US bank JP Morgan has joined the circle of investors backing Rocket Internet‘s online furniture retailer Home24, after previously backing a string of other Rocket enterprises including Zalando.
Eight digits for two per cent?
Home24, with furniture, forms one of the four main pillars of the Samwer brothers’ e-commerce focus, together with fashion (Zalando), beauty (Glossybox) and electronics (the Amazon model – Lazada in southeast Asia).
JP Morgan quietly joined the Samwer-led supporters of Home24 in September, handing over an unspecified sum for a total of nearly two per cent in the company.
The relevant financing round can be presumed to be in the high seven- or eight-figure range. JP Morgan compliments a group of already active donors: Reinhold Zimmermann and Holtzbrinck Ventures, investors in 2010 and 2011, before a new round of funding from an unspecified donor in May. Rocket’s main investor Investment AB Kinnevik is also involved in Home24.
Rumbles in the IT department for Home24…
The financiers of Home24 can expect great things, but not everything is going smoothly. In October, the company weathered the loss of customer data and subsequent phishing attempts (some details in a 22 October post on Home24’s Facebook page).
In-house IT has had its troubles, too – during a migration from Magento to a proprietary tool, there were so many problems, the marketplace had to be briefly taken offline.
Home24 relied on numerous freelancers to carry out the migration project quickly, creating corresponding costs. After completion of the task, with projects forced back on more permanent staff members and with open discussions with interested freelancers, there are reports of frustration among some employees.
One former Home24 employee told Gründerszene that the mood among some employees is bad – that one is said to have been threatened, because of an alleged theft of three laptops, with legal action if he did not sign a termination agreement. It seems most likely these are frustrated individual voices. “This is an exaggeration of a few frustrated people,” said another former employee.
Home24 might be a hard employer but that’s not unlike other Rocket companies. Also, Home24 CEO Philip Kreibohm stressed: “For us, it is important to create sustainability in Home24. We want to build long-term employee relationships, and of course there is sometimes frustration when temporary freelance projects are migrated to fixed structures. We try, however, to take into account the concerns and desires of all employees, and are equally open.”
Furniture shipping – it’s a complex business
Problems with IT are somewhat typical for young companies. Taking a wider view, confronted with a challenging market, JP Morgan’s monetary support will be put to good use. While the furniture sector is still largely an offline one, there is exciting potential for online offers.
The relatively complex processes for furniture shipping can be a challenge. According to an insider, Home24 should have reduced the involvement of third parties in their own supply chain to avoid furniture being delivered damaged by external service providers (and the complaints that follow).
It might be telling that Home24’s German and international businesses branches are held in the same place – unlike Zalando, known for its international ambitions, and parallel international holding company Bigfoot (home to regional companies Dafiti, Lamoda and Namshi).
If a company has its processes well under control, such a split structure can be useful. For Home24, which still uses a third-party for most of its furniture dispatch, the quality may not yet be high enough. It remains to be seen whether Home24’s processes can endure the challenges – and costs – of full-on international growth.
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