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1 Year : From Oct 2018 to Oct 2019
By Alexandra Wexler
SAN FRANCISCO -- Naspers Ltd., Africa's biggest company best known for its bet on Chinese internet giant Tencent Holdings Ltd., is building a foothold in Silicon Valley. But unlike many other tech investors, Naspers isn't solely focused on finding its next big hit here.
Rather, the South Africa-based media and internet giant, which opened a San Francisco venture-capital office in 2016, wants to be closer to the flow of innovation and ideas in the Valley and apply that knowledge to its decisions across the globe as it repositions itself as an e-commerce company.
Led by eBay Inc. veteran Larry Illg and eager to invest part of an almost $10 billion windfall from selling down a small piece of its Tencent stake last year, Naspers Ventures is concentrating on businesses focused on emerging markets that fulfill mainstream global consumer needs such as providing food, education and health care, as illustrated through their investments.
Mr. Illg, who leads a team of employees working out of a sparsely populated office with sweeping views of the Bay Bridge, said the move made sense for Naspers.
"We had visibility into China through Tencent, but we were missing visibility into the other areas where product and technology really gets created, in Silicon Valley," he said.
Naspers executives say they reach out to hundreds of companies a month, and are often approached by founders interested in funding from the Ventures office. With that, the media-shy firm is finding its feet in Silicon Valley, where it has struggled with name recognition and relaying its business model.
"It's only in the U.S. where the conversation takes a little bit longer, because people are like, 'Wait, are you like SoftBank, are you like Andreessen [Horowitz],?' Mr. Illg said, referring to big startup investors. "That's where it takes a little bit longer, hence the physical presence here," he added.
Naspers has made some bets on U.S. companies including Honor, an online network of home-care agencies for the elderly; FarmLogs, which provides technology solutions for row-crop farming; and Udemy, an online learning marketplace.
But the bigger bets are being made on emerging-market startups. In December, the Ventures team led a $1 billion funding round in Swiggy, India's largest food-delivery platform, and a $540 million round in BYJU's, an educational technology company and creator of a popular schoolchild age learning app in India. In November, Naspers committed $400 million in funding for iFood, the leading online food-delivery platform in Latin America.
"Over time, we're like, 'Wait this is going to be of a scale that people in the West can't see,'" Mr. Illg said of online-food delivery in the developing world. "I certainly hope every one of the segments we're in develops like food."
Naspers also maintains close ties with Tencent, in which it bought a stake in 2001. Tencent followed Naspers into Swiggy in last year's $1 billion round. The Ventures office regularly passes startups and founders that aren't right for them over to Tencent.
Founded in the wine capital of South Africa, Stellenbosch, in 1915, Naspers was originally De Nationale Pers Beperkt, or the National Press Ltd., which produced a Dutch-language newspaper for the country's Afrikaner population and eventually served as a mouthpiece for the apartheid government.
In the 1980s, the company began expanding beyond its publishing roots, including into video entertainment. Now the company is shifting its focus to online classifieds, payments and food delivery. The Tencent stake transformed the regional publishing player into a media juggernaut with a market value of about $97 billion. Naspers hasn't disclosed any write downs specific to Ventures in its public filings.
Naspers Ventures' investments are part of a broader strategy to reconfigure the company as an e-commerce giant, after it sold its Tencent stake down to 31.2% from 33.2% in March 2018, giving the company a $9.8 billion windfall.
Ventures reported revenue of $223 million in Naspers's 2018 fiscal year, up 44% from the previous year, while the unit's trading loss widened to $134 million from $107 million in the 2017 fiscal year. The unit invests in early, middle and late-stage funding rounds, and doesn't have funds like a typical venture-capital firm, freeing it from worries about returning money to investors in a set number of years.
Sriharsha Majety, chief executive of Swiggy, said he first approached Naspers in 2016. The following year, when they approached him to invest, "I wasn't listening, because I was already sold," he said.
Mr. Majety said Naspers's belief in the startup founders, its capital and support in areas like corporate development have enabled Swiggy to grow its order volumes 10 times since Naspers's first investment in May 2017.
"You can be going after it with a little more courage than if you're mostly hand to mouth," Mr. Majety said.
Write to Alexandra Wexler at email@example.com
(END) Dow Jones Newswires
March 17, 2019 10:14 ET (14:14 GMT)
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