The Top 25: #1 Russell Dreisenstock, Naspers Ventures
It is a nice message to receive from a star investor: “Have you seen our Swiggy announcement today? Big finish to the year.”
The big finish to 2018 for Russell Dreisenstock, head of international investments at Naspers Ventures, was Swiggy raising $1bn in a round led by the South Africa-based media, education and internet company.
This followed news earlier in December of Naspers leading the $540m round – including buying some shares from existing investors – for India-based education company BYJU at a reported $4bn valuation. Dreisenstock, who has worked with the South Africa-based media and internet group for 18 years, joined BYJU’s board with its latest round.
He said: “With the largest school-age population in the world and a growing middle-class with the willingness to commit significant resources towards quality education for their children, BYJU is perfectly positioned to provide an effective supplemental education solution for students across India. We partnered BYJU because we believe the company’s success in India will translate across borders in any country where students are looking for an innovative and engaging form of education beyond the classroom.”
In addition to BYJU and Swiggy, Naspers has built a significant education and consumer technology portfolio. Currently at Naspers Ventures in San Francisco, California, Dreisenstock is responsible for identifying exceptional entrepreneurs and disruptive platforms, charting the course for Naspers to build leading technology companies globally.
Dreisenstock has led investments for Naspers in several companies worldwide, including Germany-based food delivery businesses Delivery Hero, which is present in 40-plus markets globally and in which Naspers invested $1.3bn. He also led or participated in investments in Flipkart, RedBus and Goibibo in India; Dubizzle and Souq.com in the Middle East; Movile and iFood in Brazil; SimilarWeb and Twiggle in Israel; Udemy, Codecademy and Brainly in the US; and Tokobagus and Sulit in Southeast Asia.
He said the Delivery Hero investments had been a big success. “We invested just before their initial public offering, at the IPO and just after – buying secondary from Rocket – and have seen a material return in just over a year. As always, we are invested for the long term and look forward to global success with Delivery Hero. In addition, the success and explosive growth of iFood in Latin America and Swiggy in India is particularly exciting for me as we invested in these companies quite early.
“My main ambition is to open up new vertical segments for Naspers in innovative and exciting new areas that are addressing huge societal needs, like education, health and food. Also, I am working to ensure that our existing investments have the support and capital to maximise their global potential.”
He has certainly started to achieve this goal. Larry Illg, CEO of Naspers Ventures, said: “Over the past several years, Russell has led the investments of several companies that have begun to shape our future. He was the deal mastermind behind our food delivery investments, including Delivery Hero, Swiggy and iFood, and has also been instrumental in developing our edtech portfolio including Udemy, Brainly, Codecademy and SoloLearn. Russell has a deep passion for seeking out innovative companies that are truly disruptive to bring into the Naspers portfolio.”
The choice of sectors has also been interesting, as well as the size of cheques written. Historically, few investors have concentrated on how digitisation and the internet will transform services or have been able to show how corporate venturing can enable strategic repositioning of a whole company from one sector to a broader category.
Benedict Evans, partner at venture capital firm Andreessen Horowitz, said in a podcast: “Close to three-quarters of all the adults now have a smartphone, and most of the rest will get one in the next few years. However, the use of this connectivity is still only just beginning. E-commerce is still only a small fraction of retail spending, and many other areas that will be transformed by software and the internet in the next decade or two have barely been touched. Global retail is perhaps $25 trillion dollars after all.
“Meanwhile, as companies address more and more of this with software and the internet, they do it in new ways. We began with models that presumed low internet penetration, low speeds, little consumer readiness and little capital. Now all of those are inverted. So we used to do apartment listings and now Opendoor will buy your home. We used to do restaurant reviews and now you can get a hot meal delivered to your door. Tech is building different kinds of businesses, and so will take different shares of that opportunity, but more importantly change what those industries look like.”
Andrew Chen, partner at Andreessen Horowitz, in his blog – What’s next for marketplace startups? Reinventing the $10 trillion service economy, that’s what – said: “Marketplace startups have done incredibly well over the first few decades of the internet, reinventing the way we shop for goods, but have been less successful for services. The next era will do the same to the $9.7 trillion US consumer service economy, through discontinuous innovations in artificial intelligence and automation, new marketplace paradigms, and overcoming regulatory capture.”
Dreisenstock said what attracted him to corporate venturing was the “exposure to cool new technology that is going to transform the future”. He added: “I like meeting new and innovative people – inventors, innovators, scientists, entrepreneurs and investors. I really enjoy the negotiating process and closing a deal that is beneficial to both us as the investor and the founders.
“The biggest challenge has to be operating across time zones around the globe.
“Naspers philosophy of investing for the long term, in platforms with global potential with exceptional founders, gives us a great shot at success. I am able to structure our deals to be extremely founder-friendly and those terms, combined with the operational support and access to our global portfolio, have been shown to be very useful for founders looking to build global businesses.
“In order for CVCs to be more competitive against traditional VCs, CVCs can make sure their deal terms are not overly restrictive. They should also continue to nurture the startups and let them act on their vision without immediately imposing a corporate way of doing things or harnessing them to do just what the corporate ambition may be.