A German company is on a mission and travel is core to its plans but where it is headed remains uncertain. Sally White reports

‘What goes up must come down’ is a very old stock market adage. Yet it could have been invented for Rocket Internet, the German internet accelerator which floated last year valued at a whopping $8.2bn.

Rocket Internet, which counts travel as one of its core areas, came to the Frankfurt market priced at €42.5 a share, since when it has been up to €60.3 and down to €31.1. Currently it is priced a little off the bottom.

Founded by 40-year-old German entrepreneur Oliver Samwer only eight years ago, it is now run by him and his two brothers (Marc and Alexander). They are nothing if not ambitious.  Its mission is ‘to become the world’s largest internet platform outside the United States and China’. They have startled markets with the speed and boldness of their moves. Already there are over 30,000 employees across over 110 countries on six continents working on four main sectors - ecommerce, marketplaces, travel and financial technology.  

Top travel representation in Rocket Internet’s portfolio is via Amsterdam-based TravelBird (which offers deals to subscribers) and Traveloka, an Indonesian flight search engine covering mostly domestic routes and airlines.  However, it also has Asian booking app Easy Taxi and room booking app Wimdu. There are plans for many more.

Rocket Internet can spread itself widely as it does not buy outright, but takes a stake. Learning from experience, Rocket relies on locals to run its operations although top management is ex-pat. This is because they know and understand the model and have an interest and commitment to the group.

After taking on dozens of new companies, Rocket Internet saw its net income last year plummet from €174 million in the black down to a loss of $20 million. Since most companies are in early stages they are not revenue producing yet.  

So it is understandable that the brothers were hungry for cash from other sources. First they raised €588 million in February this year by selling new shares; then last month they went for another chunk - €550 million in the form of a convertible bond offering.

That seems to have been a step too far or too fast for the markets. The shares were already sliding when the bond was announced, and they went down some more. Market nerves were being shaken by the Greek crisis. Dealers rushed to short the shares (selling in the hope of buying more cheaply later). So, while Rocket Internet got its money it was at the price of market confidence.

Analysts have been astonished at how successful Rocket Internet has been

Analysts have been astonished at how successful Rocket Internet has been.A number of Rocket companies grew their sales rapidly last year. For example, at e-commerce group Lazada in Southeast Asia, sales grew by more than 300% to $384 million. Southeast Asia and Africa are very important for Rocket Internet, with investments like Food Panda in India and Jumia in Africa.

Food is a big part of the portfolio – 38% in May, according to the Financial Times. It quoted Oliver Samwer as saying that Rocket’s food businesses dwarfed their competitors in terms of the number of countries in which they operate and the number of orders processed.

“We are the largest global online takeaway group outside China in the world. We are active in 71 countries, number one in 59 countries . . . and the value of the food that’s ordered through our platform is over €1billion,” he was quoted as saying.

The Samwer brothers are no novices at start-ups. In 1999 they started Alando, an eBay clone, which they sold for in $43 million in 100 days to eBay itself. Their next effort was content provider and ringtone maker Jamba, which they sold for $273 million, raising enough money to begin work on Rocket Internet.

Uncertain times

However, at times of uncertainty, all the doubts come out. So, Rocket Internet’s business model is now under scrutiny. Describing that model, Forbes magazine said in April that Rocket Internet made a living by taking the billion-dollar ideas of successful American technology companies and cloning them abroad before they could.

It should have added Samwar brothers’ successes at selling on companies to their inspiration. Groupon clone CityDeal, which, says Forbes, became a market leaders in Europe in less than six months was bought by Groupon for $170 million just five months after its inception.

However, Rocket Internet has taken companies through to attract outside capital and then IPO. This was the case for European online fashion retailer Zalando, which IPO-ed last year valued at $6.7 billion.

While there are rumours, is does not seem that TravelBird is quite ready for an IPO quite yet, though its success is being recognised in competitions such as the Europas European Tech Start-ups. Valuations muted in the market after a €16.5 million injection from Rocket Internet a few weeks ago (giving it a third of the business) were for around € 156 million. It reported transaction volume last year of €96 million, up from €37 million in 2013.

Nor are there signs yet of what will be Oliver Samwer’s new travel company for 2015. He is still keeping the market guessing!