Rocket Internet

Rocket Internet SE is a German technology company, famously known as a “startup factory” or “venture builder.” Founded by the Samwer brothers (Oliver, Marc, and Alexander), its business model is built on a controversial yet often effective strategy: identifying successful internet business models in developed markets, particularly the US, and rapidly cloning them for launch in emerging markets across Europe, Asia, Latin America, and Africa. Instead of pioneering new ideas, Rocket Internet specializes in execution. They take proven concepts—like e-commerce marketplaces, food delivery, or online fashion retail—and build copycat versions at lightning speed, flooding the new markets with capital to achieve dominance before local competitors or the original company can react. This “copy-paste” approach minimizes the risk of a flawed business idea and shifts the focus entirely to operational excellence and aggressive growth.

Rocket Internet's method is systematic and relentless, often described as “blitzscaling” before the term was even popular. It follows a clear, repeatable process.

• Identify: The process begins with scouring the globe, especially Silicon Valley, for breakthrough internet companies that have already achieved “product-market fit.” Think early Zappos, Groupon, or Airbnb.
• Replicate: A dedicated team then builds a clone of the target business in a matter of weeks. This includes the website, the brand (often with a similar-sounding name), and the entire operational backend.
• Launch & Scale: This is where Rocket Internet's true expertise lies. They parachute in a management team, provide immense funding, and execute a hyper-aggressive marketing and expansion plan. The goal is to capture as much market share as possible, as quickly as possible, creating a significant barrier to entry through sheer scale and speed.
• Exit: The endgame for a Rocket-backed company is almost always an “exit.” This can be through a sale to a strategic buyer (famously, selling CityDeal to Groupon, the very company it copied) or, for its most successful ventures, an Initial Public Offering (IPO). The parent company, Rocket Internet, profits from these exits.

For a value investor, Rocket Internet is a fascinating and polarizing case study. It defies many core principles of the philosophy, yet its approach has undeniable strengths.

• Proven Concepts: By copying existing successes, Rocket Internet sidesteps the single greatest risk in startup investing: that nobody wants the product. They are betting on execution, not invention.
• Emerging Market Access: The company provided a unique, albeit high-risk, vehicle for public investors to gain exposure to the rapid growth of the internet economy in developing nations—markets that are otherwise difficult to invest in directly.
• Operational Prowess: No one can deny the Samwer brothers' ability to build companies from zero to massive scale in record time. Their operational frameworks are a masterclass in aggressive expansion.

• The Missing Moat: This is the cardinal sin from a Warren Buffett perspective. Rocket's businesses are built on speed and capital, not on a sustainable economic moat. They lack the proprietary technology, strong brand loyalty (beyond being the first or biggest), or network effects that protect a business from competition in the long run.
• High Cash Burn: The “blitzscaling” strategy is incredibly expensive. Rocket-backed companies often burn through hundreds of millions of dollars to achieve market leadership, posting huge losses for years. This is the polar opposite of the value investor's preference for profitable, cash-generating businesses.
• Complex and Opaque Structure: As a holding company with stakes in dozens of private startups at different stages, accurately valuing Rocket Internet itself was a nightmare for analysts. The lack of transparency and the difficulty in assessing the true value of its underlying assets made it a speculative investment.
• “Clone Factory” Reputation: The business model, while effective, drew criticism for its lack of originality and its aggressive, sometimes ruthless, competitive tactics.

Rocket Internet is best understood not as a traditional company but as a publicly traded venture capital fund with a very specific, high-risk strategy. It represents a bet on the “jockeys” (the Samwer brothers and their management teams) and their ability to execute a proven playbook in high-growth markets. The company's journey on the stock market tells a crucial story. After a high-profile IPO in 2014, its shares struggled as investors found it difficult to value and grew wary of the high cash burn and constant need for new funding rounds. In 2020, Rocket Internet delisted from the stock exchange and went private again, arguing its long-term strategy was ill-suited to the short-term pressures of public markets. For investors, this serves as a powerful lesson: business models built purely on speed and replication, without a deep, defensible moat, may struggle to create sustainable, long-term shareholder value in the way that truly great businesses do.