They’ve starting their own companies and tell others about the start-up scene in Berlin. Some eventually show up to begin working in the German capital, too.

…but they’ve never made a profit

Since the initial public offering two years ago, things have not appeared to be going well. Last year, CEO Oliver Samwer reported losses of 1.1 billion euros, promising investors that the losses had reached their peak. The company began cutting costs, especially in the marketing sector, and experiences a drop in revenue. Its current valuation of around 5.3 billion is well above the company’s market capitalization.

But Rocket Internet is not your average company. They are a company that builds other companies.

CEO Oliver Samwer says they are sticking to their goals

Despite the seemingly alarming losses, CEO Oliver Samwer remains committed to goals. His “strategy is to have his startups spend and expand heavily for five-to nine years before becoming profitable” according to the WSJ. In addition, he expected that the losses at major portfolio companies to peak in 2015 and “at least three of our selected portfolio companies to turn profitable by the end of 2017”.

“We remain committed to our goals,” says Samwer.

Furthermore, Chief Financial Officer Peter Kimpel says that Rocket also made “significant write-downs and negative adjustments to other stakes in companies it owns”. The information is set to be released September 22.

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