Will Rocket Internet do an IPO? And how “big” will it be?
According to Thomas Baldwin, who blogs about the Brazilian startup and VC scene, Rocket Internet is planning an IPO. He seems pretty sure of the news, and is also very convinced of the bigness of the news:
ROCKET INTERNET IS PREPARING TO GO PUBLIC. I am officially going on the record as the first individual to break this news. This is a mega-event that will send shock waves throughout the startup world.
Baldwin says he has “sources close to the company” and does share some detailed information about the IPO:
- JP Morgan is the favorite to lead the deal as Advisor to Rocket Internet. This makes sense given JP’s track record as a capital provider to Rocket’s clone portfolio.
- Ernst & Young will serve as auditor for most of the LatAm ventures.
- PWC will serve as auditor for the Brazilian entities (Dafiti foremost amongst them)
- No word yet as to who will audit the Southeast Asian startups
- No information as to the size of the raise, although it is likely to be in the hundreds of millions of dollars
- Pricing not likely to occur for some time
In a reaction to VentureVillage, Rocket Internet says the rumors about an IPO for Rocket Internet as an entity are “sheer nonsense”. “If Rocket were to go public, they would IPO with their separate companies”.
Sara Lacy at PandoDaily, on the other hand, thinks it’s not a big deal at all, because ripping off business models (down to the color scheme of websites like Pinterest) is not entrepreneurship.
Playing for the Silicon Valley rafters a bit, I suspect, she goes as far as calling the Samwers “shameless extortionists”, although I never heard of any company being forced to buy Samwer clones.
In a later blog post, Baldwin does acknowledge that the Samwer brothers’ business model is “ugly”, but follows up with some consequences of the IPO, which he insists will be big:
- bigger likelihood of long term success for Rocket Internet. Because their businesses (mostly e-commerce) burn so much cash initially, an IPO war chest would help mitigate the long periods of negative cash flow that come with starting up e-commerce businesses
- a pause in the cloning activity of Rocket Internet; in fact, the Samwers have been somewhat less active recently, as we wrote earlier. Baldwin says that Rocket might start to consolidate and manage its ventures instead of launching new ones all the time.
- a huge headache for emerging market e-commerces; with stronger Samwers, other competitors will have to work hard to stay afloat
- big payday for the Samwers; the Samwer’s net worth is currently estimated at € 1 billion. An IPO would certainly help them climb a few steps on the ladder of the ten richest tech entrepreneurs in Europe.
So how BIG will a Rocket Internet IPO be?
Baldwin also rebuts Sara Lacy’s post, saying that she misses the international implications of the IPO, because her report is “typically Silicon Valley-centric”:
from my seat here in Sao Paulo – and from my recent conversations with emerging market entrepreneurs in markets such as Indonesia and Nigeria – this is undoubtedly big news.
I think Baldwin might be right that the IPO means that the emerging markets, where the Samwers are very active (Brazil, Asia,…) are becoming more important for startups.
This trend was already visible in the recent Genome Startup/Telefonica report about the global startup hubs: Silicon Valley is still the biggest tech and startup hub in the world, but no longer the only one.
Deezer proves that a strategy of consciously avoiding the US market can work. It’s growing faster than Spotify, which concentrates on the US. It’s also profitable, while Spotify is struggling to become profitable and spending a lot of marketing money to acquire customers in the US.
Also, Baldwin rightly points out that the Samwers are becoming a real threat to American startups now.
There’s a real danger that the Samwers, with their vast experience, deep pockets and access to money, will start leapfrogging Silicon Valley startups.
You can say what you want about the Samwers, but they have built a record of great execution. And isn’t that what we incessantly hear about how to build a great company? Execution, execution, execution.
And these days, they seem to be able to open a firehose with money at will:
Glossybox, a Rocket clone of Birchbox, raised € 55 million versus $ 11,9 million for Birchbox. That must hurt Birchbox.
Paymill, Rocket’s Stripe clone, just announced a $ 13 million financing round. Launched only a few months ago, it’s already active in 34 countries. That must be hurting Stripe.
It’s not hard to imagine a future where the “clone factory” will start acquiring the originals, instead of the other way around.
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