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As it delists, Rocket Internet’s ill-fated experiment with public markets is over

It was all supposed to be so different. When Rocket Internet IPO’d in 2014 it was the largest tech company floatation in Europe for seven years. A year later it had lost $46 million and its valuation had dropped by 30%. Since then the German startup factory behind internet companies such as Delivery Hero, Zalando and Jumia has languished, in part because the reason for its existence — to provide growth capital for “rocket-fueled” startups — has ebbed away, as the tech market was flooded with capital in recent years. Today the company said it was delisting its shares from the Frankfurt and Luxembourg Stock Exchanges for just that reason.

Rocket’s market value has fallen from its high of 6.7 billion euros ($8 billion) on the day of its IPO on the Frankfurt Stock Exchange to just 2.6 billion euros and is now offering investors 18.57 euros ($22.23) for each of their shares, lower than Monday’s closing price of 18.95 euros.

The company said it was “better positioned as a company not listed on a stock exchange” as this would allow it to focus on long-term bets.

In a statement, the company said: “The use of public capital markets as a financing source as essential [sic] parameter for maintaining a stock exchange listing is no longer required and adequate access to capital is secured outside the stock exchange. Outside a capital markets environment, the Company will be able to focus on a long-term development irrespective of temporary circumstances capital markets tend to put emphasis on.”

Delisting, it said, will also reduce operational complexity when setting up new companies, “freeing up administrative and management capacity and reducing costs.”

Its investment division, Global Founders Capital, and CEO Oliver Samwer, will retain their stakes of 45.11% and 4.53% respectively, meaning the virtual shareholder meeting on Sept. 24 to ask for shareholder approval to delist will largely be a formality. It has also launched a separate buyback program to secure 8.84% of its shares from the stock market. Although the decision to delist makes sense, smaller shareholders will be burned, especially as Rocket is using its own cash for the buyback.

The bets Rocket took, however, have of course paid off. For some. According to Forbes, Samwer and his brothers and co-founders Alexander and Marc are worth at least $1.2 billion each.

The Berlin -based firm became quickly known as a “clone factory” after Samwer famously conceded during his Ph.D. that Silicon Valley had got innovation wrong by coming up with new ideas, and the “innovation” would simply be to make existing models more efficient. The fact those existing models were usually dreamt up by other people never seemed to phase him.

Almost like clockwork Rocket produced clones of Amazon, Uber, Uber Eats and Airbnb. Its defense for this rapacious strategy was that it was simply adapting proven models for other markets.

Rocket would say it was merely adapting proven models for untapped local markets. Of course, the kicker was usually that the company would either scale faster globally than the original U.S.-based startup, thus forcing some kind of acquisition, or that it would have its clones IPO faster. It did however produce some big, global, companies, even if they were not particularly original, including e-commerce firm Zalando, food delivery service Delivery Hero and meal-kit provider HelloFresh .

There have been successes. Jumia, the African e-commerce company, listed in April last year and when Rocket sold its stake earlier this year, it contributed to Rocket’s net cash position of €1.9 billion at the end of April.

But it has not benefitted from the recent stock market rally for tech companies, as it is overly exposed to e-commerce rather than pandemic-proof companies like Zoom .

For nostalgia’s sake, here’s that interview I did with Oliver Samwer in 2015, just one more time.

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Vista Partners founder calls for a fintech revolution to help pandemic-hit, minority-owned small businesses

The head of what is arguably private equity’s most successful technology investment firm — Vista Equity Partners — made a rare appearance on Meet The Press to discuss the steps that the country needs to take to help minority-owned businesses recover from the economic collapse caused by the COVID-19 epidemic.

Robert F. Smith is one of the worlds wealthiest private equity investors, a noted philanthropist, and the richest African American in the U.S.  Days after announcing a $1.5 billion investment into the Indian telecommunications technology developer Jio Platforms, Smith turned his attention to the U.S. and the growing economic crisis that’s devastating minority businesses and financial institutions even as the COVID-19 epidemic ravages the health of minority communities.

Calling the COVID-19 “a pandemic on top of a series of epidemics”, Smith said that the next round of stimulus needs to support the small businesses that still remain underserved by traditional financial institutions — and that new financial technology software and services can help.

“We need to continue to rally as Americans to come with real, lasting, scalable solutions to enable the communities that are getting hit first, hardest, and probably will take the longest to recover with solutions that will help these communities thrive again,” Smith told NBC’s Chuck Todd.

Smith called for an infusion of cash into community development financial institutions and for a new wave of technology tools to support transparency and facilitate operations among these urban rural communities that aren’t served by large banking institutions. 

In all, the first round of the Congressional stimulus package poured $6 trillion into the U.S. economy through authorizations for the Treasury to issue $4 trillion in credit and $2 billion in cash payouts to various industries. The average size of those initial loans was just under $240,000, according to a post-mortem assessment of the Payroll Protection Program written by Lendio chief executive Brock Blake for Forbes

Blake’s assessment of the shortcomings of the PPP echoes Smith’s own criticism of the program. “Many of these small communities — urban, rural — aren’t being banked by the large institutions,” Smith said. Instead they’re working with community development financial institutions that in many instances weren’t approved lenders under the Small Business Administration and so were not able to distribute PPP money and make loans to their customers.

“We have to take this opportunity to reinvest in our business infrastructure in these small to medium businesses. In our banking infrastructure so that we can actually emerge out of this even stronger,” Smith said. “We have to invest in technology and software so that these ‘capillary banking systems’ are more efficient and they have more access to capital so they can engage with these businesses that are underbanked.”

In many instances this would amount to the construction of an entirely new financial infrastructure to support the small businesses that were only just beginning to emerge in minority communities after the 2008 recession.

“We need to get this average loan size to $25,000 and $15,000,” said Smith. To do that, community banks and development finance institutions are going to need to be able to access new fintech solutions that accelerate their ability to assess the creditworthiness of their customers and think differently about how to allocate capital and make loans. 

In some ways, Smith is echoing the call that fintech executives have been making since the PPP stimulus first started making its way through the financial system and banks began issuing loans.

“We would be remiss if we didn’t take a significant portion of capital to reinvest in the infrastructure of delivering capital back into those businesses and frankly reinvest in those businesses and give them technology and capability so there’s more transparency and visibility so there’s an opportunity to grow [and] scale,” said Smith. “I don’t want to see us go back to the same position where we were so we have these banking deserts.”

The head of Vista Equity Partners has even tasked his own portfolio companies to come up with solutions. As Barron’s reported last week, Smith told the Vista Equity portfolio company Finastra to develop technology that could help small lenders process Paycheck Protection Program loans for small businesses in underserved communities.

“In the process, it became apparent how unbanked these most vulnerable communities are, and we felt it was imperative to help build out permanent infrastructure in those banks so that they can build long-term relationships with the U.S. Small Business Administration beyond PPP,” Smith told Barrons.

As of last week, 800 lenders had processed 75,000 loans using the software that London-based Finastra developed for U.S. small lenders. Those loans generated $2.2 million in processing fees for the fintech company, proving that there’s money to be made in the small ticket lending market. And even as Finastra is reaping the rewards of its push into small business lending services, Vista Equity and Smith are donating the same amount to local food banks, according to a spokeswoman for the private equity firm, Barron’s reported.

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Here’s How Some VC Firms Are Trying To Keep Founder Mental Health In Mind

When Ezra Galston was spinning up Starting Line, a Chicago-based venture capital fund, the pressures of raising “almost broke” him. And that was with his wife, a licensed therapist, and his own therapist in his corner.

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So when Galston picked himself back up and finally closed the $17 million fund, he promised that a core tenet of the venture capital firm would be to offer a series of subsidies for every entrepreneur in the portfolio to take care of their mental health.

The subsidies can be applied to a range of services, “as long as it’s something focused on forced introspection and personal growth [or an] outlet where entrepreneurs can really be transparent about the struggles they’re going through,” Galston told Crunchbase News.

Galston’s Starting Line is part of a small, but growing, cohort of venture capital firms that explicitly offer mental health services for their portfolios. As programs roll out across the country, some investors are finding different ways to support the holistic health of founders, from subsidies to in-house therapists.

In 2018, Dasha Maggio, a partner at Felicis Ventures, launched the firm’s 1 percent program. The premise was simple: Felicis Ventures will commit 1 percent on top of every first check it writes in non-dilutive capital for “founder development services.”

“Money talks, I think, and it’s one thing to say yes we support you, etc. It’s another thing to say, we are committing money out of our own budget and giving you the choice of how to invest in yourself as a founder,” she said in an interview with Crunchbase News.

Since starting the program, Maggio’s had a “growing but nascent resource database’ saying it’s all about ‘breaking down the barriers,” she said.

And while the program was inspired by two years of surveying founders, per Forbes, Maggio said she continues to learn new lessons, as the firm is on its sixth fund. Maggio declined to share statistics around usage of the capital committed to mental health. She did say, “we can very confidently say that it is driving impact.”

One founder spun up a circle of colleagues for a mini-founder support group with a trained facilitator. Another used the funds for a therapist. Others have hired life coaches.

Life coach is the exact kind of job that Sarah Gaines, an entrepreneur and Yogi, is betting could be her next full-time gig.

In December 2019, Gaines ended The Y Society, a Boston-based platform for women professionals, and pivoted to being a life coach for entrepreneurs as a side gig. She charges a flat rate of $5,000 for her programs, a high value, she said, so her “clients know they’re making an investment in themselves.”

“I want to help mission-based entrepreneurs find more joy, more time and more clarity so they can show up for themselves,” Gaines told Crunchbase News.

Gaines is not professionally trained, and said that her clients, often early-stage founders, have used her services along with traditional therapy services. Think of her as a personal trainer, but for founders.

As for whether or not Gaines thinks people like her or other mindfulness professionals will ever be part of a suite of services across more VC firms?

“For VCs it’s such a fast paced, ‘you need to get shit done’ environment and that is the opposite of meditation and mindfulness,” Gaines said. “It’s going to be a VC-by-VC basis, and needs someone in the company who is really passionate about it becoming a benefit.”

In some ways, San Francisco-based Builders VC has found a way to fit mindfulness into this get-it-done mentality. This support includes an in-house therapist, a promise of confidentiality and a healthy dose of trust.

Johnny LaLonde, a licensed and trained therapist, moved to the Bay Area eight years ago and started a private practice. He soon learned that his clientele, which included founders and “folks who worked with VC firms” needed services valuable for high-stress, high-pressure positions. Then, Jim Kim, the founder and general partner of Builders VC, which we’ve written about before, approached LaLonde asking if he wanted to be a “more consistent resource” for the firm.

LaLonde agreed to be an in-house resource, with one non-negotiable in place: anonymity for founders who talked to him–especially from Kim. That’s just in case the founders feared they were being checked up on by the investor that cut a check into their company.

“It meant that founders could meet with me on a weekly basis for a year, and Jim would not know anything about it,” LaLonde said. The anonymity made a difference.

“I have a license built on confidentiality and anonymity, and that allows them to have a little more trust for me on the front end,” he said.

LaLonde noted how there’s a shortage of trained professionals helping founders.

“As far as I know, if there are other folks like me you can count them on one hand,” he said. Demand for his services reflects that. And since consistency in therapy is an important tenet, his use rate is high.

Finally, he pointed to a lesson he’s learned since working with Builders VC: Despite the general trend of awareness around mental health and mindfulness, younger entrepreneurs are more likely to use his services than older ones.

And that brings us back to where we started, with Galston. Sometimes, Starting Line’s Galston has learned, just providing and paying for the services isn’t enough.

Since kickstarting the subsidy program with Starting Line, Galston said he’s struggled to get portfolio companies to take advantage of the opportunity.

“In spite of offering people free therapy, it’s really really really hard to get anybody to actually close the loop on it and attend, and attend with any sort of regularity … and I wish 100 percent of our entrepreneurs were utilizing our subsidies,” he said.

Illustration: Dom Guzman

Software startup working to resolve issues surrounding inefficiencies in the independent trucking industry, gets $600,000 raise from notable group of…

A look at some of the mid-sized startup hubs, which despite lower amounts, keep steady pace with funding rounds.

Landing, a flexible long-term leasing company formed by Shipt founder Bill Smith, reaches $45 million in funding with latest raise.

Houwzer, a Philadelphia-based real estate brokerage and home services company, has raised $9.5 million in a growth round led by Edison Partners.

Source: Crunchbase News