Rocket Internet raises $1 bn in new fund

Rocket Internet SE, the German investment firm that has struggled with its bets on Indian companies, has raised $1 billion in a new fund to back Internet companies globally.

The Rocket Internet Capital Partners fund is Europe’s largest fund focused on the Internet sector, the firm said in a statement.

The new fund will make early-stage and growth-equity investments in high-growth Internet-related businesses. It seeks to invest in key focus areas of the Internet sector including marketplaces, e-commerce, financial technology, software and travel.

Rocket Internet said the fund received strong backing from a diverse group of global investors, including financial institutions, pension funds, asset managers, foundations and wealthy individuals.

Rocket Internet contributed about 14% of the overall commitment, it said.

The fund will provide funding over the lifecycle of high-growth Internet businesses.

Rocket Internet CEO Oliver Samwer said in the statement that the fundraising shows the strong interest of investors, who “share the enthusiasm for the attractive investment opportunity” the fund presents.

Goldman Sachs International acted as placement agent for the fund.

India bets

Rocket Internet has had a forgettable experience in India. It made its debut investment in India nearly five years ago and backed firms such as HeavenandHome, Printvenue, PricePanda, OfficeYes and 21Diamonds, among others.

It made bigger bets on food-tech venture Foodpanda, fashion e-tailer Jabong and furniture portal FabFurnish. Most ventures rapidly expanded initially, but subsequently ran into rough weather and struggled to survive.

Last year, Rocket Internet sold Jabong and FabFurnish in what can be called as distress sales. In April last year, Future Group acquired FabFurnish.com in an all-cash deal. And in July, Jabong was sold to Indian e-commerce firm Flipkart’s fashion portal Myntra for $70 million.

Rocket Internet is now left with Foodpanda, Printvenue and CupoNation in India.

Foodpanda grew fast, acquired smaller companies and became one of the early Internet successes as it spent aggressively on marketing and customer acquisition. It then got tangled in one controversy after another, from fake orders and questionable financial deals to top-level exits, a slump in valuation and staff layoff amid talk of a shutdown. Printvenue also saw top-level exits in 2015. Rocket Internet, however, led a Series B round of $11 million in CupoNation in February 2016.

Rocket Internet works on a simple formula—copy business models proven in a developed market like the US or a fast-growing market such as China and emulate them in other high-growth markets. It hires executives to run these businesses.

Venture capital investors and former executives at Rocket-backed companies have previously said that the German company failed because of its “copy-paste” model that doesn’t consider local situations, the lack of effective oversight and the absence of the will to stay in the game.

Rocket has started around 100 firms worldwide, with minority and majority stakes in its portfolio companies.

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