Huawei and Rocket Internet: great similarities

Rocket Internet has had a strong presence in Southeast Asia since the early 2010s through the launch of Zalora, Lazada, Foodpanda, Easy Taxi & many others.

Being the pioneer startup builder in the region has given it the best picks in terms of talent, but also thanks to its seemingly deep pockets (at least by the standard of those years), it has built one of the best team of people – who later went on and built the startup ecosystem across Southeast Asia. The same can be said for Rocket Internet’s companies across the developing world, in Latin America, Middle East, Iran and Africa.

Few have ever heard of Huawei (besides its smartphones) accomplishing the same things first for the Chinese market, and globally. Although Rocket Internet and Huawei may be two very different companies – one as a venture builder, one as an mega-conglomerate, they have some amazingly similar traits.

Similarities:

i) Culture that focuses on execution, speed and aggressiveness

During the early days of Rocket Internet, the founders successfully cloned Groupon’s business and grew it all over Europe in a period of 5 months. It was later sold to Groupon for a whopping US$100 million (well yes, a lot of money back then). The focus on execution and speed, together with aggressive growth strategies (despite losses) is what sets Rocket Internet apart from others.

Huawei prides itself by being relentless, and in many cases, demands their employees’ full attention to work. In the early days, each new employee was known to have received a blanket and a mattress (a practice we still see today in many startups across China). Now in many markets, key employees’ transportation, childcare, and even food were all taken care of, leaving them with nothing to worry about but to aggressively fight for numbers.

ii) Giving young people significant budget, responsibilities and targets

At Rocket, it was not unusual to have a 24 year old being in charge of the whole venture, with a millions of euros to manage, and bearing the responsibility of building a business from scratch in a short time period. Failing which, the person will be replaced at a heartbeat.

Still, many MBA graduates, investment bankers and consultants clamoured at the opportunity to prove their mantle. This was what helped Rocket garner its own loyal following. At one point, we (yes we used to run Rocket ventures) kept receiving CVs from bored insecure overachievers determined to make a bigger impact than at McKinsey.

While typically not employing ex consultants or bankers, Huawei also prides giving young people significant responsibilities. Rumours went on in China last year that anyone above 34 years old was already considered ready for retirement. We see 28 year old division heads in charge of hundred million sales target, and 26 year old HR directors overseeing teams of a few thousand employees.

iii) Relentless drive into developing markets

Easy Taxi was a national pride (of Brazil) in the early days, and when its founder decided to sell to Rocket Internet, that was all about to change. Easy Taxi (nowadays known just as Easy), expanded globally, into nearly every continent, and about 40 or more countries just overnight. It did not matter if they had licenses to operate, or business entities, they just did. Where a normal company would shy away given the small amount of capital to launch 1 country, Rocket Internet did not. Its motto was to fail fast, and learn fast.

Even until today, Huawei still earns more revenue abroad than in China – all these thanks to its aggressive expansion overseas. For a company that was founded in Shenzhen in 1987, it has by 2012 beaten the entrenched conglomerates like Ericsson at its own game becoming the world leader in telecommunications and networks. If that is not enough, Huawei entered the mobile phone market in 2012, and by 2016 it had beaten Samsung to become the world’s most profitable Android smartphone maker.

Its founder, Ren Zhengfei, used to be a People’s Liberation Army officer, and we believe he took Chairman Mao’s war strategy at heart: Do not fight the enemy in cities, where they are superior; occupy the vast underdeveloped countryside first, and surround the cities gradually; when the enemy realises this, they are already outpowered. Hence you see them go to places like Africa, Iran, Eastern Europe and Latin America. They even have a team operating in Papua New Guinea. By the time their European and American competitors realise Huawei’s presence, Huawei already amassed a large customer base and improved economies of scale to be very, very competitive.

My Chinese colleague travelled extensively for work – and for twice he was asked “which division are you from” by Huawei employees he encountered on a flight: once from Kolkata to Delhi; once from Sao Paulo to Santiago de Chile. He had to clarify that not all young Chinese who flew these routes worked for Huawei.

iv) Good remuneration

It was often accepted as a fact that Rocket Internet works everyone the hardest, but also pays the best, often comparable to what graduate bankers and consultant would receive, and in addition, a small equity stake in the new venture. Huawei also is known for its working “over-time” culture, but employees are also known to get paid (well) above market rates. When one removes the worry for money, employees can focus on the tasks at hand. Clearly these two companies do it very well.

The only difference, probably, is the fact that Huawei is hugely profitable – that allows them to pay out generous year-end bonuses. We hear that the best bonuses are paid to their staff in Iran – well, they do not have to give clients discounts as competitors shy from the market.

v) Strong reputation

In the beginning of the discussion, we talked about the “graduates” of both Rocket Internet and Huawei leaving and starting something of their own. From our experience at Momentum Works, because these two companies enjoy a strong reputation for producing results, and hiring good talent, their graduates have a less steep hill to climb when it comes to fundraising. Today, it is hard not to find a Rocket Internet “alum” in any top startup in the region.

The same can be said for Huawei (in China, and increasingly in Southeast Asia). Even Chinese investors investing in Chinese founders in oversea ventures prefer at least one of these founders to have Huawei background: they can execute.

Conclusion

It should be quite clear by now, the extent of Rocket Internet and Huawei’s contribution to the global network, however it is also important to take note of the following differences between the two. For one, Rocket provides services (marketplaces), while Huawei manufactures and sells tangible products.

While you may be meeting more Rocket “alum” in the near future, it is actually due to Huawei being able to keep more of its employees through sophisticated, structured and generous rewards system. The founder of Huawei (Ren Zhengfei) is only known to have kept to himself 1.4% of the company’s total shares (in 2014), and the rest being held by Huawei’s employees. In a sense, there’s a spirit of camaraderie.

In contrast, Rocket Internet usually only rewards its founders 0.5%-1% share in the said venture. Returns will only come to fruition depending on the success of the venture. Even when the venture succeeds, Rocket keeps a majority of the money leaving insignificant amounts (in comparison) for the founder.

As far as employee retention goes, Huawei is vastly superior as its employees developed specialized talents (making them perhaps more subservient) than versus Rocket’s employees who are are mostly generalists, that likely drives them down the entrepreneurial pathway.

Either way, both companies have left great marks in the developing world, and their alumni are going from strength to strength starting new businesses and creating more opportunities.