July 15, 2014 2:03 pm

Rocket Internet’s Oliver Samwer responds to critics ahead of IPO

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Oliver Samwer for Business Life.©Charlie Bibby

Broadband brother: Oliver Samwer says working closely with his two brothers means ‘you have an unlimited level of trust’

At the end of breakfast with Oliver Samwer, one of the three brothers behind controversial start-up conglomerate Rocket Internet, the German entrepreneur ferrets around in a bag to extract a wad of well-thumbed cash, held to­gether by a bull-clip. Bank notes from Hong Kong, Singapore, Indonesia and the US are visible as he rifles at random through the makeshift wallet.

Clearly a man who takes nothing on trust – not even that his credit card will work abroad – he selects a £20 note to pay the bill. Perhaps this is un­surprising in an e-commerce mogul who spends his life grappling with delivery and payment systems from Myanmar to Nigeria.

Rocket is in the business of building start-ups from scratch on an industrial scale and at speed. So far it has created more than 70 active e-commerce ventures in 102 countries, from payment processors in Poland to fast-food marketplaces in the Philippines. “We want Rocket to be the biggest consumer internet group outside the US and China,” says Mr Samwer. He puts himself alongside Amazon’s Jeff Bezos and Jack Ma, chief executive of Alibaba, which is gearing up for the biggest initial public offering ever by listing in New York next month.

Mr Samwer is poised to join their ranks soon as a public company CEO, when a planned autumn float in Frankfurt is expected to value Rocket at between €3bn and €5bn, according to people familiar with the matter.

It would mark a high point for a company that Mr Samwer co-founded in 2007 with his two brothers Alexander and Marc. The trio have wanted to work together from when they were teenagers. In Mr Samwer’s telling, they consider themselves a bit like Victorian rail magnates, lucky to be living at time when they can take advantage of a sweeping technological trend: in this case, the internet. The three still live within 500m of one another in Berlin.

Critics call Rocket a clone factory, which squashes new ideas by spawning copycat bus­iness­es in new markets until the original is for­ced to concede defeat or buy them out. Many of Rocket’s start-ups resemble their forerunners, even by name: storage-on-demand company SpaceWays (like Makespace and Boxbee), cleaning services marketplace Helpling (Homejoy and Hassle), and matchmaker eDarling (like eHarmony). CityDeal, Rocket’s answer to Groupon in Germany, was sold to its American rival in 2010.

There is a romantic concept of what tech innovation is. There’s always an Einstein, a pioneer who defines the first category. But take the first car – it looked horrible

Mr Samwer’s riposte is that Rocket is a “platform” that raises the chances of a start-up succeeding from the two-in-10 bets known to venture capitalists to something approaching eight-in-10. It is too early to make a call on whether Rocket can achieve this, but one thing is clear: it is growing fast. After seven years, the company has 15,000 employees and combined an­nual sales of €700m.

It has a standardised process that in­volves recruiting local entrepren­eurs and parachuting in professional managers from the likes of Goldman Sachs and McKinsey. Mr Samwer says Rocket can now build five start-ups at a time, aiming for a period of 100 days from idea to launch that can sometimes be crunched into just four weeks. Successes include Lamoda, the largest online fashion retailer in Russia, and Jabong, an e-commerce site that puts more Nike shoes on Indian feet than any other online company.

Rocket has two lines of defence to the copycat criticism. One is that it shows sour grapes on the part of American e-commerce businesses that neg­lect trickier markets outside the US and China, but feel aggrieved when someone dares to steal space they had earmarked for themselves. “There’s a simple rule: the more complex a market, the less players play in that market, the higher the margins,” says Mr Samwer.

Rocket’s philosophy is to focus on what he calls “universal basic needs leading to universal basic industries”. If asked to choose bet­ween the longevity of Amazon and Twitter, Skype or Facebook, Mr Samwer would tip Mr Bezos. In general, “you can only be a basic industry or be fast,” he adds. “We are trying to be a basic industry and fast.”

But complexity does not go away, Mr Samwer admits. To solve the problem of wafer-thin retail margins and un­reliable infrastructure in countries where Rocket operates, Mr Samwer prides himself on intimate familiarity with his local markets and a Germanic obsession with detail.

This leads him to a second salvo against his detractors: that some of the venom directed at the Samwers comes from their rejection of the archetype of the tech entrepreneur as a modern-day successor to the muse-touched artist, in an industry that fetishises risk and creativity.

“There is a romantic concept of what tech innovation is,” Mr Samwer says. “There’s always an Einstein, a pioneer who defines the first category. But take the first car – it looked horrible, you would never want to use it, and you would never make a market for it. It took someone like Toyota to work harder, make it cheaper and bring it faster around the world.”

Although Mr Samwer is the public face of Rocket, he works closely with his brothers. They sold their first joint company Alando (a German answer to eBay) to the US equivalent in 1999, after a stint in Silicon Valley. “Many people say you need to be complementary to be a great team, but actually we are all the same,” he says. “The beauty there is that you have an un­limited level of trust.” While one is building in India, anoth­er can handle Russia, while the third might focus on Myanmar.

His own dedication can veer towards monomania. In a leaked email from 2011, he demanded that employees at several furniture start-ups “sign . . . with your blood” to adopt “blitzkrieg” tactics, ending with: “I am the most aggressive guy on internet on the planet. I will die to win and I expect the same from you!”

Mr Samwer has apologised for the email, which he says was written late at night. “If you read between the lines, what you see is a lot of passion for the industry,” he says. “It’s almost like falling in love: when you fall in love you make mistakes . . . I’m a guy that falls in love at first sight. That happened with the internet, it happens with our business models, it happens with countries.”

Is Mr Samwer worried that someone might out-Rocket Rocket – take the idea of a start-up platform and just do it better, more relentlessly? A rare look of surprise flickers across his face. “Innovation in operations is something much more difficult to catch up with – it’s more of a killer cocktail than a killer app.”

Mr Samwer then makes his most un­usual confession: before the internet, he was “big into baking”. Now, however, he focuses his flair for precision and measurement on Rocket. “We combine 25 ingredients, like one of those German apple or plum cakes.”

Further reading: from alpaca slippers to the web

Oliver Samwer’s love affair with retail began as a university student on exchange in Chile, writes Sally Davies. With an initial investment of $2,000 from his professor, he started a business with a classmate and his girlfriend importing alpaca slippers from Bolivia. The name, Ego, was made from their first-name initials – Esteban, Gabriela and Oliver – and they added “International Trading Company”, Mr Samwer says, “so it sounded big and would get the attention of local shops.”

It fell to Mr Samwer to trek to the slums of La Paz to supervise production, because he had the time and the knack. Gabriela designed the shoes and Esteban helped with sales.

“Retail is in the detail,” Mr Samwer says. “It was very tough, but you learn from every business, and they’re all very similar.”

He credits the experience with planting the seed that would become Rocket. “A customer who buys shoes, who buys a phone, who goes on a taxi service, who orders a pizza – it’s the same strategy of customer acquisition, by display and search engine marketing versus lifetime value.”

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