Rocket Internet marks first close of new fund at $420M

German e-commerce incubator-cum-investor Rocket Internet has raised $420 million in the first close of its new fund, with Rocket Internet itself is contributing about $ 50 million, to invest in European internet companies, it said Tuesday in an e-mailed presentation.

Shareholders in Rocket Internet, which is owned 14.2 per cent by the Swedish investment company Kinnevik, will recoup as much as 25 per cent of the returns, provided investors in the fund reach at least 8 per cent in annual returns. The investment horizon of the fund is at least nine years.

The size of the fund named 'Rocket Internet Capital Partners' makes it Europe's largest Internet-focused fund and one of the largest European funds focused on startups.

"For startups, the access to capital may become more difficult in 2016...So there is a competitive advantage to have a fund that is endowed like the biggest US funds," Rocket Internet's chief executive officer Oliver Samwer told reporters in Berlin.

Founded in 2007 by the Samwer brothers (Marc, Oliver and Alexander), Rocket Internet is one of the largest internet incubators in the world.

The firm is headquartered in Berlin, and operates a network of around 25 international Rocket offices, covering all relevant developed and emerging markets. Its primary focus is on building transaction-based business models in the online and mobile space.

Rocket Internet already has a sizable presence in Asia, including India. The Indian ventures backed by the German internet company and startup incubator include Jabong, FabFurnish and FoodPanda. Foodpanda operates under Hellofood brand in some markets.

Some of these are multi-geography properties with a separate India online property.

Many of its India ventures are part of Europe-based companies. For instance, while Jabong is part of Germany-based Global Founders Capital (GFC, formerly European Founders Fund GmbH), Foodpanda India is headquartered in Berlin and operates in 40 countries, including India.

Jabong.com, Rocket's most serious bet in India, has become the top money losing initiative for the company in the country.

In the third quarter ended September 30, 2015, the number of orders and transactions remained flat over the year-ago period. Although it managed to pull up its socks in the quarter ended September 30 with a sequential growth after seeing a decline in number of orders in Q2, at 1.6 million or around 17,400 orders a day, it just managed to match up to the previous year's level.

Jabong, which competes with Flipkart owned Myntra and other horizontal and lifestyle e-commerce players, has also been on the radar of other e-commerce companies. Last November, as first reported by VCCircle, e-commerce giant Amazon.com, Inc was in talks to acquire Jabong where the asking valuation was $1.1-1.2 billion. The deal was called off due to a mismatch in valuation by the prospective buyer and Jabong's shareholders.

Besides, the e-tailer recently saw a slew of top management changes with founding team members moving out. It had recently hired Sanjeev Mohanty as CEO.

On the other side, recent news reports suggest that Foodpanda and FabFurnish are also on the block. Foodpanda has been plagued by suspect orders, lack of automation and over-dependence on Excel sheets. FabFurnish recently pivoted into a full-fledged marketplace.

Rocket Internet's core model is to replicate successful global internet businesses in emerging markets outside China with rigorous marketing. It brings in industry executives, gives them stakes in its companies and designates them as co-founder, founder or CEO. Most of its portfolio companies operate in multiple regions.