Old money, new business – An inside look at Sweden’s Kinnevik, the money behind Zalando and Rocket Internet

The money fuelling two of Europe’s most talked-about tech companies is coming from a media-shy Swedish investment house with roots in twentieth century iron-working. Here’s a spotlight on Kinnevik.
Old money, new business – An inside look at Sweden’s Kinnevik, the money behind Zalando and Rocket Internet

This autumn, two of Europe’s tech giants will be hitting the stock market almost simultaneously. German-born Zalando and Rocket Internet are expected to raise hundreds of millions of euros through their respective IPOs, both will likely join the elusive 'Billion-Dollar Startup Club' and underscore Berlin’s position as a major player in the European tech scene.

Another common denominator that Zalando and Rocket Internet share is the fact they are both funded by Kinnevik, a Swedish investment group which has in the past few years emerged as a key player on the global e-commerce market.

Besides its stakes in Zalando and Rocket, it holds significant interests in Russia’s Avito, India’s Quikr, Sweden’s Cdon, Germany’s Home24 and many others. In total, it has more than €3 billion invested in online retail and marketplaces, and powering startups in countries including India, Ghana, Sri Lanka and South Africa.

From woodworking to e-commerce

At first glance, it seems an unlikely partnership considering Kinnevik is a family-held business with roots tracing back to the twentieth century. Controlled by the Stenbeck family, its fortunes were originally made in the iron, paper and woodworking industries of northern Sweden.

To understand how the money ended up in the online space, you have to understand the actions of former chairman Jan Stenbeck, who's a renowned figure in the Swedish business scene and father of current chairperson Cristina Stenbeck.

It’s difficult to estimate the pivotal role Jan Stenbeck played in Swedish business during the 1980s and 1990s. Through a series of aggressive moves and market-grabs, he steered the Kinnevik group away from its historical interests and into telecoms, media and new technology founding both TV3, the country’s first commercial TV broadcaster, and Swipnet, its first commercial Internet provider along the way.

Stenbeck helped break down the Swedish state monopoly on telecoms by laying the groundwork for today’s flourishing Swedish tech scene and companies such as Skype, Spotify and Mojang.

The Kinnevik Group also developed a reputation as a hot-bed for ambitious young entrepreneurs to cut their teeth on before moving on to start their own companies. Niklas Zennström, co-founder of Skype, spent several years there as did Johan Brenner, co-founder of Livebookings and advisor to Mojang.

Jan Stenbeck’s celebrity status wasn’t just due to his business acumen. Tales of his extravagant lifestyle and, in particular, his infamously lavish eating habits still serve as tabloid fodder today.

“Our food orgies almost killed me,” longtime friend, author and criminologist Leif G W Persson, told newspaper Expressen in 2006, recounting one particular dinner. “We’d start with beer and shots of vodka. After that we’d eat shellfish, roast duck, smoked eel and then apple cake with custard.”

“To finish we’d have potato mash, mostly made from butter, cream and eggs with a few potatoes thrown in. Jan would stir two pounds of beluga caviar into it. And we’d eat it with spoons.”

Photo: Ake Gunnarsson /VUE AB

When Jan Stenbeck died in 2002, control of the company passed to his daughter Cristina (right). Within a few years, she had turned Kinnevik’s attention away from telecoms and onto online retail. One thing she has retained, however, is her father’s disinterest in the media.

Cristina Stenbeck rarely speaks to the press and has declined tech.eu's requests for an interview.

If you can’t beat them, copy them

The lion’s share of Kinnevik's investments in the online space are, in one way or another, closely tied to the Samwer brothers and Rocket Internet.

Since 2009, Kinnevik has invested over €2 billion into the Berlin-based company incubator and its companies, which represents the majority of Kinnevik's investments in the field.

It now owns nearly 24% of Rocket Internet and 36% of Zalando, making it the largest external investor in both companies. It has also made a sizeable investment into the newly-formed Global Fashion Group, a new company where Rocket Internet has gathered its various fashion-oriented e-commerce brands.

Cristoph Barchewitz, investment manager at Kinnevik, prefers to talk of Rocket Internet not as an investment, but as a close-knit partner.

“We are actively involved in developing these businesses. We work closely with Rocket and the team in Berlin on a day-to-day basis,” says Barchewitz.

The 'partnership' makes sense seeing as the companies Kinnevik has invested in directly share more than a passing resemblance with what tends to come out of the Berlin-based incubator.

Rocket Internet's formula essentially boils down to this: Find an idea that has already proven successful in the US and work quickly to introduce it on as many other markets as possible (Zalando builds on the success of Zappos and others, Easytaxi is Uber in brighter colours, and so on). The competitive edge lies in execution and access to capital, rather than any true innovation or disruption of existing business models.

ALSO READ: Doing it the Rocket Internet way: An inside look at what it's like to build companies at lightning speed

Through direct investments, such as Quikr in India, Avito in Russia and Saltside, which manages online marketplaces in Sri Lanka, Bangladesh and Ghana, Kinnevik is essentially attempting the same thing, but outside of Europe. All businesses are built on proven ideas from Europe and the US, which Kinnevik is trying to introduce to emerging markets.

“We want to enter early, ideally ahead of mobile uptake in the market. We incentivise highly talented, local entrepreneurs. Our focus is emerging markets, where access to capital may be a restricting factor,” says Chris Bischoff, investment director for e-commerce and marketplaces at Kinnevik.


Unsurprisingly, some see problems with the strategy. Hjalmar Winbladh, founder of Wrapp and Rebtel, has been on the receiving end of the Rocket Internet copying machine. He says Kinnevik and Rocket Internet are playing a dangerous game, which may end up harming the startup ecosystem as a whole.

Wrapp, a gifting service built around a mobile app and tight social media integration, launched in 2011 with funding from Atomico and Greylock partners. Only months later, Rocket Internet funded a clone with the name Dropgifts.

“We ended up in a situation that didn’t benefit anyone,” says Winbladh. “When you’re a brand new startup, life becomes very difficult when a clone suddenly appears in 30 different markets backed by someone with very deep pockets.”


“On their end, Rocket and Kinnevik aren’t great innovators. They are very good at deploying existing business models but in situations like these, they run the risk of killing ideas that haven’t fully matured yet,” adds Winbladh.

With that said, from a purely financial perspective it’s hard to fault the strategy. Few would argue that these countries will not follow a similar rapid uptake in Internet penetration and smartphone adoption as the US, Europe and China.

When that happens, online retail will grow exponentially. Kinnevik just needs to make sure to be there when it happens by leveraging its deep pockets and expertise.

If the strategy is successful, the rewards could prove enormous.

Playing it safe

“There was a slight madness to Kinnevik in the past, that’s definitely gone now,” says Stefan Lundell, a journalist at Swedish business newspaper Dagens Industri.

Twenty-five years ago, Kinnevik was synonymous with disruption. Jan Stenbeck’s investments in TV, telecoms and Internet access were seen as way ahead of their time and helped pave the way for Sweden's current booming tech scene.

Today, the group is a very different animal. Largely, Kinnevik’s investments in e-commerce are dependent on the success of Rocket Internet and its associated companies.

Although copying successful startups in the west and applying the formula to developing markets may not be the most exciting strategy in the world, for a long-term investor, it’s likely to pay off nicely in ten or twenty years.

“It may be slightly less interesting, but I think Cristina would say you don’t have to invent the car yourself,” says Lundell. “You just have to build a better one than the competition.”

ALSO READ: Everything you always wanted to know about Rocket Internet

Featured image: xtock / Shutterstock - Cristina Stenbeck photo courtesy of Kinnevik

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