The top 25: Larry Illg, Naspers Ventures

Bob van Dijk, chief executive of South Africa-based media and internet group Naspers, said: “Naspers has been investing in innovative businesses around the world for many decades, identifying leading companies addressing big societal needs in high growth markets. Naspers Ventures has taken us into several new sectors including food, education, health and more. Larry and his team are setting Naspers up for our next wave of growth, investing in leading businesses in new sectors that will mould our future.”

Naspers’ approach to investing in developed markets changed in late 2015 from avoidance – after some middling deals in Europe in the 1990s – to active investments in the US.

One of its first deals was a $100m series A round in Letgo, a US-based mobile classified advertising application, in September 2015, following up with a $175m in January 2017 then again with a $500m in August last year.

Naspers CEO Bob van Dijk said at the time: “We will probably have more focus on the San Francisco Bay area than we have had previously. If we see the right opportunities, we could see ourselves put a good amount of capital there.”

This led to the opening of Naspers Ventures in San Francisco in May 2016 under Larry Illg, a former eBay online auction company executive. Illg joined Naspers in 2013 from real estate listings platform Trulia, where he was general manager of new ventures. He was chief operating officer of Naspers’ e-commerce assets before taking the reins at Naspers Ventures.

Naspers Ventures is where the majority, 36 deals worth an aggregate $2.5bn in round totals, of the investing has happened but not all. Charles Searle, who is responsible for managing Naspers’ listed assets, including Tencent and Mail.ru, had an active year, too.

In March last year, Naspers sold HK$76.95bn ($9.8bn) of shares in Tencent, the China-based internet group in which it invested $32m in 2001.

Tencent operates a large-scale online services offering centred on its messaging app, WeChat, which has more than one billion users. At the time of the agreed sale, it was the fifth most valuable company in the world, and it had a market capitalisation of about $505bn.

Naspers acquired a 46.5% share of Tencent through its $32m investment, which took place three years before its initial public offering in Hong Kong, and as of March 2019, Naspers holds 31% of Tencent.

The company sold 190 million shares, equating to a 2% stake in Tencent, at HK$405 each. Naspers pledged in a statement not to sell any more shares for a further three years.

The proceeds from the sale will be used to shore up Naspers’ balance sheet and fund an investment drive intended to boost its holdings in other sectors. Naspers Ventures invested in five main sectors last year, food, education, health, mobility, mobile – with Illg focusing on food.

Outside the US, Naspers Ventures expanded by opening offices in Singapore and India. Ashutosh Sharma was recruited in October 2016 from venture capital firm Norwest Venture Partners to head the India office and to lead Naspers’ VC and M&A deals in India. Sharma was a vice-president for Norwest in India, having previously been an investment manager at Qualcomm Ventures, the corporate venturing arm of mobile chipmaker Qualcomm, between 2010 and 2012.

Although none of its other investments have garnered the same return as Tencent, in 2007, Naspers invested in Mail.ru, the Russia-based internet company with about $1.85 billion of revenue last year and its earnings before interest, taxes, depreciation and amortisation reached $320 million. Mail.ru exited through a $740m M&A by Russia-based telecoms operator Megafon in early 2017.

Naspers had also been backing since 2012 the India-based e-commerce firm Flipkart and invested about $616m. Its US peer Walmart acquired Flipkart’s 77% stake worth 16bn in mid-2018, and Naspers made about $3.3bn in the sale.

Another notable exit was Philippines-based blockchain technology developer Coins.ph, with ride-hailing service provider Go-Jek acquiring a majority stake for an undisclosed amount. Naspers Ventures had initially led a $5m second tranche of the $10m series A round in 2017.

GCV’s Rising Star Russell Dreisenstock, who ranked first in 2019, had been instrumental in conducting the $71m investment in Flipkart. For his profile, he cited the low valuation at Naspers first entry and the “exceptional” returns it produced.

And Dreisenstock had had good reason to be pleased with its success. “When looking at technology hotspots outside the US, it is difficult to see past India. Home to 1.3 billion people and the world’s seventh largest economy, India is also the birthplace of an outsize influence in Silicon Valley, due to a large diaspora of talent spread across both startups and established technology companies – look no further than the top executives of two of the world’s top five most valuable companies, Satya Nadella at Microsoft and Sundar Pichai at Google,” wrote Dreisenstock in an article for Entrepreneur.com in September 2017.

In his Entrepreneur article, Dreisenstock cites the characteristics present in Indian culture that have a positive influence on the country’s startups. They are bargaining and negotiating, respect for experience, community and jugaad – an Indian concept that he defines as “the most innovative, economical and quality method to accomplish the desired task by unusual or imaginative means and ways”.

It is no surprise then that Naspers Ventures has been particularly focused on India. It supplied $250m in 2016 for Ibibo Group, which owns and operates bus ticketing platform redBus.in and hotel booking site Goibibo.com, and participating in five financing rounds for online food ordering platform Swiggy, having provided most recently $80m for its $210m series G round and $660m for a $1bn series H round in June and December 2018, respectively.

However, India is by no means the only part of the world Naspers is interested in. Food delivery platforms around the globe appear to be one of the areas beyond media and e-commerce that firm is keen to move into, having invested about $2bn in such companies in 2018, overseen by Illg.

Germany-based Delivery Hero, in which Naspers invested $423m shortly before the initial public offering in May 2017, received about $775m in March 2018. Later that year in November, Naspers led a $500m round commitment for Brazil-based online food delivery platform iFood.

Alongside food, one of the other verticals targeted by Naspers Ventures is education. The initial deals under Illg and Dreisenstock targeted Codecademy, which is “teaching the world to code”, Udemy, a learning and teaching marketplace, and Brainly, the world’s largest social learning network with 70 million-plus users.

In 2018, Naspers incorporated a new portfolio company in this field by making a $3m series A round for US-based programming-focused peer-to-peer education platform operator SoloLearn.

According to Dreisenstock, one of the reasons Naspers has been so successful is that the firm’s philosophy is to invest for the long term, and this allows him and others to structure deals that are founder-friendly and offer operational support. He said this was what corporate venture capitalists needed to do to be more competitive against traditional VCs.

“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,” he said.