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Leonid Bershidsky

Why German Startups Fail

An e-grocery service's strangulation by regulation offers a case study.
The horns of a dilemma.

The horns of a dilemma.

Photographer: Hannelore Foerster/Getty Images

In March, the long-vacant commercial space on the ground floor of my apartment building in Berlin was taken over by Shopwings, an online grocery-delivery service developed by Rocket Internet, the flagship company of the city's hot startup scene. This week, the space was empty again. The story of the company's rise and fall helps explain why Berlin, or any European startup hub, is not Silicon Valley.

Rocket Internet, a startup factory run with an iron hand by the three Samwer brothers, went public in October 2014. The offering, the biggest in German tech in 14 years, valued the company at $8.4 billion. At that point, Shopwings was just a concept. Here's what the IPO prospectus said: