New funding round of $363M drops value of Rocket Internet’s fashion group from $3.4B to $1.1B

(Updated at 2:01 at PST to include additional information on investors.)

In the latest sign that Germany's Rocket Internet may be hitting rough waters, the startup factory's Global Fashion Group announced today that it had raised $363 million in venture capital at a significantly lower valuation.

Last summer, GFG raised $167 million at a valuation of $3.4 billion. Today's round gives GFG a value of $1.1 billion. In addition, Rocket said all the money came from existing investors.

Launched in 2014, GFG operates fashion websites in six markets: Latin America, Russia, the Middle East, Australia, Jabong, India, and South-East Asia.

GFG came right out of Rocket's classic playbook with an aggressive approach, but one that has made investors increasingly nervous. The company's mission is to take what it calls "proven business models" and replicate them in European, Asian, African and Latin American markets. In Silicon Valley, Rocket is often derided for what some see as its "copy cat" approach.

Since Rocket's IPO almost two years ago, the company's various groups and business units have struggled to move toward profitability or demonstrate long-term sustainability. Rocket's stock price is down sharply. And the stock took a big hit earlier this year when Sweden's Kinnevik, Rocket's second-biggest shareholder, marked down the valuation for its emerging market fashion websites by two-thirds. Kinnevik also announced that its representatives were leaving the board.

In the funding release, Rocket claimed that "due to high demand" the round was increased by $33 million in the final tally. The money came from "existing investors, including Rocket Internet SE ("Rocket Internet") and the Rocket Internet Capital Partners fund ("RICP")." Rocket now controls about 20 percent of GFG.

The release did not specify whether Kinnevik participated in the round.

"GFG has successfully built its position as market leader in online Fashion in many key emerging markets," says Oliver Samwer, CEO of Rocket Internet, in a statement. "The recent funding round provides GFG with the necessary capital to continue on that path. We are looking forward to continuing to work with the GFG team as well as Kinnevik and the other GFG shareholders."

UPDATE: Some of the details of this investment had already been confirmed in a recent report from Kinnevik here. In short, Kinnevik said it would provide about half of the $363 million round, and that the size of the round had also been increased "due to strong shareholder interest." Certainly, a welcome vote of confidence for GFG and Rocket.

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