It is an enviable problem to have – your cor-porate venturing deals in different countries become so successful they overshadow the parent business and affect other potential investments.
For South Africa-based media group Naspers, its answer to the phenomenal suc-cesses in China and Russia through minority ownership of Tencent and Mail.ru – formerly Digital Sky Technologies until its listing on the London Stock Exchange – has been to row back on other deals in those countries, leaving it to its portfolio to buy or partner targets, such as through Tencent’s $1.5bn Industrial Collaboration corporate venturing fund set up last year.
And while Naspers has steered away from deal-making in developed countries in the US and Europe after some struggles in the early days and given lower growth expectations than in emerging markets, the South African group’s Netherlands-based corporate venturing unit, Myriad International Holdings (MIH), will reap a large profitfrom its indirect shareholding of American social network Facebook’s expected near-$100bn flotationon the Nasdaq stock exchange on May 18.
Naspers owned 28.7% of Mail.ru ahead of its UK listing at the end of 2010 (and which raised $912m) and the Russian internet services provider owns 1.7% of Facebook, having paid $200m for its stake at a reported $10bn valua-tion for the social network.
This 10-times paper return on Facebook, however, pales before the spectacular gains Naspers has made from Mail.ru and Tencent – the latter turning an estimated $70m investment for half the business into one diluted (Naspers has never sold a share) to about a third ownership of a China-based company with a market capitalisation of nearly $50bn.
Facebook itself is the sort of deal Naspers generally avoids, as its MIH team – David Tudor, general counsel picked up the Global Corporate Venturing award – looks for fast-growing companies in often emerging markets but with proven business models and strong defensive characteristics.
This has led MIH often to look at electronic commerce companies round the world, such as Turkey – it bought a majority of Marakafoni in July at a $200m valuation – Brazil, including Editora Abril and BuscaPe, and Asia, as well as growing its pay-television businesses in sub-Saharan Africa, to try to replicate and reinforce the success it has found in Russia and China.
For example, when Naspers bought US-based Multiply in late 2010 for its south-east Asia e-commerce assets, one of its vendors was privately delighted as the offers were multiples of their private valuation. But, as the vendor later admitted, Naspers’ strategy was extremely effective for Multiply in Asia.
Internally, Naspers regards part of its success as having come from its strategy of supporting portfolio companies’ strong management teams rather than looking actively to force cost-savings or collaborations across countries. Naspers leaves its input to opening its rolodex of contacts and paying for airfares and bar and hotel bills for the regular strategy and operating conferences it holds round the world – most recently in California’s Silicon Valley and which included other Facebook shareholders.
This trust in the entrepreneurs is built on a strategy of running winners able to throw off large and repeatable dividends and share price growth for potentially decades – a strategy made famous by US value investor Warren Buffett – while Naspers occasionally nudges or encourages its portfolio’s international growth and collaboration.
The largest such public collaboration has been Tencent’s $300m investment in Mail.ru two years ago, which indirectly has also helped the China-based company’s entry into the US early-stage innovation epicentre, such as the Y Combinator seed competition.
In short, Naspers’ long-term focus on emerging markets and supporting entrepreneurs has helped it deliver unprec-edented success.
Shortlist:
Ten corporate venturing units regarded as most influentialin their sector, as rated by Global Corporate Venturing, were judged by its advisory board for an overall firm of the year.
Deutsche Telekom’s T-Venture (utilities) – leading more deals, going earlier stageGeneral Motors Venture (transport and logistics) – kick-started venturing in its sector and highly-regarded programme widely followed by peers
Intel Capital (IT) – $10bn invested in 20 years by a 200-strong team with unprecedented introductions between portfolio companies and Fortune 1000 companies – two new funds, AppUp/UltraBook, active globally
Salesforce (services) – explosive development through venturing to broaden its service, complemented by chief executive’s personal deals
Naspers’ MIH (media) – unparallelled emerging markets network and biggest success of any venturing unit
General Electric’s GE Capital, Equity (industrial) – highly regarded Ecomagination and Healthymagination programmes supported by internal buy-in from its legendary cadre of managers
Novartis Ventures (healthcare) – strong exits, including from its Option fund, and continued dealmakingCiti Ventures (financial services) -widely imitated among financial services peers and a top tier of dealmakers andinnovation experts
Chevron Technology Ventures (energy/raw materials and clean-tech) – despite recent staff losses, Chevron’s ability to find entrepreneurs to help its parent is perhaps without equa
Unilever Corporate Ventures (consumer) – creating a unique federation model across the innovation piece from spin-outs and incubation to early-stage and buyouts around the world