Paketeria - My Latest Investment Adventure

It all started because of a trip he didn’t really want to take and could barely afford. In 1991 Andy Roesch received a call from one of his business advisors sheepishly asking him to meet me in the Frankfurt airport. His partner had heard that I was considering offering one of Andy’s competitors the German representation for our line of medical instruments. “Take on the representation and just sit on it,” his advisor said. That just wasn’t in Andy’s DNA. He had just started his business. A trip with such a lukewarm recommendation didn’t sound worthwhile. Luckily he listened to his instincts and met me. During our two-hour meeting and he agreed to take on the representation of our line of medical instruments. The next year he was responsible for 80% of our Company’s overall sales. We bought his Company, Roesch AG for $700,000 and some stock. When he took the Company public in 2001 he returned $100 million in cash to us. He was named “One of Germany’s Top Five Entrepreneurs of 2001”.

In 2006, I find myself taking trips to visit Andy in Berlin. I have just made my second investment in his biggest idea yet. Paketeria is a novel franchised supermarket services concept he is launching in Germany. Paketeria offers five services; E-Bay service (Germany is the second largest market for E-Bay), photo shop, package service and printer cartridge refilling (in cartridge refilling Germany has only 10% of cartridges refilled versus 50% for the USA). Besides the obvious “Bet the Jockey” strategy, I find Paketeria compelling for the following reasons:

1. He is building a network of entrepreneurs to beat an entrenched monopoly.

Deutsche Post is a hugely profitable newly privatized giant that is shutting down many small post offices throughout Germany and investing capital in helping their DHL subsidiary compete against FEDEX and UPS overseas. They are taking their home market for granted and are counting that their customers will have no other option but to accept reduced service. One of the most proven business models is to attack a complacent monopoly.

2. Paketeria is designed with first-time entrepreneurs in mind

Many of the target franchisees will be from the ranks of Germany’s six million unemployed so capital will be tight for most of them. Paketeria’s fee is only 15,000 Euros and the investment in inventory, the bane of most retail businesses, is tiny. The five interrelated services increases store traffic and spend per customer visit.

3. Paketeria is more inviting than a traditional post office

Germany’s post offices are dark, cavernous spaces where customers wait in long lines to be served by slow and surly union employees. During my past summer vacation I waited 45 minutes to buy stamps in a Deutsche Post office. Paketeria stores provide a stark contrast. The stores are bright with cheerful colors and staffed by entrepreneur owners who are happy to see you. Believe it or not friendly service is a unique concept in Germany.

4. Paketeria is a collaborative network supported by a proven team.

Andy is truly a great entrepreneur but the power of him working with a network of smart franchisees will certainly magnify his success. It is also no surprise that Andy’s team is largely composed of people, like me, that participated in his past success.

Paketeria and Spirit Shop are two of my first investments in the field of “collaborative networks”. In my next entry I want to explore why investors have made such huge fortunes in collaborative networks like Ebay, Google and Amazon.com.