Rocket Internet to launch the next wave of ventures in Southeast Asia

Startup incubator Rocket Internet is preparing to launch its next wave of ventures across Asia Pacific, starting in Indonesia. The Berlin-based venture builder had said in April that it planned to set up more companies this year compared to 2018.

Rocket is approaching third-party investors in Asia for the initial rounds of financing for the new ventures, which are expected to launch in the next two weeks.

Photo by SpaceX on Unsplash

Speaking to Tech in Asia, Rocket managing director Raphael Cohen said Indonesia would be a key focus, citing how the country’s vast population size and growth rates are driving investments. A few projects are also in the works for more mature markets like Singapore and Australia.

Under the “Asia Pacific Internet Group” umbrella, the company currently runs over 10 ventures in the region, including salon-booking app Vaniday, household services platform Helpling, and budget hotel network Zen Rooms.

Among internet companies, Rocket has been zeroing in on four consumer sectors: food and groceries, fashion, general merchandise, and home and living. But that is shifting somewhat.

Cohen didn’t offer details about the upcoming ventures due to confidentiality reasons, but he said Rocket is eyeing the business-to-business sector as well. “All kinds of services around the B2B sector… everything that can serve companies, especially SMEs (small and medium-sized enterprises) – that’s a sector we’re very bullish on.”

Rocket is known for replicating proven internet-based business models, and then building and scaling these companies in new markets. A vital part of that process is the selection of a startup’s founding team, and it’s “extremely picky” about who it brings on board, observes Cohen. The company tends to choose “top-profile” people “who are analytical and can manage a very large business team.”

He adds that Rocket’s portfolio of companies gives them a good sense of what’s working in the global scene and what business models might work. The company’s active portfolio covers more than 200 companies on six continents, employing over 42,000 employees in 2018.

Early successes in the region

Rocket was an early player in Southeast Asia’s ecommerce scene, founding marketplaces Zalora and Lazada in 2012. Cohen counts both as some of the company’s early successes in the region.

Four years later in 2016, Lazada sold a majority stake to Alibaba for $1 billion. Today, the Chinese ecommerce titan owns over 90% of the company. Wang Xiaofeng, a senior analyst at market research firm Forrester, told Tech in Asia that she considers the deal a win-win, at least for the Lazada brand. It remains one of the largest – if not the largest – business-to-consumer platforms in Southeast Asia.

Alibaba’s acquisition meant that Rocket’s original founders would lose control of Lazada’s operations, but Wang says it made financial sense. “From an investment or financial perspective, obviously it was a good deal for both sides. In terms of financial return, it was very successful.”

Established in 2012, Zalora was another effort to scale Rocket’s ecommerce ambitions in the region. Headquartered in Singapore, the online fashion retailer gradually expanded into neighboring countries including Indonesia, Malaysia, the Philippines and Thailand, where operational costs were lower.

Zalora, however, faced stiff competition in these markets. Its operational losses rose 36.1% year-on-year from 2014 to 2015 to €93.5 million (US$104 million), compared to an 11.3% increase from 2013 to 2014. Eventually, mounting losses and profitability concerns led the platform to later retreat from some markets. In 2016, Zalora sold off multiple business units, including Vietnam and Thailand – territories that Rocket is looking to reenter.

Southeast Asia then and now