spree—$2.3 million, and then $5.9 million, and
then $30 million on marketing—more than a
third of its revenue each year.
Now the company was running out of cash,
and its three biggest investors, including Rocket,
were unwilling to pony up more money. In 2014,
HelloFresh’s next two largest investors, Holtz-
brinck and Kinnevik, bailed on the company,
trading and selling their shares. Richter and
Griesel decided to go for broke, pouring their
remaining funds into growth marketing. Then,
with months of runway remaining, they flew to
America to woo new investors.
In conversation, Richter can sometimes sound like he
learned to speak English by listening to corporate earnings
announcements. He’s vague about specifics but fluent in financial models and jargon, which hardly worked against him when
pitching American investors, to whom he presented HelloFresh
as nothing short of transformational. HelloFresh, he told them,
cut out distributors, wholesalers, and nearly all food waste in
the multitrillion-dollar global grocery supply chain. Sure, there
were steep upfront marketing costs, but the cash flow from
subscribers would eventually flood back in.
In June 2014, New York City–based Insight Venture Partners
led a $34 million round, according to company filings, that
valued HelloFresh at $178 million, several times its previous
valuation. The firm was wowed by HelloFresh’s customer
growth, its data-obsessed, workaholic founders, and the com-
pany’s global footprint, says Je;rey Lieberman, the general
partner at Insight who shepherded the deal and is now Hello-
Fresh’s chairman. “It’s really hard to scale a business like
this,” Lieberman says. “And to scale across six to seven coun-
tries? It speaks to the leadership Dominik and Thomas have.”
With the new valuation, Rocket’s Samwer suddenly had
renewed interest in HelloFresh. (Samwer declined to talk to
Inc.) In February 2015, less than a year after the Insight Venture
investment, Rocket led a $124 million round, valuing HelloFresh
at over $700 million. After he’d let Rocket’s holdings dwindle,
Samwer once again owned more than 50 percent of HelloFresh.
But Blue Apron still dominated the U.S. with about 70 percent of the market, and HelloFresh was fighting over distant
second place with Plated. In March, Samwer sent Rocket’s new
COO, a former McKinsey consultant named Adrian Frenzel,
along with Griesel, with plans to fix HelloFresh.
“Keep the panko breadcrumbs moving in the pan as
you toast them in Step 3 and lower the heat if you see or
smell any burning—they can start to singe if left alone.”
—From “Spinach Artichoke Pasta Bake With Toasted
Panko and Parmesan,” HelloFresh recipe WK 15 NJ- 9
F;lush with venture capital, HelloFresh’s U.S. ops team hustled to go national. By early 2015, they had leased fulfillment centers in Texas and California, enabling the company to ship meals anywhere in the lower 48 states within two days.
They had also leased a 35,500-square-foot raw warehouse in
TRIALS OF A CLONE FACTORY
If anyone’s managed to figure out how
to exploit a formula for e-commerce, it’s the Samwer brothers—Oliver, Marc,
and Alexander. As chronicled by Inc.
in June 2012, the Germany-based
trio built Rocket Internet, which has copycatted dozens of overseas startups,
from Amazon to Uber. Today, the
estimated $4 billion empire flaunts a portfolio of more than 100 companies
spanning six continents—but since
launching HelloFresh in 2011, it’s been a rocky ride. —JEMIMA MCEVOY
2012 The Copycatter Gets Copycatted
With a portfolio of some 30 successful startups, Rocket’s
copycat strategy in emerging markets is paying off. Rocket
develops HelloFresh, which it started at the end of 2011, and
invests in African-based online marketplace Jumia. It also
accumulates more than $1 billion from J.P.Morgan and Swedish
investment company Kinnevik. Two of Rocket’s four managing
directors, who had left during the past year, start a Rocket
competitor, called Project A.
2013 Only the Strong Survive
Rocket’s portfolio boasts 75 companies in over 50 countries—
spanning from fashion to laundry to freight transport—projecting
a combined revenue of $3 billion, and 200 to 250 companies
by 2018. Rocket also starts shuttering its weaker early-stage
ventures. Home24, an online furniture store positioned as an
Ikea disrupter, lays off all of its employees in Southeast Asia.
2014 A Shaky IPO
The company raises $2.1 billion in an IPO, appealing to investors
who want in on Latin America, Africa, India, and Southeast Asia.
But within minutes of going public, Rocket’s shares tumble by 14
percent, and they continue to fall amid concerns over losses and
Rocket’s practice of overvaluing investments. Rocket announces
plans to double down on its food and grocery businesses.
2016 Falling Out of Fashion
Rocket’s revenue drops by 60 percent, from $139 million to
$55 million. One of its biggest portfolio companies, Global
Fashion Group—an online storefront for fashion sites—suffers
huge losses and sees its value slashed. Shareholders lose
confidence in Rocket’s strategy as its portfolio companies
continue to flounder, but the company maintains its will to
make three of its startups profitable by the end of 2017.
2017 Back to Earth
Several of Rocket’s portfolio companies have folded, and its
most successful companies are still accumulating losses.
Longtime Rocket investor Kinnevik sells its stake, and Rocket’s
shares and revenue fall. HelloFresh and Delivery Hero go public,
but both are still unprofitable. Rocket reiterates its intention to
“invest in lower-risk business models” and break even.
2018 Chasing the Next Shiny Object
Rocket’s portfolio is half the size it had projected for 2018, and
the company is still operating at a loss. Now, Rocket says, it’s
redirecting its $3 billion war chest to fintech and A.I.
CEO of Rocket