The Difference between Rocket Internet and Y Combinator

As the first person to be member of the alumni of the biggest and most successful incubator in Europe (Rocket Internet) and in USA (Y Combinator), I would like to share some of my experiences that have helped me in my entrepreneurial endeavors.

Rocket Internet (aka. Rocket)

Rocket has launched more than 75 different companies in as many countries, among those, e-commerce blockbusters of Zalando and Zalora (Zappos copy) and Lazada (Amazon copy) to name a few. Rocket was started by the Samwer brothers in 2007, who still run the incubator today, and who makes sure the incubator receives $1+ billion in venture capital every year to fund their existing and future startups. A very big number compared to Y Combinator’s $1,6B total follow-on funding for alumni companies since YC began in 2005.

Rocket is different than what most people associate with a startup incubator. Usually, an incubator looks for talented entrepreneurs with an interesting business idea they want bring to market. Rocket doesn’t look for new ideas; they copy already successful ideas and look for talented people to expand the concept to new countries in exchange for high salary, low equity and a Co-Founder title.

When I was first recruited by Rocket, I clearly remember Oli Samwer’s first email telling me “Ideas are dime a dozen, success lies in execution, jaa”. With 10 startups in my backpack I couldn’t agree more. I’ve seen plenty of great ideas die because the founders didn’t know how to execute, but I’ve never seen founders with great execution skills kill a business because the idea wasn’t good enough – they adapted and changed the idea based on their findings, until they got it right. Most startups – despite how awesome the idea is – will have to adjust the idea along the way.

Rocket’s focus on execution is almost fanatic. Everything must happen as fast as possible with no or very little attention to costs or quality. You don’t wait for the next day, but get things done immediately, also if you have to drop everything else. Deadlines are not months, weeks or days, but hours, which creates an intense and stressful work environment that only a certain kind of people thrives in. The upside of such company culture is a steep learning curve where mistakes are frequent and solutions are found incredibly fast. To give you an example, in my 8 Rocket startups, we went from 5 to 2000 people in 12 months with millions of orders across 8 different countries (and languages) with fully developed frontend, backend, WMS, DWH, UMS and much more. The downside is that it’s expensive and you loose 30% of the workforce during the process because people who prioritize free time above work finds themselves working 24 hour days – sometimes more when passing through different time zones.

The sense of urgency, focus on solutions instead of obstacles and never taking “no” for an answer, is fundamental to the success of Rocket Internet. Any startup implementing these core values increases their chance of survival and future success.

Y Combinator (aka. YC)

What Rocket is to execution, YC is to product. YC would never dream of accepting a startup copying an already existing product or business model. YC startups tend to have a new product or business model that builds or combines elements of other business models to offer something unique that solves a pain or makes life easier, faster or better for the user.

YC is more of an accelerator than an incubator (as they don't house startups) with a three-month program culminating with demo day where the startups present their company and the hockey stick graph with incredible growth. Different from Rocket, YC doesn’t employ and assign you to a startup. Instead, YC invests in you and your startup, typically for 6-7% equity, and provides guidance and advise on all the questions and challenge you and your co-founders might have. Every week, office hours are held, where you give a status update followed by an inspirational talk from one of Silicon Valley’s finest that leaves you amazed, wiser and most importantly - motivated. After 10-20 guest speakers, you start to see a clear correlation between startup success and amount of hard work (and shit) you have to go through.

Similar to Rocket, YC also focus on momentum and launching sooner rather than later even though quality might not be perfect. The reason for this is based on the fact that you’ll never hit a home run in your first try and once you’ve launched, you’ll have real user feedback (instead of your own presumptions) to further develop and build the product people want. Don’t overthink it, just launch.

A great thing about starting new businesses for Rocket was that funding was usually not an issue. Even though 1 star hotels and budget airlines were the standard, you had the freedom to try a lot of things despite costs. That scenario is not very useful when bootstrapping your own startup, where money is always an issue. YC knows this and wants you to get funding, so the company has time to figure out what its product is, who its users are and how to make money. YCs motto is “build something people want”, which confirms their focus on product development, but on the backside of that t-shirt, it should say: “in growth we trust” because growth (eg. users, customers, impressions etc.) is the single most important indicator of success and something you can’t get any funding without when it comes to demo day. A simple question to ask when prioritizing tasks for yourself and your employees is this: Does it give you growth?  If it doesn’t, something else is more important.

YC spends a lot of time teaching you how to pitch your startup. Each comma in your presentation is questioned and every word is discussed. In 3 minutes, your pitch has to be crystal clear, understood by everyone and leave an impression investors remember (and not “something with storing data”). In order to stand out from 80+ startups you have to deliver a compelling story – very American and very different to the European ways of modesty, arrogance and shyness. Read my previous post on my pitching recommendations and the video of the pitch I gave at TechCrunch Disrupt.

AirHelp got accepted to the W2014 batch after 10 min of third degree interrogation and 1001 questions. I was told that if I got an email, AirHelp was out, if I got a phone call, AirHelp was in. That evening I received an email – asking for my phone number. 

27 responses
Spot on...!
Excellent :-)
Thanks for the write up. That is a very interesting comparison. I think the biggest differentiator is that the purpose of Rocket Internet is not to support talented entrepreneurs with their innovation. They are only interested in scaling their e-commerce business. For me that has nothing to do with innovation or with startups. Y-Combinator on the other side truly supports young entrepreneurs and helps them to build a business around their innovative ideas.
I am so glad to have a chance to read your wonderful article. I am looking forward to read more of your works and posts.Thanks for sharing such a nice article.
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