Rocket Internet’s GFG gets $340M+ at $1.1B valuation, down from $3.5B a year ago

Berlin-based e-commerce incubator Rocket Internet continues to bring in money for its various startups, but things are definitely not looking great for all of its companies. On the heels of Alibaba investing in its Amazon clone Lazada, today the Berlin-based incubator announced that Global Fashion Group, the company’s unprofitable merged fashion businesses, raised €300 million ($340 million) “at least” (indicating there is actually a higher number that isn’t being disclosed).

Rocket itself is putting in €100 million at a €1 billion ($1.1 billion) valuation. But this is not a prancing unicorn: it’s a significant down round (one of many at the moment, it seems). Last year, GFG raised funding at $3.45 billion valuation.

In a statement, Rocket said that it would be investing alongside other existing shareholders. These include Rocket regulars Kinnevik and Access Industries.

The GFG focuses on emerging economies and includes Dafiti in Latin America, Lamoda in Russia and CIS, Namshi in the Middle East, The Iconic in Australia, Jabong in India and Zalora in South-East Asia. It was originally formed in 2014 ahead of Rocket going public, part of the company’s move to better organize its global tangle of e-commerce operations.

This also gives some context to last week’s news that the unprofitable Zalora business was selling some of its operations: the company appears to have been trimming operations ahead of the funding round to put itself in a better position for profit.

There is some clear housekeeping underway right now at Rocket Internet to sweep out businesses that are not growing fast enough and are proving to be a challenge to expand without more scale. Just earlier today, it was announced that Payleven, Rocket’s bid at building a mobile payments powerhouse a la Square, was merging with its rival SumUp.

There is also a question of whether Rocket Internet’s bigger strategy of targeting emerging markets is necessarily working.

When the company first started moving full-speed ahead outside of Europe, there were two main ideas behind it. First, less mature markets, where digital services were still being adopted among a growing middle class, would be ripe for new e-commerce services to spend their money.

Second, these were markets where U.S. giants like Amazon and eBay had yet to make any headway — meaning an open playing field for Rocket’s businesses, which could even become acquisition targets for the U.S. companies in their own growth.

But as it turned out, the losses of many of these businesses outweighed those opportunities. Still, the company’s execs continue to show optimism.

“We continue to be very excited about the prospects of GFG, which has successfully built out leading market positions in key emerging markets. We are looking forward to continuing to work with the GFG team as well as Kinnevik and the other GFG shareholders to support GFG,” said Oliver Samwer, CEO of Rocket Internet, in a statement.

“We very much appreciate the continued support of our key existing investors in GFG. The financing will provide GFG with the necessary capital to continue to execute its strategy of building out its leading position in the online fashion sector in emerging markets. During the first quarter 2016 we have made significant progress on our path to profitability, reducing the loss from operations meaningfully in comparison to the first quarter 2015 resulting in an improvement of the Adjusted EBITDA margin by over 10 percentage points year-over-year. This is in line with GFG’s plan to deliver an accelerated path to profitability across its regional businesses while continuing to capture the significant market opportunity available,” said Romain Voog, CEO of GFG.

Voog joined the GFG last year after getting poached from his previous role leading Amazon in France.