5 possible reasons for Rocket Internet’s surprise sell-off of Foodpanda

Photo credit: George Lu.

Rocket Internet’s announcement of Foodpanda’s sale yesterday certainly caught most of us by surprise. There hadn’t been persistent rumors of a sell-off, unlike all the chatter before the Alibaba-Lazada deal earlier this year. Foodpanda had also largely escaped the intense scrutiny that’s been subjected to most of Rocket’s startups this year – with its fashion stores the most culpable.

That’s not to say it was all smooth sailing for the takeaway meals conglomerate. It tried in vain to find a buyer for Foodpanda’s Indonesian arm, eventually shutting down after finding it impossible to compete against Go-Jek. It was a similar situation in Vietnam where Foodpanda closed shop abruptly, with a terse announcement a few days later saying it’s sold the business to local rival Vietnammm.

But all in all, the service, which spanned 22 countries, was generally viewed as a Rocket Internet bet that might just work. After all, it went on an acquisition blitzkrieg just two years ago and fattened up with a colossal US$210 million in additional funding a few months later.

So why the surprise announcement yesterday? We’ve identified five possible reason Rocket Internet washed its hands of Foodpanda.

1. Was it running out of money?

Rocket’s financials for the first nine months of the year, released last month, make for some interesting reading.

Foodpanda managed to reduce its losses significantly as compared to the previous year – registering an improvement of almost 40 percent. But cash it had in the bank was dwindling fast – it went down from US$99.7 million in 2015 to US$60.7 million in September.

Let’s keep in perspective that these were Rocket Internet’s results for the first three quarters, not the entirety of 2016. It’s possible that Foodpanda burned through even more cash as the year drew to a close. If this was indeed the case, then alarm bells must have been sounding within senior management – forcing their hand and actively seeking out a deal.

Photo credit: lenyvavsha / 123RF.

2. Loosening grip in Asia

Rocket Internet has long touted itself as a trailblazer, fearlessly entering peripheral countries and building a market for its internet businesses where none existed. This first-mover advantage helped the German firm with visibility and media attention, but, as it found out in India, well-funded competition wasn’t too far away.

It may have saved its high-stakes bet in Lazada by the skin of its teeth, requiring the assistance of a third-party to snare the deal, but there was no guarantee of its other businesses finding similar saviors when the cash dried up.

And Foodpanda had definitely been feeling jittery in Asia. It repeatedly denied that it was looking for a buyer in Indonesia, reportedly for as low as US$1 million, only to confirm the huge loss via a statement on its website in October. The sale of its Vietnamese operations was in mysterious circumstances too.

With Uber Eats launching in Tokyo, Singapore, and Dubai, Deliveroo opening for business in both Singapore and Dubai, and local apps delivering knockout punches in India, Foodpanda knew it had to make some tough decisions in the near future. A lack of appetite to engage in a drawn-out battle could have been a key reason to seek out a buyer while there was still a chance.

3. It already sold a meaty chunk

4. The elusive IPO

5. Breathing space