19. November 2012–
It seems like the leadership team at Rocket Internet continues to abandon the infamous Samwer brothers with news that another two managers, Raphael Strauch and Mads Faurholt-Jorgensen, have jumped ship to form Nova Founders, described as a “Rocket Internet 2.0”. They predominately headed up the Rocket businesses overseas and follow last year's exodus to Project A Ventures.
Ex-Rocketers launch Nova Founders
It isn’t the first time that a group of managers from Rocket Internet have banded together to start an incubator – basically the whole leadership board of the “A-Team” at Project A Ventures was drawn from the Samwer stable. And now Raphael Strauch and Mads Faurholt-Jorgensen want to work independently and begin their own incubator – Nova Founders. Even if the incubator will have an international focus, they themselves have said that one-third of the startups will be in Europe.
Until recently, the two managers were mostly responsible for rolling out Rocket business internationally. They have not made a secret of their Rocket past, quite the opposite in fact, on their own website they advertise that Zanui and Zalora are two successes from the team – both well-known Rocket companies.
“Rocket Internet 2.0?”
Christian Weiss, Uwe Horstmann, Thies Sander and Florian Heinemann from Project A Ventures, along with Tirendo, who recently made themselves known through an advertising campaign featuring Formula One World Champion, Sebastian Vettel, along with a prominent financing round, are focusing on establishing businesses internationally.
Similarly, the two ex-Rocketers have founded their own incubator that, with offices in Kuala Lumpur, Hong Kong and Gentofte (Denmark), is also working to roll out companies worldwide, just like their former employers. And the expectations for the businesses are not exactly modest, Nova Founders wants to launch viable businesses globally that will be quick to make a profit. They’ll use their own ideas, along with concepts from driven entrepreneurs.
We interviewed Mads Faurholt-Jorgensen to discover how he and Raphael Strauch want to combine the know-how of Rocket Internet along with sustainable business models and a healthy business culture, what the incubator offers founders, which entrepreneurs they’re after and how Nova Founders wants to give investors good dividends that are low risk...
Will Nova Founders be an incubator or a company builder, ie. will you be working on own ideas or are you looking for business concepts?
Both company builder and incubator. We build companies that are based on own ideas or great business models that we see somewhere. Sometimes entrepreneurs, investors or companies (eg media, telcos) come to us with ideas or existing online companies in search for execution support, and sometimes we find the entrepreneurs.
What are you offering entrepreneurs with good business ideas?
There is so much to learn as an entrepreneur – say you are building Zalando over again tomorrow, you have to learn buying, merchandise planning, online and offline marketing, PR, inbound operations, editorial/content, warehouse management, outbound logistics, customer service, HR, recruiting, raising capital, building tech, and many many other things and all this in days, weeks or a few months. I mean no wonder that startups fail, despite having great people. We want people to learn one thing at the time and then learn it very well.
In the case of building a home decor shopping club, if you were two founders then we would say why don't you focus on buying, which is the most important part now, and then our CTO (who has launched over 40 sites before and was acting head of product and CTO at Rocket for a long time) take care of the tech, let our CMO (who has spent millions US dollars in marketing and who made Zalora a household name almost overnight in Asia) take care of marketing etc. Over time we then build capabilities in the company so that they can stand alone. But key is to change the risk profile completely.
Are you actively looking for people? And what qualifications are you looking for?
We are always looking for great people. While I have properly recruited more people from McKinsey than anyone (perhaps Oliver did beat me :) ), at Nova we believe that talent comes in many forms. As my good friend Rasmus Ankersen (author of among other things “The Goldmine Effect”) says, there are two types of talent that is relevant, “Shouting Talent” such as Usain Bolt who was clearly going to be a world-champion runner. This is typically your McKinsey talent or your Oliver Samwer, everyone knows they are going to be great.
On the other hand you also have “Whispering Talent” like Asafa Powell, who had been turned down by every club until coach Mr Francis took him in. Mr Francis had learned one key thing, to not just look at what meets the eye, but to find the talent who has great potential and mindset but not been under great coaching (Asafa had the right mindset, but had just not had the right coach). Same goes for business – everyone is searching for McKinsey talent, and we are as well, but fundamentally believe and continue to find “Whispering Talents”.
An example of this – one of team members Anders, who was doing Ultimate Fighting in Taiwan when we met him. I have never seen a guy so determined to win in business (dont worry, he's friendly). In short, we love both Shouting and Whispering talent, but we are one of the few who are actively shouting. Same goes for business models. Everyone is throwing themselves at the hottest one, we believe there are great opportunities that few people talk about.
Who will be in Nova Founder’s team?
In Nova we love all nationalities. In fact we properly favor diversity. A lot of our team members come from Rocket, while others have worked with other startups. When we left Rocket, we went to the 15 best people of the thousands we were managing or had hired, to see if they shared our passion, values and mindset, fortunately they all did and joined. This includes the PM and CTO who have launched the most ventures for Rocket, CMO for Asia, the best Business Developer we have seen ever, head of operations for Zalora, et cetera. But the team should be much more diverse going forward.
Where does the money come from?
When we left Rocket we first had to decide what do we really want to build and what do we need to make this happen – that’s the great thing when you built a new venture, you start on a blank piece of paper and there is no right or wrong, but only how you want it to look like. We started out self-financing to focus on building profitable sustainable companies. It did not take long for the first investors to approach us. We have since received offers for double digit millions and are in the process of finalising the first rounds.
I think what investors like is that we tend to think much more structured about building companies than a lot of other people and work very actively to reduce the risk. As an example, we are properly fundamentally one of few entrepreneurs that think about business models in a mix between Silicon Valley, PE, fund, hedge fund and true entrepreneurs. With all business models we see or ideas we have we start with top down on macro and demographic trends and then look at an attractive space, and then see what business models we like/make fundamentally sense and where we have passion.
We also have requirement that the business model or need should have existed offline for “hundreds of years” to make sure we are not betting on a short term trend. We focus a lot on building superior returns to similar asset classes, with the goal that private people can invest in our “product” over time. We expect to build 30 per cent of our companies in Europe and the other 70 per cent in Southeast Asia, which is one huge opportunity in our belief.
What are you looking for?
We always look for great ideas, but ideas are usually not the issue, we have already many for Europe and hundreds for Asia. The key, and where we differentiate ourselves, is in selecting which ones to pursue. The best team in the world with a mediocre idea is worth nothing. We fundamentally believe there is too much hype around certain business models that will never be profitable, we are properly extreme about the pre-research we do on every idea and our qualifications, but this is the only way we can produce best in class returns to investors.
Are there any investors cooperating with you from the beginning?
Great question. We actually want to and believe in partnering with investors in building companies, in fact we think this has been completely overlooked. We are currently finalising agreement to partner e.g. with a media company to build a particular e-commerce model and with an offline retailer to win online for them. We would love to and look actively to partner with companies that have been successful elsewhere, and then win online with them. For example there are very few media companies that have been successful in building online companies, however the power of media is absolutely amazing.
In the same way, there are few offline retailers that have been successful online. We are currently speaking with a few, including a few private equity funds about their portfolio. Companies should do what they do best. We are extremely good at building online companies, and bring the knowledge from the last 30 or more ventures we have launched and dramatically change the risk structure to the opposite.
Are there any projects yet?
I would love nothing more than to share that news with you! We leave it with the founders of the companies to decide on when to do PR. We are working currently on four extremely exciting businesses.
Will Nova Founders have a particular focus (e-commerce, mobile etc.)?
Focus can come in many ways: method, industry, function, culture, etc. We will focus on the methodology to producing great companies and superior returns to investors. Key is leveraging knowledge and experience, choosing the right business models, doing business models that are based on skills that we have.
What are your goals for the next year?
At Rocket, Raphael and myself twice took companies and region from zero to 3000 people in six months and built 16 companies at the same time. We want to focus a lot more now, because we believe this is key to building long term returns. So the goals are no longer the number of companies, size or number of people, but instead fully on building a great sustainable culture, building profitable and sustainable companies and producing returns for our investors.
Is there a long-term strategy?
Our long-term strategy for our founders and employees is to make sure that they have a great place to work, with a lot of fun and where they get appropriately valued for their hard work. For investors our goal is to change the return structure of the industry.
We fundamentally believe that current return structure of the industry is completely off, and it does not have to be this way. We will prove that startups can produce best in class asset returns, if we focus on bringing best in class experience, work actively to reduce risk, are careful about the models we choose and do proper research and analysis, and are willing to provide great returns to our investors.
What are your reasons for leaving Rocket Internet?
Rocket was undoubtedly a great place to learn and we enjoyed the last years a lot. Both Raphael, I and a large part of our team came to Rocket in 2010, when Rocket was still relatively German focused. After a short stop in India to build up todays Jabong (similar to Zalando) we spent a lot of time on Groupon in Asia.
When we later returned to the Rocket level, we became Global MDs and were at that point in time the only ones in Rocket with Global equity (plus Alexander Kudlich, who joined a bit later).
Despite a great deal, opportunity and trust the Samwers had given us, we believed there was a “2.0 version” of what we were doing. We believed it was possible to be focused, work hard, be very smart and systematic like Rocket, but at the same time building a great culture that people love, be honest, truthful and very importantly building great profitable and sustainable companies and returns to investors.
Translated by Michelle Kuepper
Photo credit: MindMillion.com
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