Rocket Internet quashes Asia exit talk amid reported Zen Rooms sale bid – ANITH
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Rocket Internet quashes Asia exit talk amid reported Zen Rooms sale bid

Rocket Internet quashes Asia exit talk amid reported Zen Rooms sale bid

Zen Rooms sign

Photo credit: Zen Rooms

Rocket Internet has denied that it is exiting Asia after multiple layoffs and proposed sell-offs at several of its local unit’s portfolio companies.

Rumors emerged late last week that Asia Pacific Internet Group (APACIG) – Rocket’s Singapore-based joint venture with Qatari telco Ooredoo – may be shutting down following the closure of ecommerce app Lyke and the departure of several staff from hotel-booking platform Zen Rooms, both of which are APACIG-backed startups.

Zen Rooms is being offered to investors and possible acquirers, including a rival company, Tech in Asia has learned.

A source familiar with the matter told Tech in Asia that most, if not all, of APACIG’s portfolio companies have been told to accelerate cost-cutting exercises over the past couple of months and that several startups in its stable are likely to be de-funded entirely.

We contacted APACIG to confirm whether it would be closing shop – effectively marking Rocket Internet’s exit from the region – or if a restructuring process was underway that would see it de-fund some of its portfolio companies and dismiss staff.

“At this point, we can confidently say that APACIG is not closing down,” an APACIG spokesperson said in response to these queries. “As for the other questions on our portfolio companies, we will have more concrete information to share with you in the next few weeks.”

Startup consultancy Momentum Works published a blog post last Friday suggesting that APACIG had apparently “shut its doors” with “many people […] let go at different ventures, including Zen Rooms.”

No more runway?

Tech in Asia‘s source said that an expected funding deal for Zen Rooms – which aggregates hotel rooms for budget-conscious travelers – had fallen through, leaving the startup in a precarious financial position.

Zenrooms’ co-founders, global managing director Nathan Boublil (L) and CEO Kiren Tanna (R) / Photo credit: Zen Rooms

A separate source who’s also familiar with the matter said that Zen Rooms’ owners have been “approaching people for a fire sale.” Those parties supposedly include Singapore-based competitor RedDoorz, which today announced a new US$11 million fundraise.

“[Zen Rooms] is out of cash, running around in circles. It seems the company might just get out of business unless it has a desperate last-minute sale,” noted the source.

We reached out to RedDoorz for a comment, but it neither confirmed nor denied that they’ve been approached.

See: While rivals struggle, RedDoorz sees ‘exponential’ growth with $11m new funding

Zen Rooms co-founder and global managing director Nathan Boublil confirmed to Tech in Asia that close to 10 percent of the startup’s total staff have been let go, all of them based in Thailand.

“We are optimizing our budgets, as always, pushing our more profitable countries, and restructuring in our least,” he said. “This had been on the table since January and we executed it late February.”

Boubil, however, did not say if a collapsed fundraising deal had been a factor in the layoffs.

On external funding, he explained: “Conversations happen all the time and are still ongoing.”

Funds for the foreseeable future will come from “operations and existing investors,” he added.

He hasn’t responded to our query about the supposed sale.

Zen Rooms scored US$4.1 million in its most recent fundraise, a series A round in April 2017. Redbadge Pacific and SBI Investment Korea led the round, with APACIG participating.

Deeper problems than funding

Meanwhile, Lyke CEO Bastian Purrer told Tech in Asia’s Indonesian site that following the termination of the startup’s service, majority of its staff would join Chinese ecommerce player JollyChic. Lyke used to aggregate listings from a variety of third-party fashion retailers.

He also indicated that the firm’s tech team would be let go after a transition period and replaced by JollyChic’s own developers.

Image credit: Lyke

According to Purrer, revenue that Lyke generated from transaction fees could not match its operational costs, and seeking further venture funding would not be enough to solve fundamental issues, such as the startup’s lack of an on-board payments system. He decided that a merger with JollyChic, which is looking to expand its presence in Indonesia, would be the best outcome for the company.

Lyke raised US$4 million at its series A funding round in August 2016. Germany’s Holtzbrinck Ventures led the round, with APACIG joining in.

Market cautious

Through APACIG and other vehicles, German venture builder Rocket has helped establish a range of startups throughout Asia, and is widely recognized as one of the Southeast Asian ecosystem’s key players.

Food-delivery app Foodpanda and ecommerce marketplaces Zalora and Lazada – the latter was acquired by Alibaba – are among the most high-profile platforms that Rocket launched in the region.

But the company’s ability to secure a return across all of its investments and the valuations it attaches to its portfolio have been questioned by investors.

Its market cap was US$4.82 billion at time of writing, indicating that investors place little value on the firm’s assets above and beyond its US$4.6 billion in cash and equity. Rocket held US$2.2 billion in cash and cash equivalents as of September 30 2017, while its equity holding is largely accounted for by stakes in publicly listed food-delivery firms Delivery Hero and HelloFresh.

However, investment bank Berenberg thinks that Rocket’s other big startup stakes could be worth over US$1.23 billion.

“While we understand that investors may be reluctant to accord a platform value to Rocket… we think the market is taking a far too cautious an approach with this company,” Berenberg analyst Sarah Simon previously told Reuters.

The team at APACIG, Rocket’s investment-focused joint venture in Southeast Asia / Photo credit: APACIG

Rocket has sought to address concerns about valuations and shaky performance at some of its startups by divesting some assets. In addition to the aforementioned Lazada sale, it sold Foodpanda to Delivery Hero – in which it is also a shareholder.

It has also sold a portion of its Delivery Hero stake through a US$775 million deal with South African tech giant Naspers and a US$243 million sale to an undisclosed buyer.

Rocket subsidiary Global Fashion Group sold its Indian ecommerce store Jabong to local player Flipkart, as well as divested Zalora’s Thailand and Vietnam businesses to Thai conglomerate Central Group.

The German company has also offloaded loss-making businesses. In November, it sold the Vietnam unit of its used-car marketplace brand Carmudi.

This strategy has borne positive results, with Rocket revealing last November that it had narrowed its losses to US$54.3 million for January to September 2017 from US$793 million a year earlier.

However, Rocket CEO Oliver Samwer told investors that several of its key startups would take longer than expected to turn a profit.

Continuing to divest expensive and non-performing assets could help speed Rocket’s route to recovery.

Converted from euros. Rate: US$1 = €0.81

This post Rocket Internet quashes Asia exit talk amid reported Zen Rooms sale bid appeared first on Tech in Asia.

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Anith Gopal
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