WhyRocketInternetisstrugglingin

India
Whileitworkedelsewhere,hereitsrivalswerealsodiscountingheavily.Indiashowscloningwithoutdifferentiation
mightnotwork
RanjuSarkar|NewDelhi
February11,2016LastUpdatedat00:38IST

ALSOREAD

32

693

35

EverytimethemediarunsastoryquestioningFoodpandaIndia's
future,SaurabhKochar,thechiefexecutiveoftheglobalfoodordering
anddeliveryplatform,wouldsay"alliswell"withthecompany.Last

Foodpandamakesa
profitabilitypitch

year,whenitsoperationscameunderacloud,hesaidthecompany

Beingintheforefront
comeswiththewinner's
curse:SaurabhKochhar

yearbylayingoff300people.Lastweek,Kocharwasquicktoscotch

IsFoodpandasaying
goodbyetoVietnam?

It'snotjustFoodpanda,whichisinthenews.RocketInternet,the

It'sconfirmed!Foodpanda
quitsVietnam

allitsIndiainvestmentsJabong,FabFurnishandPrintVenueandit

Zomatoentersthe
Philippines,tocompete
headonwithFoodpanda

Rocket.TheGermanfirm,though,didnotrespondanmailseeking

hadstrengthenedprocessesandtheteamhowever,thefirmendedthe
reportsthatRocketInternetwasplanningtosellFoodpandaIndia.

GermaninternetfirmbackedbySamwerBrothers,hasstruggledwith
hasputalmostallofthemontheblock,confirmedasourcecloseto
confirmationofthesame.

WhyhasRocketstruggledinIndiawithitsventures?"Rockethasan
investmenthorizonoffoursixyears,butIndiaplayedoutdifferentlyin
termsofcompetitionorinvestmentcomingin.Itwasoutplayedbyother
players,"saidapersonwhohasworkedcloselywithRocketInternetin
India.Unlikeothermarkets,Rockethasrealiseditwouldtake10years
forthesecompaniestobeprofitable.
WhileRocketisabletoraiseenoughfundsforitsventuresinmost
markets,inIndia,thecompetitionhasmanagedtoraisemoremoney,
sayobservers.Besides,Rocketwasnotabletoretaintopleadershipinthesecompanies:Jabong,Foodpanda
orFabFurnish.Innearly85percentofthecases,thefoundersleftontheirown,whileinsomecasestheywere
replacedbytheinvestor,sayinsiders.
"Therewassomuchuncertainty.Therewasnoconsistencyintheirphilosophy,andtheykeptchangingtheir
strategy.Besides,therewaslittleincentivefortheleadershipteamastheycouldnotencashtheirstock
options,"saidaformerCEOwithoneoftheRocketInternetcompaniesinIndia.
InAugust2015,FabFurnishfoundersVikramChopraandMehulAgrawalsteppeddownfromexecutiveroles
beforebeingreplaced.Thethirdcofounder,VaibhavAggarwal,hadquitinMarch2014.InAugust2015,
FoodpandafounderRohitChaddasteppeddownafteritsoperationscameunderacloudovergovernance
issuesandRocketbroughtinKocharfromgroupfirmPrintvenue.
Unlikeotherstartupswherefoundersownasignificantstake,thefoundersandthetopteaminRocketfirms
have10percent,withRocketpossessingtherest.
"Itisveryhard(andrare)toreplicatefounderpassionandconviction,whichplaysacrucialroleinthesuccess
ofbuildingastartup,"saysTarunDavda,managingdirectoratventurecapital(VC)firmMatrixPartners.

"Rocketdidnothiretalentwhohadbuiltbusinessesofscalebefore.Theprofessionalversusfounder
entrepreneurdivideshowedupandwasevenmoremarkedinatoughoperatingenvironment.Employeeswith
lowstakeinbusinessescanbehaveverydifferentlyfrom'owners',saidaVC.
RocketInternetisaninternetplatformthatidentifiesandbuildsproveninternetbusinessmodelsandtransfers
themtonew,underservedoruntappedmarketswhereitseekstoscalethemintomarketleadingonlinefirms.
"Rocket'smodelisofaggressivelybuyingmarketsharebydiscounting.Thismodelworkedinsomemarkets
becausethecompetitiontheredoesnotdodiscounting.HereinIndia,allcompetitorswerealsodiscounting,and
heavily,"saysAnandLunia,founder&partneratVCfirmIndiaQuotient.Forexample,TinyOwlandSwiggy
outbidFoodpandaintermsofdiscountsinIndia.SodidJabong.Therefore,grabbingmarketsharewasnoteasy
forRocketinIndia."Theyareaclonefactorythatbelievesthatpureexecutionwinsoverdifferentiation.They
haveamercenaryapproachtobuildingclones,andtheymakenobonesaboutit.They'vehadsomesuccessin
cloningUSinternetbusinessesinEuropeanandLatinmarkets,butIndiaisquicklybecomingagraveyardfor
them,"HareshChawla,partner,IndiaValueFund.
InvestorssayRocketappliedastandardtemplatewithoutpayingattentiontodepth/economicsoftheIndian
market."Insomebusinesses,itseemslikeitgottheaggressivemanagersitwanted,butthatwastoppedwith
lackofcontrols,governancewhichallowedemployeestotakethemforaride.Thehurrytobuildvaluationand
sellouttostrategicinvestorsquicklydrovethedecisionmakingandwe'llseethatwillbethebaneofmanyVCs
andbusinesses,"saysanobserver.
AnotherreasonfortheirfailureinIndiaisofwrongmanagers.
But,mostmultinationalfirmsinIndiafacethisissuesmoothtalkingexecutivesalwaysswindlethem,say
VCs.