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Rocket Internet’s GFG closes $330M down round as external investors shy away

ICE Graveyard 22/07/2016 Jon Russell

Global Fashion Group (GFG), the umbrella group that manages Rocket Internet-backed online fashion businesses worldwide, has added €30 million ($33 million) to a €300 million round that it announced back in April.

That deal was a curious one, being that it valued GFG at €1 billion ($1.1 billion), a valuation that is massively down on its previous funding activity when the group raised $167 million at a $3.4 billion valuation in the summer of last year. This latest round has closed at €330 million ($365 million) and retained that same $1.1 billion valuation.

Rocket Internet said in a statement that the round sized increased “due to high demand.” In all fairness though, this is very often how Rocket Internet fundraising goes and we cautioned in our original reporting of this round that the final figure raised could well increase, so bare that in mind when considering the “high demand.”

It’s certainly interesting to note also that Rocket Internet and Kinnevick (its close ally and regular investing partner) provided the initial €300 million in its entirety together. Other “undisclosed” investors only added the extra €30 million — and, even then, the only investor named in today’s press release is Rocket Internet Capital Partners fund, which is aligned with… you guessed it… Rocket Internet.

It remains to be seen whether other investors were offered a spot in the initial €300 million tranche, and thus rejected the offer, or whether Rocket Internet decided to make the injection with Kinnevick from the start, and thus the valuation of the round was lower in order to secure maximum stakes.

A source from inside the group told TechCrunch that GFG CEO Romain Voog, who joined the business from Amazon in 2014, met with more than 90 investors from across the world in his efforts to raise capital but “couldn’t get a penny from them.” The person, who spoke to TechCrunch anonymously, suggested that the fundraising roadshow had been arranged in a hurry which didn’t help the (already challenging) cause.

That certainly plays into the idea that this round was drawn up in haste, which would explain why Rocket and Kinnevik forged ahead with the large chunk. Other Rocket Internet-backed companies have raised money from legitimate investors with no direct linkage to the mothership. Temasek and Tesco are among those which invested in Lazada, its Amazon-like service in Southeast Asia, so going outside of the usual circle of Rocket Internet-friendly investors is possible. But it appears that GFG wasn’t able to drum up that level of interest.

GFG encompasses Rocket Internet’s emerging market fashion business, that’s Dafiti in Latin America, Lamoda in Russia and CIS, Namshi in the Middle East, Zalora and The Iconic in Asia Pacific and Jabong in India. The firm has been cutting back and streamlining its presence in Asia, in particular, with Jabong continually reported to be up for sale, and Zalora trimming back with the sale of its businesses in Vietnam and Thailand. Our source suggested that there could be further sales as other business units deemed unnecessary are discarded from GFG.

Following this round, Rocket Internet confirmed that it owns a total of 20.4 percent of GFG.

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