They are here and they mean business. Rocket Internet, a global e-commerce focused venture capital firms and startup incubators founded in 2007 by the Samwer brothers has fired its rocket engines and is ready to take on the African internet space. The VC firm has had successful investments in internet companies like in Groupon, eBay, Facebook, Linkedin, Zynga, etc and is here to make more or extend such internet-based companies on the African continent specifically Uganda.
The VC’s business strategy is quite simple; identify successful internet ventures from other countries (often the United States) and replicate them in predominantly emerging markets — and it has worked (so far).
Now the company that operates in more than 50 countries and has more than 75 ventures in their portfolio is expanding to Africa at a rapid rate. The VC is behind eCommerce mega site Jumia operational in more than 5 African countries including Nigeria, Kenya, Ghana, Uganda(soon to launch). It’s also backing Easy Taxi, Nigeria’s Taxi booking App, car classifieds site Carmudi, Jovago Africa’s leading online hotel booking platform, Lamudi the online real estate platform that just launched in Uganda, helloFood, online food ordering system, online marketplace- Kaymu also in Uganda among other new ones coming.
The multi-billion dollar VC firms comes with lots of business experience, talent and a lot of money ready to knock down local startups at their own home ground. One startup entreprenuer, Daniel Olel who has worked on an online real estate website thinks the VC is up for a rocky journey in this market; “ it is going to take a hell lot of work for these startups to make it in Uganda. rocket Internet should be looking to the future i.e making profit in like 2 years or more”.
Rocket Internet will have to overcome the challenges that have beset Ugandan dot com innovators. For instance the VC must find a solution for a functioning electronic payment mechanism that works on the local market. For years, developers have been eluded by the problem of non-functional or non-existent electronic payment methods that facilitate ecommerce akin to Visa credit cards, Paypal in the west. Many local “Amazons” have sprouted and died because transactions couldn’t be automated online.
Rocket Internet will also have to overcome trust issues that users unfamiliar with virtual markets have challenges with. Because, there hasn’t been a successful model yet on the market, users often encounter “does it work” or “how does it work” questions when it comes to internet marketplaces. These are some of the challenges that Daniel encountered with his real estate startup; “You spend a lot and the margins are low. It’s just the same for the e-commerce space. The payment stem is broken, the Trust of users is low, the infrastructure to do it is broken, you’d have to spend a lot before you start to see a return on your investment”
Besides challenges in internet infrastructure and local startups, Rocket Internet needs to be worried about an even bigger competitor — Facebook. The Mega social network isn’t just another place where online users can post their funny images and check on what their friends are doing, it’s a one-stop shopping center for almost everything. There are thousands of Facebook groups and Facebook pages that are about selling and buying of different items. These include, Liquidation Uganda, ith over 121, 950 members, Trade Links Africa with over 48,000 members, Kings Salesmen Africa with 29, 764 members, Online trading Uganda with 14,365 members among others. Rocket Internet backed ecommerce sites will have to upset this arrangement which seems to be working and has contributed to the death of several online classified websites outside of the Facebook platform.
The VC fortunately has enough capital to shoulder whatever hurdles it might encounter as opposed to startups that operate on shoe-string budgets. The good news is the success of Rocket Internet backed companies might pave way proceeding internet-startups that will benefit from the models of these companies.