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Rocket's Unbelievable IPO -- And the (Re)Birth of the Digital Studio

Having the credibility to be a pioneer in emerging markets and bringing these startups to scale globally is amazing -- and unprecedented.

While Rocket Internet’s IPO today is expected to raise far less than Alibaba Group’s record-setting $25 billion public offering, it is grabbing much deserved attention. So much so, that the seven-year-old company has had to move its offering five days ahead of schedule due to demand and, at $2 billion, is set to be one of Germany’s largest tech IPOs in more than a decade. The company’s projected valuation has now exceeded even the loftiest early estimates of $8 billion.

Another reason to pay attention: Rocket Internet, I would argue, is the world leader when it comes to launching emerging market Internet-driven businesses and driving them to scale quickly — ranking above nearly any other global Internet company, including Amazon, Google or Alibaba.

To some, Rocket, started by three German brothers — Oliver, Marc and Alexander Samwer — is just a cloning shop that replicates U.S. businesses abroad. For example, they will take a known concept, like eBay, and transplant it to an emerging market such as Brazil, launching it within as little as 100 days. They’ve created or invested in more than 70 such companies in 100 countries in the past seven years. It’s a staggering pace of company building. To others, namely in Europe, Rocket is a collection of cutthroat German operators who have scaled through brute force and left many unhappy employees in their wake. I believe that in both cases the opinions are valid, but only part of the story.

Rocket’s founders do not claim to be innovating new business ideas. They do not claim to have a long-term comfortable workplace, as many critics have noted, citing their reputation for long hours and high pressure. But they have indisputably proven that they can select a working concept from America, quickly deploy it with tight operational focus within strategic markets abroad, and attract hard operators willing to work in challenging environments. In just seven years, Rocket — which calls itself “the world’s largest incubator,” has launched and scaled more than 20 companies to at least $960 million (€757 million) in annual sales. It’s a feat that few other organizations could match.

As a longtime observer of Rocket, I believe that it’s most impressive innovation is in their global footprint and centralized approach to company building, where ideas are commodities to be tried and tested in markets.

Rocket not only benefitted from launching businesses that were already successful in the U.S. market, they also smartly took advantage of capital partners who wanted exposure in emerging markets and had few digital options to select from. In its short lifetime, Rocket has raised an astonishing $2 billion in estimated investment capital from venture partners, LPs and corporate strategics. Their ability to raise money is as incredible as their pace of company-building.

This studio-like model may well prove to be the future. We certainly believe so here at Science. Rocket’s centralized resources and IP group has helped fund and drive a staggering number of online businesses to success. After three years of applying a similar approach, less the business concept appropriation, we believe that, in the end, centralizing support and infrastructure can in fact lead to stronger startups over time, while transforming legacy assets and drastically reducing cost and time from concept to scale. Today’s Rocket IPO is evidence enough of this fact.

My only criticism of Rocket’s strategy is what seems like inefficiency in the invested capital required to get to this size. Rocket has raised an immense amount of funding, and although it is hard to dive into the individual P&L’s of their portfolio, I wonder how sustainable the spend is. Regardless, having the credibility to be a pioneer in emerging markets and bringing these startups to scale globally is amazing — and unprecedented.

A longtime entrepreneur and the former CEO of Myspace, Mike Jones now serves as the CEO of Science Inc., a Los Angeles-based company builder that nurtures successful digital businesses by bringing together the best ideas, talent, resources and financing through a centralized platform. Reach him @mjones.

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