A member of the top 25 from the Global Corporate Venturing Powerlist
Talking at the Global Corporate Venturing Symposium in 2012, Charles Searle, who runs listed internet investments for South Africa-based media and e-commerce company Naspers and is a member of the core senior executive team, spoke of “the halo effect” created for the business’s corporate venturing operations when it backed runaway success story, China-based internet company Tencent.
Naspers owns large stakes in China-listed Tencent, and in London Stock Exchange-listed internet company Mail.ru Group, which is Russia’s largest internet company, among a host of others around the world, such as Movile in Brazil and Flipkart and Ibibo in India. But given the vastly different business cultures to striking deals at the top end and then maintaining those relationships requires breathtaking business and emotional skillsets. Searle agrees in his softly-spoken way that the cultures are very different and then moves on.
Naspers’ investment unit continues to look to pick the best companies in emerging markets and making increasingly large bets as the parent company moves beyond media to take a global leadership position in online retailing. These are difficult deals to do.
When proposing Louise Stuart as one of the GCV Rising Stars awards in January, Searle said: “She was closely involved with our recently announced substantial further investment in Avito – classifieds in Russia – and the merger of certain Naspers classifieds assets in several markets with Schibsted Media Group among numerous other transactions.”
The Avito deal was complicated. Stuart, who reports to chief investment officer Mark Sorour at Naspers, described it as a “deal that started off in 2011 as the acquisition of the number two classified player in Russia, Slando, which we subsequently merged with the market leader, Avito for a minority share and has recently lead to a larger transaction where we have taken a controlling position in Avito”.
The Schibsted deal in November 2014 was equally challenging, requiring four groups to agree shareholdings for joint ventures with varying levels of ownership stakes in four markets. Schibsted and Naspers, as well as Telenor and Singapore Press Holdings, set up joint ventures for the development of their online classifieds platforms in Brazil, Indonesia, Thailand and Bangladesh.
Searle said for his 2014 Powerlist award: “The future of the internet sector looks as bright as ever. A few general global themes and observations that might impact investment decisions over the next few years – smartphones and mobile becoming the primary work and play device and method of accessing the internet, e-commerce taking an increasingly large share of overall retail, and the need to achieve scale, which may drive consolidation among internet businesses, especially in e-commerce.”
These insights have been witnessed in other Naspers’ portfolio companies’ deals since 2015, notably Tencent-backed mergers of fashion retailers Meilishuo and Mogujie, taxi-hailing mobile applications Didi Dache and Kuaidi Dache. classified ad websites 58.com and Ganji.com and the $15bn merger of Alibaba-backed Meituan with Tencent-backed Dianping. About one month after the merger to form was announced, Tencent said it would invest $1bn in the new company, China Plus Internet Group.
Searle joined Naspers in 1997 after working at communications company Cable & Wireless in corporate finance from 1994 to 1997 and at accountancy firm Touche Ross, which merged to become part of what is now Deloitte, from 1989 to 1994. Having studied management at Harvard University and economics at University of Cape Town, he has been instrumental not just in the initial deals but the strategy of holding on to the winning investments and reaping returns through dividends and joining up portfolio companies through Naspers’ strategy days so lessons can be learned and applied across borders.
This is a concept that portfolio companies, such as Brazil-based Movile, are also applying within their own corporate venturing units to create effective, local entrepreneurial ecosystems, according to Fabricio Bloisi, CEO of Movile, in a keynote speech at the GCV-curated Corporate Venture in Brazil conference in October.
Searle said: “We organise regular meet-ups of Naspers and portfolio companies to share ideas. We embed in each major business an M&A development star who reports mainly to its CEO. They then have a dotted line to Mark Sorour. I have moved away from deal execution to spend more time with Tencent and Mail.ru as well as Naspers group strategy as part of the executive team and sit on the Naspers investment committee.
“We have a hybrid approach as well as our portfolio companies getting involved in CVC activity. We also have a venturing group run by Larry Illg [CEO of Naspers Ventures since July 2015].
“This is a small office in Silicon Valley doing early-stage deals, all strategic on new emerging areas, such as fintech, edtech and artificial intelligence, beyond hardcore transactions.
“It is fair to say corporate venturing has enabled Naspers’ strategic transition from media to a transactions business. The lion’s share of management time is on e-commerce and attention of our older business, print and pay TV, is helping their digitalisation.”
Searle identified Naspers as being opportunistic in how it had undergone this transition. He said by showing flexibility in often taking smaller stakes initially in a company, it had allowed Naspers, and others developing their own CVCs, to identify management teams in the entrepreneurial companies that could build and run larger businesses while retaining “meaningful” equity.
He added: “If opportunities then arise we will step up.”
However, this opportunistic argument underplays the strategic insights it has within its team after about two decades of dealmaking, as evidenced by its expectation of consolidation back in 2014 and then being, along with its portfolio companies, some of the most active acquirers of internet-focused businesses.
Looking ahead, Searle this month said: “It is becoming more difficult for smaller companies to break through. It is a world where big players dominate. It is a resource issue.”
However, there are still opportunities, especially if you have the resources. As Naspers has found success in emerging markets, and has platform plays in countries with a majority of the world’s population, its attention has also turned to more developed markets, such as Israel, Europe and the US. Its hybrid model of supporting portfolio companies, such as Movile and Tencent, and helping them be more active internationally, while also building out a new startup, Letgo, targeting classified advertising in the US.
In September, Naspers invested $100m in the series A round of US-based Letgo, which is lead by Alec Oxenford, previous founder of OLX, an online classifieds platform with more than 240 million monthly active users worldwide and in which Naspers took a controlling stake earlier this decade.
This month, LetGo agreed to acquire the US operations of Spain-based peer Wallapop, with existing investors putting another $100m into the combined business.
This Letgo deal alone shows the power of Naspers’ venturing alumni and resources to focus on building out its opportunities have scaled.
Naspers’ investment activity since the beginning of 2015
